Stellantis ready to axe brands and fix US problems, says CEO

MILAN: Stellantis is taking steps to fix weak margins and high inventory at its US operations and will not hesitate to axe underperforming brands in its sprawling portfolio, its chief executive Carlos Tavares said today.

The warning for lossmaking brands is a turnaround for Tavares, who has maintained since Stellantis was created in 2021 from the merger of Italian-American automaker Fiat Chrysler and France's PSA that all of its 14 brands including Maserati, Fiat, Peugeot and Jeep have a future.

"If they don't make money, we'll shut them down," Carlos Tavares told reporters after the world's No. 4 automaker delivered worse-than-expected first-half results, sending its shares down as much as 10%.

"We cannot afford to have brands that do not make money."

The automaker now also considers China's Leapmotor as its 15th brand, after it agreed a broad cooperation with the group.

Stellantis does not release figures for individual brands, except for Maserati which reported an 82 million euro adjusted operating loss in the first half.

Some analysts say Maserati could possibly be a target for a sale by Stellantis, while other brands such as Lancia or DS might be at risk of being scrapped given their marginal contribution to the group's overall sales.

Few automotive brands have been killed off since General Motors ditched the unprofitable Saturn and Pontiac during a US government-led bankruptcy in the global financial crisis in 2008.

Tavares is under pressure to revive flagging margins and sales and cut inventory in the United States as Stellantis bets on the launch of 20 new models this year which it hopes will boost profitability.

Recent poor results from global carmakers have heightened worries about a weakening outlook for sales across major markets such as the US, whilst they also juggle an expensive transition to electric vehicles and growing competition from cheaper Chinese rivals.

Japan's Nissan Motor saw first-quarter profit almost completely wiped out today and slashed its annual outlook, as deep discounting in the United States shredded its margins.

Tavares said he would be working through the summer with his US team on how to improve performance and cut inventory.

"We consider that the job is done in Europe," he said.

"The job is not done in the US and we are now going to take care of that work."

The high-margin RAM pickup trucks and Jeeps that Stellantis sells to US consumers have driven its profits, but the company's weak margin posted today "raises questions over Stellantis' cost efficiency reputation," Bernstein analysts wrote in a client note.

Stellantis is taking "decisive actions to address operational challenges" in North America, including reducing production and prices in the region this quarter, chief financial officer Natalie Knight told reporters.
"(That) is the market that needs the most work," Knight said.

Analysts at Citi said in a note that the problems were likely to continue.
"We see no real improvement until and unless Stellantis removes the overhang from inventories – which itself would put pressure on full-year ...margins," they wrote.

Stellantis reported that its adjusted operating income (EBIT) fell 40% to 8.463 billion euros in the half year to June 30, below the 8.85 billion euros expected by analysts in a Reuters poll.

The company's margin on adjusted EBIT shrunk to just below 10%, slipping below the double-digit margin it aims to achieve for the full year.