What’s Next for Stellantis With Tavares Headed for the Door

Stellantis CEO Carlos Tavares is officially a lame duck, with the automaker saying he will be replaced by the end of 2025. Such prolonged succession plans are not unheard of, but in this case it’s pretty clear that the board has lost confidence in the executive who has been trying to rationalize the unwieldy 2021 roll-up of Peugeot, GM Europe and FCA.

Tavares, 66, exudes confidence and capability when he addresses the investment community and the media. And the company posted $20 billion in profit in 2023. But the world has changed for the automaker in nine short months with sales of cash cows Jeep and Ram falling, EV sales stalling, labor unrest with the UAW fomenting and strategies to grow the company’s European brands in the U.S. flagging.

The Stellantis board has clearly lost confidence in Tavares and his senior team, some of whom have only been in the jobs a short time. Antonio Filosa is the new North America chief operating officer in addition to his role as Jeep brand CEO, succeeding Carlos Zarlenga, whose future role has not been announced. Filosa is a candidate to replace Tavares.

Doug Ostermann, the former COO of the China division, is Stellantis’ new finance chief, replacing Natalie Knight, who is leaving the company. Knight joined the automaker just last year and immediately began to face internal pressure over the company’s recent profit warning; the CFO does not create the profit shortfall, but merely identifies it and advises the CEO and board on what to do about it, but she is on the street, nonetheless.

Jeep and Ram are facing substantial inventory backlogs. By mid-2024, their supply levels were more than twice the industry average, leading Stellantis to pause production of key models such as the Jeep Wrangler and Grand Cherokee to control stock levels.

Both Jeep and Ram have seen significant sales declines, with Jeep’s sales down 9% and Ram’s plummeting 26% in the second quarter compared to the same period in 2023. As a result, Stellantis has revised its profit outlook for 2024, now expecting much lower margins than previously forecasted.

The relationship between Stellantis and its U.S. dealers has become strained. Dealers have voiced concerns about compensation models tied to shipments rather than sales and cuts to marketing funds, which they claim have hurt profitability and customer engagement.

While Stellantis is gearing up to launch new EV models for both Jeep and Ram, such as the Wagoneer S and the Ram 1500 REV, these products are entering niche segments and may not address the broader sales slump the brands are facing.

Stellantis’ stock has been downgraded after tumbling 42% this year. The revolving door of management has not instilled confidence from Wall Street. “Today’s management reshuffle adds to a growing list of senior management changes (21 in the past 12 months) and will likely be unable to calm investors’ nerves,” a note from Bernstein Securities states.

Stellantis last week lowered its forecast from positive cash flow to negative cash flow of between €5 billion and €10 billion ($5.5 billion-$10.9 billion) this year. That is an extraordinary swing from 2023.

The company suddenly seems like its targets are in serious jeopardy with profitability so questionable. Like other automakers, it needs robust sales and profits from internal-combustion-engine vehicles, especially trucks and SUVs, to bankroll the rollout of high-cost battery-electric vehicles.

Stellantis is aiming for 100% of its passenger car sales to be BEVs in Europe by 2030 and 50% of its passenger cars and light-duty trucks in the U.S. to be EVs by the same year. The automaker has an ambitious plan to offer 75 electric models globally in the next five years. And the company’s track record for launching new vehicles, especially in North America, where EV sales have slowed down industrywide, is spotty at best. In Europe, the company is facing fierce competition from Chinese automakers.

Consolidation of efforts and costs around electrification has been sweeping the auto industry: Ford and Volkswagen have an alliance. Honda and Nissan are in a joint venture. General Motors and Hyundai have a joint venture. Stellantis went the merger/acquisition route rather than JV by rolling up FCA and PSA, creating a barn with 14 brands to feed, several of which are perennial niche and troublesome brands to wring profit from – Alfa Romeo, Citroen, Maserati, Chrysler, Fiat and Lancia, to name six.

Is Stellantis a replay of DamlerChrysler? Then, as now, the idea was for a European operation to balance its portfolio of brands between luxury and mass-market, and geographically between Europe and North America, with a consolidated effort to grow globally in China. Also, then as now, the Jeep and Ram brands were the jewels in the crown, cash cows, if managed right. Then, as now, the European executives who ran the U.S. operations were inexperienced and unoriented to the brutal U.S. retail war fought through sales incentives and frequently updated models.

Adding to the headaches is a current fight with the UAW, with which it struck a contract just a year ago. The union is threatening to strike some of Stellantis’s U.S. plants, which would add to the company’s losses. Stellantis has filed lawsuits against the UAW.

As Stellantis searches for a new CEO, outside candidates would put a fresh set of eyes on the company’s sprawling operations and give the European board of Stellantis rough reality about the growth potential of its European premium brands in a world where the Chinese auto industry is eating the lunches of western legacy automakers on the road to electrification. But will the board listen?