Stellantis, struggling maker of Jeep and Ram, seeks a new CEO

Stellantis, the parent company of Jeep and Ram, is currently on the lookout for a new CEO to take over from Carlos Tavares. The firm has clarified that this search is part of a routine leadership succession plan.

Recent financial struggles have put Tavares under scrutiny, particularly following a disappointing performance in the first half of the year. The company was caught off guard with an excess of high-priced inventory sitting on dealer lots.

Tavares has been at the helm since January 2021, when the Netherlands-based Stellantis was formed from the merger of Fiat Chrysler Automobiles and PSA Peugeot. While North America once served as the company’s main profit generator, it has faced significant obstacles in the current market.

The company issued a statement indicating that Tavares’ five-year contract will expire in a little over a year, in 2026. “It is standard protocol for a board to explore the subject with the necessary foresight due to the significance of the position,” the statement read, noting that Tavares might extend his tenure.

However, Erik Gordon, a business and law professor at the University of Michigan, suggested that the announcement of the CEO search indicates a forthcoming departure of Tavares. “They are likely recognizing the need for fresh leadership as Stellantis faces numerous challenges in the U.S. market,” he stated.

Gordon explained that companies prefer to manage leadership transitions smoothly, avoiding a perception of chaos or panic. “It is essential for them to portray this as a responsible and expected course of action,” he added.

In response to the current issues, Tavares has initiated cost-cutting measures, which include the postponement of factory openings, layoffs among union employees, and buyouts for salaried staff.

Stellantis reported a staggering 48% drop in net profits for the first half of the year compared to the same period in 2022, with U.S. sales plunging nearly 16%, despite an overall increase of 2.4% in new vehicle sales nationally.

The mounting inventory at dealerships, coupled with high vehicle prices, has led to discontent among the company’s dealer network. The head of the U.S. dealers council has urged Stellantis to enhance discount offerings to help clear vehicles from dealer lots.

Further complicating matters, the automaker informed the United Auto Workers union about delays in reopening a factory and the establishment of an electric vehicle battery plant in Belvidere, Illinois. UAW President Shawn Fain responded by calling for Tavares’ dismissal, emphasizing that the company had committed to these plans under a contract signed after a protracted six-week strike last fall.

The UAW has since filed grievances and threatened strikes over these delays, with Fain attributing the issues directly to Tavares’ leadership, in contrast to the positive performance of competitors like General Motors and Ford.

Stellantis maintains that it will fulfil its obligations regarding the Belvidere facility and battery plant, but insists that delays are necessary due to current market conditions.

The company is actively collaborating with its dealers to manage inventory levels, and their efforts saw an uptick in sales in August. Chief Financial Officer Natalie Knight highlighted that the inventory had decreased by 40,000 units over July and August, with a goal of reducing total inventory by 100,000 by the start of next year.

Tavares shared insights over the summer, indicating that the global auto industry is facing a dilemma: consumers increasingly seek affordable vehicles while the demand for investment in electric and traditional vehicle development rises.

In North America, he acknowledged that Stellantis had allowed its inventory to swell excessively and that earlier strategies to rectify this situation fell short. He pointed out that high sticker prices deter potential customers, despite the availability of discounts.

Recent months have seen several high-level executives depart from the company, including those overseeing the Jeep, Dodge, and Ram brands. Additionally, a layoff of 400 white-collar workers was announced in March, coinciding with the industry’s shift from combustion engine vehicles to electric alternatives.

In November 2023, Stellantis extended buyout and early retirement offers to 6,400 nonunion salaried positions, though the specific number of acceptances remains undisclosed.

The search for a new CEO was first reported by Bloomberg News.