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Stellantis seeks new CEO as Tavares faces pressure to turn around plunging sales.

Stellantis announced on Monday that it is beginning the search for a successor to CEO Carlos Tavares, as the company works to strengthen its North American operations by reducing excess inventory and lowering vehicle prices. This move is seen as standard procedure ahead of Tavares' contract expiration in January 2026, though there's still a possibility he may remain beyond that date.

Tavares has led Stellantis since its formation in early 2021, transforming it into one of the most profitable companies in the industry. However, he faces mounting pressure to address the challenges within North America, where declining sales and profits have negatively impacted the company’s stock price.

A source close to Stellantis Chair John Elkann, who is also the largest shareholder through EXOR, clarified that the decision to seek a new CEO was not prompted by recent events but reflects the recognition that the search will be lengthy and complex.

Bloomberg previously reported on Stellantis initiating this search.

The automaker plans to cut 100,000 vehicles from its U.S. inventory by early next year, having already reduced about 40,000 units in July and August, according to Chief Financial Officer Natalie Knight at a BofA Securities virtual conference. “We are navigating tough times, where success hinges on being the last man standing,” Knight stated, emphasizing that maintaining discipline on pricing and inventory will be vital during the transition to electric vehicles.

Stellantis is under pressure from shareholders, dealers, and its unionized workforce to reverse declining sales, profits, and share prices. The company is also facing a potential strike from the United Auto Workers union, with local chapters preparing for a nationwide walkout.

Knight noted, “In challenging times, friction is inevitable,” and expressed a desire for investors to view 2024 as a year of transition rather than a new status quo for the Franco-Italian group.

By mid-year, Stellantis reported total inventories of about 1.4 million vehicles, with an adjusted operating profit drop of 40% largely due to weak North American performance, which has historically been a profit driver.

Last month, Tavares visited the U.S. to devise a strategy to improve the struggling operations. His aggressive cost-cutting measures have already led to workforce reductions. Knight indicated that executives will continue restructuring efforts in the coming years.

She also mentioned plans for 80% of the company's supply to come from low-cost countries by 2028, which is expected to significantly lower overall costs. Additionally, prices for certain vehicles, including the Jeep Grand Cherokee and Jeep Compass, have been reduced.

While acknowledging the difficulties faced in the first half of the year, Knight expects conditions to improve toward the end of 2024, with new model sales anticipated to contribute 15-20% of revenues in the latter half of this year.

News Reference