By Nick Carey, Ben Klayman and Gilles Guillaume
PARIS (Reuters) -Stellantis CEO Carlos Tavares alternated between defiance and contrition about the company's turnaround plans on Monday in a packed schedule of public events at the Paris auto show following a massive profit warning.
The Sept. 30 warning from the world's No. 4 automaker shocked investors used to high margins fueled by lucrative U.S. pickup truck and Jeep sales. Stellantis (NYSE:STLA) stock is now down nearly 45% year-to-date.
Tavares initially brushed off the U.S. problems as a "small operational error." But Stellantis shares slid further last week as news of his exit when his contract expires in 2026 and a major management reshuffle failed to soothe investors.
Speaking to reporters at the show on Monday, Tavares said he had not sought a further term as CEO "for personal reasons".
"I'm the guy who is heading the company, so I'm here to take the hits," Tavares told reporters.
But Tavares said Stellantis' U.S. problems came down to a "risky" second-quarter marketing plan decided upon by regional managers in that market.
"I saw that it was risky," Tavares said. "I could have stopped it. I didn't and it didn't work."
Previously seen as almost invincible after revving up Peugeot (OTC:PUGOY) maker PSA and then overseeing its merger with Fiat Chrysler to create Stellantis, Tavares was in unfamiliar territory as he embarked on a media blitz.
The 66-year-old was scheduled to speak at five events, the same as Renault (EPA:RENA) CEO Luca de Meo but more than executives from BMW (ETR:BMWG) and many other automakers. Volkswagen (ETR:VOWG_p) chief Oliver Blume will not attend the show at all. In the end, he took questions at four briefings.
Under pressure to explain how he plans to revive Stellantis' fortunes in his remaining 18 months in charge at a time of growing competition from cheaper Chinese rivals, weak demand, and rising costs, Tavares told French radio RTL he could not rule out job cuts.
He also said keeping up with Chinese rivals and staying profitable could require plant closures or offloading brands, adding it was up to the group's customers to decide which brands had a future.
He also said Stellantis' U.S. problems should be fixed by the end of the year.
"It's essentially a problem of excessive inventories," said Tavares, adding: "I can safely say the problem will be solved before Christmas 2024."
An investor update would probably come before Christmas, he told reporters. The company's shares ended the day up 1.6%.
Data from analysts and interviews with industry players show major U.S. operational errors at Stellantis, which raised prices beyond customers' budgets then reacted too slowly to discount models, leaving tens of thousands of cars stuck on dealer lots.
"They tried for too long to stand tough on pricing," said Erin Keating, an analyst at researchers Cox Automotive, whose data show inventory problems across the board at Stellantis.
"When the U.S. is your cash cow, it seems negligent to ignore it."
Dealers complain that, besides over-pricing, Stellantis scrapped entry-level vehicles and under-invested in popular cars while rivals including Ford (NYSE:F) and General Motors (NYSE:GM) revamped theirs.
Ford in particular has eaten into Jeep's market with its Bronco SUV.
In a Sept. 10 letter to Tavares, Stellantis national dealer council president Kevin Farrish complained the pursuit of short-term profits meant "rapid degradation" of the Jeep, Dodge, Ram and Chrysler brands, adding: "You created this problem".
David Kelleher, president of David Auto Group, which has a Chrysler-Dodge-Jeep-Ram store outside Philadelphia, said when Stellantis was created in 2021 he sold an average of 165 new cars per month. This year, that has fallen to 89.
"We need a CEO who understands the North American market," Kelleher said.
Tavares faces tough choices and a possible battle with the United Auto Workers (UAW) union to fix Stellantis' problems. The UAW has threatened to strike over delayed investments, prompting lawsuits from Stellantis accusing the union of breach of contract.
Experts say, long term, Stellantis must determine whether it needs four separate U.S. brands.
'PRICED OUT OF THE MARKET'
In downturns going back to the early 1980s when Lee Iacocca turned Chrysler around, the company that is now Stellantis has often been the first of the Detroit Big Three to suffer, with lower-cost products and more price-sensitive customers.
Today, Stellantis' problem is different.
Like rivals, Stellantis raised prices during the pandemic as supply chain glitches caused shortages of new cars. But it then refused to lower them.
Pat Ryan, CEO of car-shopping app CoPilot, said Stellantis raised prices 50% between 2019 and 2024, while inflation rose 23%.
"Stellantis really priced themselves out of their historical market," Ryan said.
Data provided to Reuters by CoPilot show 131 days supply on dealer lots of Ram 1500 pickup trucks, 41 days above its nearest rival the Chevrolet Silverado. Supply of the Jeep Wagoneer stands at 137 days, 22 days above nearest rival the Ford Expedition. Other models show similar or even larger gaps.
"Everyone has inventory problems, but nowhere near as chronic or dramatic as at Stellantis," Ryan said.
A slow response left Stellantis with a higher proportion of 2023 model year cars - that require larger discounts to sell - than most rivals on dealer lots even as 2025 models arrive.
Cox Automotive data provided to Reuters show as of early October Stellantis 2023 models still accounted for 19.3% of Dodge cars, 8.3% of Chrysler vehicles, 2.3% of Ram trucks and 1.3% of Jeeps on dealer lots. Meanwhile, 2025 models already account for 36.6% of Ram's inventory and between 11% and 14.5% for the other brands.
Stellantis reported a 20% drop in third-quarter U.S. sales, despite "aggressive" incentives across its U.S. portfolio.
According to Cox data, incentives for Jeeps as a percentage of average transaction price rose to 9% in September from 5.3% in May and to 9.6% from 6.3% for Ram pickup trucks.
CoPilot's data show Stellantis offering $4,500 cash back on a Ram 1500 pickup truck, Ryan said, but Stellantis may need to double discounts to slash inventories.
It could also cut production.
"They (Stellantis) just need to produce less ... for a few months to get dealer stock back in line," said Brian Sponheimer, an analyst at Gabelli Funds, a Stellantis investor.
Beyond the immediate crisis, experts say Jeep and Ram - and especially Dodge and Chrysler - have few vehicles, but each with separate and costly marketing, branding and design teams.
"Stellantis has substantial brand work to do in the U.S.," Cox's Keating said. "And that's going to be painful."