Alfa Romeo, one of the 14 brands under Stellantis, has recently faced challenges as the automotive group navigates through troubling financial waters. Notably, Stellantis shares plummeted by over 8% following the unexpected departure of its CEO, Carlos Tavares, whose exit came just a year before his contract was due to expire. The company has experienced a significant decline in its share value since March, witnessing a staggering loss of nearly 60%. This downturn has been attributed to dwindling sales in the U.S. market as well as escalating inventories, which raised concerns regarding Stellantis’s financial stability. Highlighting these issues, Stellantis issued a profit warning in September, projecting a cash burn that could reach €10 billion in 2024, and a profit margin considerably lower than previously expected. As European automakers, including Stellantis, prepare for a challenging financial climate, the company has begun to reassess the future of its various brands, including Alfa Romeo.
The abrupt resignation of Tavares, who had helmed Stellantis since its inception in 2021 following the merger of Fiat Chrysler and Peugeot, points to underlying conflicts regarding the company’s strategic direction with the board. Tavares emphasized that the future viability of the company’s 14 brands would rely heavily on their financial performance. This approach put potentially underperforming brands like DS and Alfa Romeo at risk of being scrutinized more closely. Consequently, Stellantis appointed Chairman John Elkann as the interim CEO while the company undertakes the critical process of finding a permanent leader and redefining its focus amid challenges. Industry analyst opinions were polarized, with some citing the early leadership transition as potentially destabilizing, while others asserted that an interim leadership structure was already in place, mitigating potential impacts on stock performance.
Market analysts such as UBS and Bernstein have commented on the complexities surrounding Stellantis during this transitional period. UBS indicated that the recent rounds of profit warnings and leadership changes have revealed deeper issues within the company, such as an oversupply of inventory in the U.S., delays in rolling out new vehicles in Europe, and tensions with stakeholders, including unions and dealers. While UBS noted the unchanged forecast in Stellantis’s September profit guidance as a positive sign, the prospect of instability following Tavares’s sudden departure remains concerning to investors. Bernstein, in particular, raised questions regarding the Stellantis board’s decision-making process, questioning why they believed maintaining an interim CEO was preferable to having Tavares remain in his position.
Despite concerns, Tavares had garnered respect for his early achievements in consolidating Stellantis’s brand structure, which historically operated as competing entities within the marketplace. His strategies were effective in achieving quickly increased profitability by optimizing overlapping technologies and achieving better economies of scale. However, a notable fall in profitability within Stellantis’s North American operations led to the recent profit warning, casting shadows on Tavares’s credibility as CEO. This scenario underscored the volatility inherent in the automotive industry, particularly as it wrestles with systemic changes highlighted by shifts towards electric vehicles and evolving consumer preferences.
Investment firm Jefferies expressed further skepticism about Stellantis’s future, suggesting that the loss of Tavares’s leadership could hinder critical decision-making efforts necessary for addressing the company’s excess capacities, both in Europe and the U.S. They also contemplated whether the multi-brand conglomerate model, adopted by Stellantis and similar companies like Volkswagen, could endure amid the industry’s pressures for transformation and innovation. The emphasis on electric vehicles introduces additional complications that may challenge traditional automotive brand structures as the industry evolves in response to regulatory demands and consumer trends.
During a recent event at the Paris Car Show, Tavares highlighted Stellantis’s efforts to maintain a competitive edge amidst these dynamics, showcasing newer models from its Chinese affiliate, Leapmotor. He emphasized the strategic importance of adapting to market trends by launching locally assembled vehicles, including models like the TO3 and C10, as well as introducing the B10 compact SUV. Tavares’s ability to point to positive initiatives during his final appearances underscores the ongoing potential of Stellantis to recover from its current setbacks. However, this potential will depend on the company’s ability to navigate market challenges successfully, find a stable leadership solution, and efficiently manage its diverse portfolio of brands moving forward.
