Summary
- Stellantis N.V., a major automotive conglomerate formed in 2020, united 14 iconic brands, including Fiat, Chrysler, Jeep, Peugeot, and Opel, under CEO Carlos Tavares, aiming to streamline production and increase profitability.
- Through shared modular platforms and cost-cutting measures, Stellantis achieved high profit margins from 2021 to 2023,
- 2024 brought financial struggles, with Stellantis laying off thousands globally, reducing production forecasts, and lowering its operating margin amid declining sales in North America and Europe.
- Stellantis’ European and U.S. dealers are concerned about stricter EU emissions targets and excess inventory, which could drive down prices, affecting profitability and brand image.
- Stellantis is exploring brand performance reviews with potential sales or shutdowns by 2026 if brands fail to meet financial expectations, marking a critical juncture for the company.
In December 2020, while the world was going through a global health crisis, Stellantis Stellantis N.V., a new multinational automotive manufacturing company formed by Fiat Chrysler Automobiles (FCA) and the French PSA Group, was born. Stellantis became one of the world’s largest automotive groups, bringing together iconic brands like Fiat, Chrysler, Dodge, Jeep, Ram, Peugeot, Citroën, DS Automobiles, Opel, Vauxhall, and more.
With 14 brands under its umbrella and a gigantic market share (almost half of France and Italy), it was challenging to sail such a ship. Carlos Tavares, the new company’s CEO, took drastic measures to tackle the challenge. However, lately, the ship appears to be drifting aimlessly in the turbulent waters of the automotive industry this year.
After months of declining sales that have resulted in massive layoffs in different manufacturing plants of the group worldwide, the future of the conglomerate is uncertain. In the words of its CEO, the Stellantis brands have at most a couple of years to survive.
The First Steps of a New Strategy
One of the first steps in the strategy of the newly formed Stellantis was to reduce production costs. The premise was to manufacture new platforms that would enable the creation of multiple cars with as many shared elements as possible. An example of this was the launching of the Jeep Avenger, Alfa Romeo Junior, or the Abarth 600e. The company introduced modular multi-energy platforms, enabling a variety of electrified models, including hybrids, plug-in hybrids, and fully electric vehicles.
The premise was clear: sell at the lowest possible cost. The main objective was to improve profitability, in the words of Stellantis’ CEO himself. During the first few years, the numbers seemed to make sense in the accounting book. The company achieved exceptional results in 2021, experienced significant growth in 2022, and achieved record profits in 2023. However, the last few months started to reveal significant internal changes within the company. In March 2024, Stellantis cut 3,000 jobs in Italy as part of the automaker’s initiatives to address the effects of the energy and technology transition process.
In mid-October, Stellantis began laying off about 1,100 workers in Warren, Michigan, after production of the Ram 1500 Classic pickup ended. The state of the company’s finances has begun to take its toll. Stellantis is looking for a replacement for Carlos Tavares, who will finish his contract as CEO in 2026. While Stellantis’ strategy for the coming months is unclear, it’s no secret the company is unhappy with its current direction.
The Carmaker Is at a Turning Point
Until a few months ago, the performance of the Stellantis conglomerate was based on excellent profit margins, especially compared to other automotive groups. However, the strategy in North America and the low sales of certain brands have contributed to the decline in those margins over time. In September, for example, Stellantis confirmed that it would reduce its annual production by 200,000 units. Another piece of bad news accompanied the announcement as the company expects the operating margin to decline from 7% to 5.5%.
According to a Bloomberg article, Stellanti’s N.V. dealers sent a letter urging the European Union to delay the introduction of stricter CO2 emissions regulations taking effect in January, arguing they could hurt the auto industry. This stance runs counter to the carmaker’s support for the mandates. Dealers fear that these new targets would force them to lower their prices, thereby making the cars less profitable and diluting the brand image. In the United States, dealers are also complaining about this issue.
Stellantis CEO Carlos Tavares is among the few industry leaders who support the upcoming regulatory changes. Last month, he expressed disbelief at the idea of altering the current rules, saying it would be “surreal.” Tavares, aged 66, is facing pressure from US dealerships to address inventory levels and reverse the company’s declining market share. In their letter, European dealers did not explicitly name the CEO.
A Snapshot of Stellantis in the U.S.
Currently, the backlog at Stellantis’ U.S. dealerships is enormous. The company has shipped thousands of cars of its different brands based on the forecasts published in the Dare Forward 2030 plan, which structured the auto giant’s strategy for a decade.
Launched in March 2022, Dare Forward 2030 is a comprehensive strategy to double the group’s net revenues by 2030 (compared to 2021) while consistently maintaining double-digit adjusted operating income margins throughout the decade. Based on this plan, some American brands had committed to selling several cars that they failed to achieve, forcing them to either sell them at a low price or let them collect dust at their lots.
CEO Carlos Tavares said in a recent interview “We will review each (Stellantis) brand’s performance at about two-thirds of the way through the Dare Forward 2030 plan so decisions can be expected in two to three years,” Stellantis CEO said at the Paris Motor Show, according to Automotive News about the future of its brands.
What the Future Holds for the Group
The 14 car brands, joined by Chinese carmaker Leapmotor in 2023, will have to prove that they generate value for the automotive conglomerate and that they are profitable on their own. “If they don’t make money, we’ll shut them down. “We cannot afford to have brands that do not make money,” Tavares stated firmly. “We cannot afford to have brands that do not make money.”
After disappointing sales, Alfa Romeo and Maserati appeared to be in danger. However, shortly after, Tavares made a statement to quell rumors of a potential sale of Maserati while also ruling out the possibility of selling Dodge or Chrysler soon.
Statements about possible sales have generally been ambiguous. However, ongoing rumors suggest Stellantis could sell off struggling brands as soon as 2026. Tavares himself has stated that groups of brands expected to show results in 2030 will need to do so “in two or three years.” The Stellantis Group brands are facing challenging times.
