Paris (AFP) – Shares in Jeep-maker Stellantis and Britain’s Aston Martin tumbled on Monday after both companies joined European rivals in cutting their profit forecasts. European auto giant Stellantis, whose other top brands include Peugeot, Ram, and Fiat, cited efforts to improve its US business as well as competition from Chinese automakers. The company, which also makes Maserati, Dodge, and Chrysler cars, said it now expected an adjusted operating income margin of 5.5 to 7.0 percent, having previously anticipated double-digit growth. Stellantis shares sank by almost 14.7 percent to close at 12.40 euros ($13.82) on the Paris stock exchange.
“While this is a highly anticipated profit warning … the magnitude surprises,” UBS bank analysts said in a note. For analysts at French brokerage Oddo BHF, the alert “raises major questions about the vision and direction for the company…and its credibility among investors”. In a statement, the company noted that efforts to improve its business in North America accounted for about two-thirds of the revision of its financial guidance for the year. Stellantis stated it had brought forward plans to reduce its dealer inventory levels to 330,000 units in the United States by the end of this year. The company offered promotional deals as US dealerships struggled to reduce their inventories.
Stellantis, which had previously expected a positive cash flow, now forecasts negative cash flow ranging from five billion to ten billion euros. “Deterioration in the global industry backdrop reflects a lower 2024 market forecast than at the beginning of the period, while competitive dynamics have intensified due to both rising industry supply and increased Chinese competition,” it said. European car companies have struggled to keep up with competition from Chinese electric vehicles. German auto giants Volkswagen, Mercedes, and BMW have also cut their guidance in recent weeks, partly due to weakness in China.
Aston Martin also cited the Chinese market as it trimmed its financial guidance for 2024, stating that its core profit is now expected to be “slightly below” the previous year’s. The company’s shares plunged 24.5 percent to £1.20 ($1.61) in late morning deals in London. Aston Martin, famous for being James Bond’s favorite car, announced that it would cut production by 1,000 units this year “to address disruption in its supply chain and continued macroeconomic weakness in China”. Delays in receiving components from suppliers have impacted the car maker’s output and postponed deliveries. However, the company asserted that its “fully reinvigorated portfolio of ultra-luxury high performance models” would support future growth.
© 2024 AFP
