MILAN — Carmaker Stellantis, the world’s fourth largest carmaker, slashed its earnings forecast on Monday, citing investments to turn around its U.S. operations amid a wider industry slump and increased Chinese competition.
Stellantis said it was accelerating efforts to turn around North America, including bringing dealer inventory levels to no more than 300,000 vehicles by the end of the year, instead of the first quarter of 2025 as previously planned.
The action is in the back of a decrease in shipments of 200,000 vehicles in the second half of this year compared with a year earlier, twice as many as the company had forecast. The company will offer higher incentives on 2024 and older models.
In its profit warning, Stellantis said it expected to finish the year with a negative cash flow of 5 billion euros to 10 billion euros, ($5.6 billion to $11.2 billion) instead of positive.
The carmaker, which was created in 2021 from the merger of PSA Peugeot with Fiat Chrysler Automobiles, also dropped its operating profit margin guidance to 5.5% to 7.0%, instead of double digits.
Stellantis shares were down 14.45%, trading on midday Monday in Milan at 12.45 euros.
The struggling maker of Jeep and Ram is looking for a new CEO to succeed Carlos Taveres, who is under fire from U.S. dealers and the United Auto Workers union after a dismal first-half financial performance. The company has portrayed the search as a normal leadership succession plan.
UAW leadership met last week to review contract violations and what they called illegal behavior by Stellantis. UAW President Shawn Fain advised Stellantis in a letter that the union is moving toward a strike. An autoworkers’ strike last year cost the company 3 billion euros ($3.2 billion) in revenues.
Stellantis is also under pressure in Italy, home to one of the main shareholders, due to production cuts. Autoworkers announced a one-day strike on Oct. 18.
The company reported that first-half net profits were down 48% compared with the same period last year. First-half sales in the United States were down nearly 16%, even though overall new vehicle sales rose 2.4%.
Stellantis, the multinational automotive company formed from the merger of Fiat Chrysler Automobiles and PSA Group, is facing a challenging road ahead as it grapples with a downturn in the industry and increased competition from Chinese automakers.
The company recently announced that it would be reducing its forecasts for the year, citing ongoing supply chain issues and the impact of the global semiconductor shortage. Stellantis now expects its operating profit margin to be around 5.5% for the year, down from its previous forecast of 7.5%.
This news comes as the automotive industry as a whole is facing significant headwinds, with global car sales expected to decline by 6.2% in 2021, according to the International Energy Agency. The ongoing semiconductor shortage has also disrupted production for many automakers, leading to reduced output and higher costs.
In addition to these challenges, Stellantis is also facing increased competition from Chinese automakers, who are rapidly expanding their presence in key markets around the world. Chinese companies like Geely, BYD, and NIO are investing heavily in electric vehicles and autonomous driving technology, posing a threat to established players like Stellantis.
To stay competitive in this rapidly changing landscape, Stellantis will need to focus on innovation and agility. The company has already announced plans to invest €30 billion in electrification and software development over the next five years, with the goal of having 70% of its European sales be electric or hybrid vehicles by 2030.
Stellantis will also need to continue to streamline its operations and improve efficiency to weather the current industry downturn. The company has already announced plans to cut costs by €5 billion by 2024, through measures like reducing complexity in its product lineup and optimizing its manufacturing footprint.
Despite these challenges, Stellantis remains optimistic about its long-term prospects. The company has a strong portfolio of brands, including Jeep, Ram, and Peugeot, which have loyal customer bases and strong brand recognition. By focusing on innovation, efficiency, and strategic partnerships, Stellantis can navigate the current challenges facing the automotive industry and emerge stronger in the years to come.
