Also read: In graphics – When the European automobile industry trembles
However, the automobile market has since stabilized at a very low level. Stellantis reported a significant downturn in the first half of 2024, with net profit halving, before facing even more serious challenges than anticipated in North America. Chief Executive Carlos Tavares had to abandon his coveted “double-digit” operating margin target for the year, which had positioned him well ahead of his competitors and justified his planned salary of 36.5 million euros ($34.3 million) for 2023.
A sector plagued by doubt
Is the company’s strategy under scrutiny? On the contrary, it “has proven itself,” insisted Stellantis’ CEO on Thursday, confidently standing in his moccasins during a visit to the Sochaux factory in eastern France. He argued that while these new targets serve as a “serious warning,” “it is not Stellantis that is facing difficulties, isolated from the rest of the automobile industry… it is Stellantis, Volkswagen, BMW, Mercedes, and this situation may continue.” In Europe, only its major French rival Renault has not yet revised its goals downward.
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The enforced shift to electric vehicles complicates the outlook for these manufacturers in an already bleak market. Several companies, including Mercedes and Renault, have requested a revision of CO2 emissions standards, which will compel them to sell more electric vehicles starting in 2025. Carlos Tavares views the situation differently, having long contested a “dogmatic” shift to 100% electric vehicles by 2035.
“Everyone has been aware of the rules for a long time; everyone has had the opportunity to prepare, and now we are racing,” he stated in an interview with AFP in September. Juggling travel commitments, this vintage car enthusiast visits historic racetracks about ten times a year. He clarified on Thursday that he aims to “contribute to addressing the problem” of global warming for his four grandchildren while safeguarding citizens’ “freedom of movement” in their vehicles.
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In order to reduce costs, it is essential for production to be less expensive, placing pressure on both employees and suppliers. Consequently, employees are regularly encouraged to leave, aligned with job cuts plans. Concurrently, the Franco-Italian-American group increasingly turns to low-cost countries such as Brazil, Morocco, or Turkey for car manufacturing.
Many unions condemn these practices, and strikes are threatened in Italy and the United States. “It is normal for the entire social fabric of the company to mobilize to reduce costs,” replied Carlos Tavares on Thursday. “The management of this company is not afraid to be unpopular.”
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Having attended a French high school in Lisbon, this key player began his career at Renault, before stepping down from his position as number two in 2013, constrained by the all-powerful CEO of that time, Carlos Ghosn. In 2014, he took control of the PSA group, which was struggling due to a crisis that had significantly impacted the European market for new cars. PSA was narrowly saved from bankruptcy thanks to the intervention of the French state and the Chinese manufacturer Dongfeng in its capital.
The leader mentioned on Thursday that he might retire at the end of his first term in January 2026, and discussions about his succession are expected to occur soon within the group. “If you ask my wife, she will say that it is a requirement on her part. I am a good husband,” said Carlos Tavares, who splits his time between France and Portugal, where he owns vineyards and a garage for vintage cars.
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Stellantis: Navigating Challenges in the Automobile Industry
Also read: In graphics – When the European automobile industry trembles
The automotive market has faced numerous hurdles, and Stellantis is no exception. In the first half of 2024, the company reported a significant drop in net profit, falling by half. Challenges in North America forced CEO Carlos Tavares to rethink the ambitious “double-digit” operating margin goal set for the year, which previously justified his hefty compensation package of 36.5 million euros ($34.3 billion CHF).
A Sector Plagued by Doubt
The conversation surrounding Stellantis’ strategy raises an essential question: Is the company’s strategic direction in jeopardy? Tavares argues that the current challenges are indicative of broader industry woes. “It’s not just Stellantis; it’s affecting Volkswagen, BMW, Mercedes, and more,” he proclaimed during a recent factory visit in Sochaux, France. He noted that only Renault has managed to maintain its targets without downward revisions.
Related Read: European Union gives green light to taxes on Chinese electric cars
The ongoing shift towards electrification in the automotive industry complicates matters further. Major players like Mercedes and Renault are lobbying for changes to CO2 emission standards, which will require an accelerated transition to electric vehicles by 2025. Tavares, however, maintains that the guidelines have long been established and there is little room for alteration. He asserts, “Everyone has known the rules for a long time, and now we are racing towards compliance.”
The Impact of Electrification on the Automotive Landscape
The forced transition towards electric vehicles is reshaping the entire industry even as the market grapples with uncertainty. The implications of this transition are far-reaching:
- Rising Costs: The costs associated with R&D and production of electric vehicles are significant. Companies must invest heavily in new technologies and infrastructure.
- Job Security: The shift towards electrification may lead to reduced labor forces, which could soon lead to strikes and unrest among employees in various regions.
- Global Competition: Manufacturers in emerging markets may capitalize on lower production costs, putting pressure on established European brands.
Strategic Adjustments and Production Shifts
To counter the challenges posed by increased competition and the need for cost-efficiency, Stellantis has begun shifting production operations to low-cost countries, including Brazil, Morocco, and Turkey. This strategy has raised significant concerns among unions, as job cuts are becoming a recurrent theme. Tavares remarked, “It is normal that the entire social body of the company mobilizes to reduce its costs,” further hinting at the stringent measures necessary to sustain profitability.
Employee Morale and Labor Relations
Amid the push for efficiency, the morale of employees becomes a critical factor. Stellantis faces accusations of fostering an environment of uncertainty and dissatisfaction among workers. Union representatives are sounding alarms about future layoffs and the increasingly corporate-driven management style. Tavares responded, stating that “the management of this company is not afraid of being unpopular,” signaling a challenging time ahead for employee relations within the firm.
Executive Vision: Carlos Tavares
The driving force behind Stellantis, Carlos Tavares, has an extensive background in the automotive industry, previously ascending through various roles at Renault and the PSA Group. His leadership style has been characterized by directness and clear communication, though it hasn’t come without controversy. Tavares has hinted at retirement plans at the end of his first mandate in January 2026, a prospect that will inevitably foster discussions about succession and organizational direction.
Beyond business, Tavares engages in personal passions, including vintage cars and vineyard management between France and Portugal. His hobbies reflect a balanced life amidst the overwhelming pressures of steering an automotive giant through turbulent times.
Industry Competition and Rival Strategies
Stellantis is not alone in navigating these trying waters; the entire automotive sector is experiencing shifts in strategies. Major competitors are exploring various avenues, including:
- Enhanced EV Production: Firms like VW are increasing their electric vehicle portfolios while also investing in hybrid technologies.
- Collaborative Innovation: Many companies are partnering with tech firms to advance battery technology and improve the overall driving experience.
- Consumer Engagement: Automakers focus on marketing strategies that better connect with eco-conscious consumers to stimulate sales.
Table of Current Market Trends in the Automotive Industry
| Trend | Description | Impact |
|---|---|---|
| Electrification | Shift towards producing electric vehicles | Higher investment costs and production shifts |
| Global Sourcing | Manufacturing in emerging markets | Cost reduction but potential local backlash |
| CO2 Standards | Stricter emission regulations create urgency | Increased R&D investments and strategic pivots |
| Consumer Preferences | Heightened demand for sustainability in vehicles | Need for innovative marketing and product development |
Further Reading: After the lion’s share, the slow decline of the car manufacturer Peugeot in Sochaux
The evolving automotive landscape interrogates the resilience of established manufacturers. Stellantis must adapt swiftly, balancing cost control while nurturing relationships with its workforce, all while delivering a transformative array of electric vehicles to compete successfully in the global market.
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