Stellantis is correcting what CEO Carlos Tavares described Thursday as \u201carrogant\u201d mistakes by himself and the company in the automaker\u2019s U.S. operations that led to sales declines, bloated inventories and investor concerns.<\/p>\n
Tavares said the convergence of three factors led to the problems: not selling down vehicle inventory fast enough; manufacturing issues, specifically with two unnamed plants; and lack of \u201csophistication in the way to go to market.\u201d<\/p>\n
\u201cWe had a convergence of three things that should have triggered, from me and nobody else, an immediate task force to address those things,\u201d he told media Thursday after the company\u2019s investor day at its North American headquarters. \u201cWhen I\u2019m saying that you are arrogant, I\u2019m talking about myself. I\u2019m talking about the fact that I should have acted immediately recognizing that the convergence of those three problems was there.\u201d<\/p>\n
During the investor day, Tavares and his top lieutenants broadly updated investors on the company\u2019s operations and how Stellantis plans to achieve ambitious financial targets amid industry and economic uncertainty. The company also reconfirmed its 2024 guidance and vowed to continue to return capital to shareholders going forward.<\/p>\n
Tavares did not elaborate on the manufacturing or go-to-market problems, but Stellantis\u2019 inventory of vehicles leads major U.S. automakers as the company has held back incentives and cut marketing budgets. Stellantis\u2019 U.S. sales were off 10% during the first quarter, leading to notable declines in revenue.<\/p>\n
In May, Cox Automotive reported days\u2019 supply of vehicles at Stellantis\u2019 Jeep and Ram brands were more than twice the industry average of 76 days. Stellantis was the only major automaker to report a decline in U.S. sales last year; its market share dropped below 10%; and Hyundai, including Kia, outsold Stellantis for the first time ever.<\/p>\n
While sales have been down, the company remains among the most profitable automakers globally. Since merging Fiat Chrysler and PSA Groupe to form Stellantis in 2021, the automaker\u2019s adjusted operating income rose by 31% from 2021 through last year. Its adjusted profit margin is also up, rising 0.4 percentage point during that time frame, to 12.8%.<\/p>\n
Stellantis reported a 12% decline in revenue in the first quarter, citing lower sales and foreign exchange effects, even as net pricing held firm. Its average vehicle transaction price in the U.S. was $57,266, according to Cox Automotive. That compares to an industry average of $48,389.<\/p>\n
As part of the event, Tavares said Stellantis has achieved 8.4 billion euros ($9 billion) in cost reductions from the merger of Fiat Chrysler and PSA Groupe that created the company in January 2021.<\/p>\n
That amount is more than double initial expectations from when the merger was announced in 2019, and an increase from the updated 5 billion euros in expected reductions within five years of completion of the merger, which formed one of the world\u2019s largest automakers.<\/p>\n
Tavares said the largest reduction was achieved in the sharing and consolidation of engineering assets for the company\u2019s vehicles, followed by purchasing.<\/p>\n
Cost-cutting has been a critical mission of the veteran automotive executive. Other cost-saving measures have included reshaping the company\u2019s supply chain and operations, as well as head-count reductions.<\/p>\n
Since the merger was agreed to in December 2019, Stellantis has reduced head count by 15.5%, or roughly 47,500 employees, through 2023, according to public filings. Additional job cuts this year involving thousands of plant workers in the U.S. and Italy have drawn the ire of unions in both countries.<\/p>\n
Several Stellantis executives described the cuts to CNBC as difficult but effective. Others, who spoke on the condition of anonymity due to potential repercussions, have described them as grueling to the point of excessiveness.<\/p>\n
The cuts are part of Stellantis\u2019 strategic plan to increase profits and double revenue to 300 billion euros by 2030. The plan also includes targets such as achieving adjusted operating profit of more than 12% and industrial free cash flow of more than 20 billion euros.<\/p>\n
\u201cWe are not looking for our way; we know where we are going,\u201d Tavares said, referring to the automaker\u2019s 2030 \u201cDare Forward\u201d strategic plan.<\/p>\n
Stellantis reconfirmed its 2024 guidance that included a double-digit adjusted operating income (AOI) margin, positive industrial free cash flow and at least 7.7 billion euros in capital return to investors in the forms of dividends and buybacks.<\/p>\n
The automaker anticipates that Jeep will be a main driver for the company globally. Stellantis expects to grow sales of Jeep vehicles globally by 50% in the next three years, as the automaker attempts to leverage the quintessential American SUV brand for increased profits.<\/p>\n
The trans-Atlantic automaker on Thursday said it will expand production and sales to roughly 1.5 million units by 2027. To do so, the company will grow its vehicle and powertrain offerings.<\/p>\n
\u201cThe Jeep brand can be a local hero anywhere,\u201d Tavares said. \u201cWe are going to reinforce the manufacturing footprint of Jeep.\u201d<\/p>\n<\/p>\n
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