Stellantis Chief Fights to Save US Business as Paris Auto Show Looms

Stellantis Chief Fights to Save US Business as Paris Auto Show Looms

As the 2024 Paris Auto Show kicks off, all eyes are on Carlos Tavares, CEO of Stellantis. The auto giant, formed by Fiat Chrysler’s and PSA Group’s merger, faces a significant crisis in its US operations. This comes just weeks after a shocking profit warning that tumbles the company’s stock.

Once seen as an unstoppable force in the auto industry, Tavares finds himself in unfamiliar territory. He’s set to make five public appearances at the show, more than many of his peers. It’s clear he’s ready to come out swinging.

The US Problem: A Perfect Storm

Stellantis’ troubles in the US stem from a series of missteps:

  1. Pricing Woes: The company raised prices too high during the pandemic and was slow to bring them down.
  2. Inventory Buildup: Dealer lots are packed with unsold vehicles, especially older models.
  3. Product Gaps: Key models weren’t updated while competitors rolled out new offerings.
  4. Brand Confusion: With four US brands (Jeep, Dodge, Ram, and Chrysler), there’s overlap and inefficiency.

Data from industry experts paints a grim picture. Pat Ryan of CoPilot, a car-shopping app, notes that Stellantis raised prices by 50% between 2019 and 2024, far outpacing inflation. This pricing strategy has backfired spectacularly.

Dealer Frustration Boils Over

The crisis has sparked anger among Stellantis dealers. In a scathing letter to Tavares, Kevin Farrish, head of the national dealer council, didn’t mince words: “You created this problem,” he wrote, accusing the company of chasing short-term profits at the expense of brand health.

David Kelleher, who runs a multi-brand Stellantis dealership near Philadelphia, has seen his new car sales plummet from 165 per month in 2021 to just 89 this year. He echoes a sentiment shared by many: “We need a CEO who understands the North American market.”

The Road Ahead: Tough Choices Loom

Tavares faces some difficult decisions as he attempts to right the ship:

  1. Pricing Strategy: Stellantis must slash prices and offer enormous incentives to move inventory.
  2. Production Cuts: Temporarily reducing output could help balance supply and demand.
  3. Brand Consolidation: The company may need to reevaluate its four-brand strategy in the US.
  4. Labor Relations: A potential United Auto Workers union showdown looms over delayed investments.

Industry analyst Brian Sponheimer of Gabelli Funds, a Stellantis investor, puts it bluntly: “They just need to produce less… for a few months to get dealer stock back in line.”

A Legacy at Stake

The following 18 months are crucial for Tavares, who plans to step down in 2026. He must fix the immediate crisis and set Stellantis on a path for long-term success in the US market.

This comes when the auto industry faces other significant challenges, including the shift to electric vehicles and growing competition from Chinese manufacturers.

In a recent radio interview, Tavares didn’t rule out job cuts or plant closures. He stressed the need for “big efforts” to stay competitive and profitable. The CEO aims to have the US problems sorted by the end of 2024, saying, “I think I can safely say that the problem will be solved before Christmas 2024.”

The Paris Spotlight

As Tavares takes center stage at the Paris Auto Show, he must convince investors, dealers, and the public that Stellantis can turn things around. His packed schedule suggests he’s ready to tackle the crisis head-on.

The auto world will be watching closely. Can the man who masterfully merged PSA and Fiat Chrysler pull off another miracle? Or will Stellantis’ US woes be his most formidable challenge yet?

One thing is sure: the next few months will be critical for Tavares and Stellantis. The entire auto industry will take notes as the company fights to regain its footing in the crucial US market.

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