The automobile group led by Carlos Tavares is now counting on a margin of between 5.5 and 7%, compared to 12% last year. Its cash flow swings into the bright red. Stellantis believes it is suffering from the situation in North America and an unfavorable market environment. Despite the measures announced, the stock is heavily sanctioned on the stock market (-14%).
Stellantis collapses on the stock market after the profit warning. ©AdobeStock-jetcityimage
The automotive group led by Carlos Tavares has drastically revised its financial objectives for 2024. Stellantis now expects an operating margin of between 5.5 and 7%… Significantly less than its initial “double-digit” objective. This is also a spectacular drop in this profitability ratio compared to the performance of previous years. In 2023, Stellantis had recorded a margin of 13%.
The free cash flow in the red
In addition, the group resulting from the merger of PSA and Fiat Chrysler now forecasts a cash flow in negative territory, estimated between five and ten billion euros. Here again, the underperformance is notable compared to initial forecasts (keep a free cash flow positive) and even more compared to the figures recorded so far (+13 billion in 2023).
Also read: Stellantis: Carlos Tavares tries to reassure after a complicated first half of 2024
The Franco-Italian-American group believes that this bad news is the consequence of a market situation below expectations, in a highly competitive context. In North America, where sales have been declining since the start of the year (-20%), the situation has worsened with the accumulation of stocks. This summer, Carlos Tavares announced important measures to rectify the situation, promising results from the second half of the year.
Inventory crisis in North America
Stellantis therefore announced that it was doubling the drop in network sales (i.e. 200,000 units) in North America over the second part of the year. It will also agree to commercial means to sell current stocks. The group wants to reduce the inventory level to 330,000 cars at the end of the year at dealerships.
Also read: In Detroit, Carlos Tavares prepares to reveal contingency plan for Stellantis
Finally, “initiatives” will be taken to improve productivity. It may be “cost and capacity adjustments. In other words, Stellantis is preparing to reduce its production in North America.
Carlos Tavares on an ejection seat
Carlos Tavares had made a my fault this summer on its negligence regarding the stock situation in North America. “We have been arrogant“, he admitted in front of an audience of financial analysts. Since then, Stellantis has announced that it has launched a recruitment process for a successor to Carlos Tavares. His term of office ends in March 2026.
Also read: Stellantis in search of Carlos Tavares’ successor
This profit warning, which comes after those of BMW, Mercedes and Volkswagen, caused panic in the markets. The price of Stellantis lost more than 14% in early trading on the Paris Stock Exchange this morning. The cumulative drop is 40% since the start of 2024.
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