Margins were significantly reduced in North America, Stellantis’ key region when it comes to profits.
The Italian-American-French conglomerate has signaled that it is ready to divest from underperforming brands, following a sharp drop in first-half earnings.
To address weak profit margins, CEO Carlos Tavares said Stellantis will not hesitate to shed brands that fail to remain profitable within its 14-brand portfolio.
“If they’re not making money, we’re going to shut them down. We can’t afford to have producers that don’t make money,” Tavares said in front of members of the seventh force during the July 25 earnings report.
Net income of Stellantis fell by 48 percent in the first six months to 5.6 billion euros. Its operating margin has shrunk to just under 10 percent, slipping below the double-digit figure the company aims to achieve throughout the year.
Tavares told Bloomberg that all the brands within the group represent important assets and are profitable, but that there is “absolutely no taboo” if their performance deteriorates.
Stamps are “here to be used,” he said. “If they’re not able to monetize the value they represent, then decisions will follow.”
The warning for loss-making brands is a reversal for Tavares, who, since Stellantis was created in 2021 through the merger of FCA and PSA Group, has said all brands, including Maserati, Fiat, Peugeot and Jeep, have a future.
Stellantis does not publish data related to individual brands, except for Maserati, which reported an adjusted loss from operations of 82 million euros in the first half of the year.
Some analysts say Maserati could be a candidate for sale, while other brands such as Lancia or DS could be at risk of being phased out, given their marginal contribution to the group’s overall sales.
North American problems
Automakers are grappling with weakening demand, particularly for electric cars, and facing more intense competition from Chinese manufacturers in Asia and Europe.
As for Stellantis, the problems are most acute in the US, a key profit region, where the company has seen high inventory levels and numerous executive departures, while quality issues weigh on profits.
The conglomerate’s margins in the first half of the year were significantly reduced in North America, after the number of deliveries fell by 18 percent, due to unfavorable model supply and pressure on prices.
Chief Financial Officer Natalie Knight said Stellantis was taking “decisive actions to address challenges within the business” in North America, including cutting production and prices in the region this quarter.
Stellantis also plans to further reduce labor costs and expects to reduce logistics costs by 25 percent in the second part of the year.
Knight suggested the company might reconsider what might be the “best home” for Maserati, whose deliveries fell by more than half to 6,500 units in the first six months.
Poor first-half results add to the pressure on Tavares, whose $40 million pay package last year made him the highest-paid CEO among traditional automakers.
He has already greatly reduced costs, with 500 million euros more in savings predicted for the second half of the year. Some analysts have begun to point out the limitations of his strategy.
Tavares said that during the summer he will work with his American team on how to improve performance and reduce inventory. “We consider that the work is done in Europe,” he said. “The job wasn’t done in the US and we’re going to take care of it now.”
Tavares said the company’s U.S. plants produce too many vehicles that need repairs before they can even be delivered to dealerships, pointing to the Sterling Heights, Michigan plant where the Ram 1500 is made as one of the main culprits.
The high-margin Ram pickups and Jeep models that Stellantis sells to U.S. consumers have boosted its profits, but the company’s weak margins “raise questions about Stellantis’ reputation for profitability,” Bernstein analysts wrote in a client note.
Betting on new models
The launch of new models, a total of 20 planned for this year, will help profitability in the second half of the year, Knight said.
Stellantis will reintroduce some models it pulled from the US, including the Dodge Charger, she added.
The automaker’s launches include the refreshed Ram 1500 pickup truck in the US, the renewed Pro One line of vans in Europe from Peugeot, Citroen, Fiat and Opel, and the third-generation Peugeot 3008, Stellantis’ first car on the STLA platform.
This medium-sized architecture can be used for both battery-electric and conventional powertrain variants.
Stellantis will also start selling electric vehicles from its Chinese partner Leapmotor in 9 European markets, including Germany, Great Britain and Italy, in September.
The first shipment of Leapmotor electric cars is on its way to Europe from China.
Stellantis now counts Leapmotor as its 15th brand, after buying a 21 percent stake in the Chinese company for €1.5 billion in October 2023.
Source:
Automotoshow.rs
Photo: Arhiva Autoblog.rs / Stellantis
Source: autoblog.rs
