Stellantis Seeks New CEO Amidst Struggles

DETROIT — Stellantis, the maker of Jeep and Ram vehicles, is on the hunt for a new CEO to succeed Carlos Tavares, but the company insists this is simply part of a regular leadership succession plan.

Tavares has faced criticism from U.S. dealers and the United Auto Workers union following a disappointing first-half financial performance. The company was caught off guard with an excess of high-priced inventory on dealer lots.

Since assuming control of the Netherlands-based company in January 2021 following the merger of PSA Peugeot and Fiat Chrysler Automobiles, Tavares has faced challenges in North America, where the company’s operations were once a major profit driver.

In a statement released Monday, Stellantis explained that Tavares’ five-year contract is nearing its expiration date in 2026. The statement affirmed, “It is normal for a board to look into the subject with the necessary anticipation given the importance of the position, without this having an impact on future discussions.”

The company added that Tavares might remain in his position beyond his current contract.

Erik Gordon, a University of Michigan business and law professor, believes the official confirmation of the CEO search suggests a likely departure for Tavares. “I think they recognize that it’s best for the company to have a new CEO,” Gordon noted, adding, “Stellantis is taking a lot of hits within the U.S.”

Gordon emphasized that companies often strive for a smooth and organized transition in leadership. “They don’t want it to look like chaos, they don’t want it to look like panic. They want it to look like this is the normal, responsible way we do things.”

Tavares has implemented cost-cutting measures, including factory opening delays, union worker layoffs, and buyouts for salaried employees.

Stellantis reported a 48% decline in first-half net profits compared to the same period last year. First-half U.S. sales dropped by nearly 16%, despite a 2.4% rise in overall new vehicle sales.

The accumulation of dealer inventory and high prices prompted criticism from the head of the U.S. dealers council, who urged the company to offer discounts to clear its stock.

When Stellantis announced plans to delay the reopening of a factory and the construction of a new electric vehicle battery plant in Belvidere, Illinois, UAW President Shawn Fain called for Tavares’ dismissal. Following a six-week strike last fall, the company ultimately agreed to the plans in a new contract with the UAW.

The union has filed grievances and threatened further strikes over the delays, which Stellantis attributes to U.S. market conditions. Fain blamed the issues on poor leadership from Tavares, pointing to General Motors and Ford’s continued success.

Stellantis maintains its commitment to reopening the Belvidere factory and building the battery plant, but cites slowing sales as a reason for the delays.

The company reports that it is actively collaborating with dealers to reduce inventory, resulting in improved August sales.

Chief Financial Officer Natalie Knight revealed during a Bank of America conference on Monday that the company is satisfied with its progress in reducing dealer inventory.

For example, Stellantis held just over 430,000 vehicles in its inventory at the end of June. This number was reduced by 40,000 in July and August, with the company aiming for a total reduction of 100,000 by the start of next year. “We’re going to continue to see reductions in September and throughout the year,” Knight stated.

Tavares acknowledged to reporters this summer that the global auto industry is caught between consumers seeking more affordable vehicles and the need for increased capital expenditure to develop new electric and gas-powered vehicles.

He also admitted that Stellantis allowed its inventory levels to rise too high in North America and that initial plans to rectify the situation were unsuccessful. Tavares pointed to inflated sticker prices as a major factor in deterring customers, even though discounts are available.

Several U.S. executives, including the heads of the Jeep, Dodge, and Ram brands, have left the company in recent months.

In March, the company announced the layoff of 400 white-collar workers in the U.S. as part of the transition from combustion engines to electric vehicles.

In November 2023, Stellantis offered buyouts and early retirement options to 6,400 nonunion salaried workers. The company has not disclosed the number of employees who accepted these offers.

The CEO search was initially reported by Bloomberg News on Monday.