You may or may not have heard the name Stellantis but you certainly know at least some of its 14 Brands four of them American. Stellantis is the fifth largest automaker in the world. It had a banner year in 2023 but 6 months later the company is struggling. after hitting a high in March 2024 shares have fallen by more than half. Shareholders are losing enthusiasm the whole discussion on Stellantis has collapsed.
As a result of the disappointing US sales profits have fallen by nearly 50% and market share is down. On September 30th, 2024 the company slashed its forecasts for full-year profitability and cash flow the stock plunged nearly 133% by closing. There is mounting pressure on Stellantis as CEO and calls for him to step down. so how did Stellantis get to this place and can it recover?
Check out these charts there’s Stellanti’s financial results for the first half of 2024.
The stock’s full-year performance as of early October has fallen from a high of 29.51 in March to just above $13.
It’s mostly due to poor US sales of its American brands. It isn’t the only automaker going through tough times but it is one that has lost significant market share to its rival over the last 3 years.
In September, several Stellantis National Dealer Council officers sent an open letter to the company accusing management of being behind the troubles. Dave Kellerer is a Dodge Jeep Ram and Chrysler dealer in Pennsylvania. Three years ago dealers like Kellerer were earning profits of about 4.5% of sales which is strong for the industry. The Benchmark is 4% but now Kellerer says the average is less than 1%.
In the same period, the values of those dealerships have plummeted from five to 5 and a half times earnings to 1 to two times depending on the dealership’s location. Kellerer sells 100 cars a month whereas he used to sell about 185. As of mid-September, he had 473 cars on his lot collectively worth about $27 million. bear in mind, that dealers buy their cars directly from the automaker. Kellerer has been selling these cars his entire career and has seen the ups and downs. This time he says the troubles are of Stellantis his own making.
The dealers aren’t the only discontent stakeholders. The United Auto Workers Union has been threatening to strike again and earlier in 2024 Stellantis suppliers were halting production over pricing disputes. The disputes have spilled into the court’s North American operations where you know highly profitable and and kind of seen as a little bit of a cash cow. Maybe the idea was it could run itself with that much influence but it still needed support.
Stellantis has only existed for about 3 and a half years. It was created out of a merger of two major automakers France’s group PSA and FIAT Chrysler Automobiles, which was itself a merger of two other companies. The Italian maker Fiat and the American Chrysler a companies with a long and tumultuous history. Chrysler has always been the weakest of the three major producers in the United States. it had the smallest market share of the Detroit 3 the three major automakers based out of Detroit Michigan.
Here’s what volumes look like for the Detroit 3 in 2007, one year before the financial crisis. by 2009, Chrysler and GM both went bankrupt. Then came the merger with Fiat. a Revival followed under the leadership of former FCA CEO the late Sergio Maron whose turnaround at Chrysler was at times considered miraculous and at others marred by controversy.
The Jeep Dodge and RAM Brands all set sales records in 2018. The Ram truck was taking share from its competitors the F-150 and the Silverado.
The Dodge Challenger was a muscle car in a declining segment and the car itself saw a few significant updates over its lifetime. But that didn’t matter it eventually outsold both the Chevrolet Camaro and the Ford Mustang despite all the success. Fiat Chrysler’s board was long known to be looking for a deal first with the American GM then the French maker Reno and then PEUGEOT.
PEUGEOT had a strong presence in Europe. The company had already bought GM’s Opel and Vauxhall brands. In some sense, it seemed like a natural fit.
But there was also the opportunity to cut costs and save billions of dollars through synergies such as sharing parts and platforms. This could also reduce the burden of investing in extremely expensive new technologies like EVs, automated driving, and software and of course, pay money out to shareholders.
In the middle of the merger, the Coronavirus pandemic hit. The factory shutdown supply chain disruptions and materials shortages severely constrained Supply. Dealers made up for the lack of inventory by raising prices on the cars they could sell. customers paid and dealers made profits. As the pandemic rolled on automakers started raising prices too. Stellantis did it much more aggressively than others.
The company also started releasing some very pricey new models including the Wagoneer and Grand Wagoneer two three-row SUVs priced starting at around $60,000 and going all the way up to $120000. The price hikes along with the internal Cost Cuts provided Stellantis with a year of record sales profits and cash flow but things were already beginning to slip.
"over the course of the pandemic products weren't being refreshed products were kind of starting to languish yet the positioning and pricing was going up and consumers certainly voted with their pocketbooks and went elsewhere "
Ed Kim
President and Chef Analyst-Auto Pacific
There were product quality issues including on new and high priced Vehicles such as the Wagoneer models. If you want to charge a premium price for your product the consumer is going to expect extra features and extra benefits. They want to enjoy that product.
At the same time, the company cleaned house removing models that no longer considered sufficiently profitable or worth producing. For example the Jeep Renegade, Jeep Cherokee, and the Chrysler 300. But the Cherokee was a mass-market midsize SUV that used to compete with top sellers like the Toyota Rav4 and Honda CR-V. The Renegade was in the popular and relatively inexpensive subcompact SUV segment. The Chrysler 300 was one of the automaker’s last sedans key to Bringing customers into the brand and hopefully keeping them for years or even a lifetime.
"We had the best SUV lineup in America. We had a great Ram truck we had commercial vehicles. we had sedans. I had a full menu we don't have that any longer."
By DAVE KELLEHER
President, Dave Auto Group
The charger and Challenger were folded into one nameplate. The closely related Chrysler 300 is gone and the company’s big V8 engines are being swapped for smaller nline-6 engines. Which bothers Ram customers. The Dodge Hornet a newish small SUV based on an Alpha Romeo product hasn’t sold well.
Of all the brands in the US Stellantis brands are among those sitting on dealer Lots the longest. Five of the eight brands with the most day supply are all Stellantis brands including every Chrysler brand. That means they aren’t selling. Dealers like Kellerer say this is due to high prices overall he estimates that the average price of the cars on his lot is about $60,000.
Dealers and analysts say the company is starting to offer some incentives to try to move cars off their lots and make way for the 2025 five models Stellantis is hoping to sell them.
"We appreciate the fact that they finally hurt us and gave us some money to help us sell these cars but it's probably not enough"
By DAVE KELLEHER
President, Dave Auto Group
"It would have been much cleaner if they had kitchen synced it on Q2 or the Capital Market stay and said look we're just going to take a bunch of money put that on the cars we'll get The Cars Moving and we'll go back to a good business. but that's not what they did. Carlos set targets for the North American team and when the North American team did not achieve those targets he simply started exchanging management."
Daniel Roeska
Managing Director,Senior Research Analyst
Bernstein
A lot of former top Chrysler Executives have left the company in recent years such as former Dodge CEO Tim Kinisus and former Jeep and RAM executive Jim Morrison whom Keller her credits with playing a part in Reviving the Jeep brand.
so in the short term, Stellantis needs to sell more cars and clear out dealers Lots of long-term critics say Stellantis doesn’t have enough fresh products and the right kind of product. There are several vehicles on the way the company plans to replace the Cherokee with a new SUV in 2025. It is one of several new products slated for release in the coming years.
Free for use under the Pixabay https://pixabay.com/photos/jeep-wrangler-rubicon-jeep-wrangler-1312276/
The Jeep Recon an electric SUV that would compete with products from companies like Rivan the revamped charger is set to hit dealers by the end of 2024 including the electric version. Even Chrysler is set to have at least three new products starting in 2026 including an electric Pacifica Minivan and two electric crossovers.
Ram is slated to release a fully electric pickup and another truck called The Ram Charger. It’s electric but comes with an onboard generator that charges the battery. Which helps with long-distance travel. There are competitive products already in the lineup Jeep’s 4Xe hybrid technology can go 20miles or 30miles on electric power. Stellantis is a plug-in hybrid including the Wrangler 4Xe are top seller.
however, Stellantis is a new STLA platform that can accommodate gas burning internal combustion Vehicles, hybrids, and EVS. When Stellantis introduced the strategy its inclusion of three different powertrains seemed like a waste at a time when EVs were expected to rapidly take over the market.
Stellantis said that it built an action plan designed to turn the corner in the second half Beyond Stellantis also said in a public response to the dealer letter
