Paris (AFP) – Carlos Tavares, a self-proclaimed “performance psychopath” who drove auto giant Stellantis with aggressive cost-cutting and high car prices, reached the end of the road as CEO when his strategy hit a dead end. Tavares engineered one of the most ambitious mergers in automotive history in 2021 when more than a dozen brands, including Jeep, Fiat, Chrysler, Peugeot, and Citroen, were put under the same roof. The Portuguese executive, who headed French group Peugeot-Citroen at the time, was appointed chief executive of the newly created French-Italian-American behemoth dubbed Stellantis.
His three-year tenure was marked by high profit margins that were the envy of its rivals in the auto industry, but the good times ended this year as sales plummeted in the United States, the group’s key market. Stellantis announced his abrupt departure in a statement Sunday night that hinted at tensions in the boardroom. Henri de Castries, an independent director on the Stellantis board, said in the statement that “different views have emerged” in recent weeks which led to the decision.
Tavares, 66, brought to Stellantis the same strategy that he had enforced at Peugeot-Citroen, which he had headed since 2014 when he took over at the French auto group. He was demanding with his teams, and his cost management included cutting jobs, closing factories, and tough negotiations that exasperated parts suppliers. Tavares championed a “pricing power” strategy for Stellantis brands, putting high prices on models and putting an end to discounts that weighed on margins.
After a series of record quarterly earnings, Stellantis cut its annual profit outlook in late September, citing a “deterioration” in the global car sector and problems in the American market. The situation with Dodge cars and Ram trucks was particularly worrying for Stellantis executives and financial markets, with new vehicles piling up on dealer lots as high prices and quality concerns turned off customers.
In Europe, the Fiat, Citroen, and Maserati brands were penalized by the late arrival of new models, sometimes due to software problems. “This is the end of the road for the strategy of cost cutting,” said German car analyst Matthias Schmidt. “All the juice has been squeezed” in what has become a “very weak market” that refuses to return to pre-COVID levels. Stellantis, like Volkswagen, also tried to produce as many models as possible on the same platform.
However, customers of its premium brands like DS, Alfa Romeo, or Jeep were increasingly unwilling to pay a premium price for cars that weren’t all that different from Stellantis mass market brands. “It became obvious that the vehicles were only rebadged Peugeots,” said Schmidt. “You can only go so far in commanding a price premium,” he added. The move upmarket by Korean and Chinese manufacturers also lured customers away from Stellantis premium brands.
For Schmidt, it was somewhat ironic given his past that Tavares “didn’t restructure even more in a weak market environment.” The group recently announced the closure of a factory in Britain but spared factories in France and Italy that are operating below capacity. Stellantis also ran out of road with its tight management of human resources, losing several senior managers in recent months, including three who jumped to work for Chinese giant BYD in Europe.
Stellantis announced in September it had begun looking for a successor to Tavares, who had been due to stand down when his current five-year contract expired in early 2026. But with the problems piling up, Stellantis’s board on Sunday unanimously accepted his immediate resignation. The move failed to reassure investors, with the company’s shares falling around seven percent on Monday.
© 2024 AFP
