Why Tavares’ troubles could mean changes at the top of Stellantis

Carlos Tavares should be thanked for admitting in June to “arrogance” and a slow response to the growing production and inventory problems that are weighing on the automaker he runs.

Four months later, Stellantis NV’s CEO is still right – and the problems look more serious on both sides of the Atlantic. The United Auto Workers and the automaker’s influential U.S. dealer group have launched an open revolt over allegedly broken promises and overpriced products, which is usually a harbinger of change in this city that dominates leadership positions. Trade union leaders in Italy are ordering demonstrations in the streets to protest against the production slowdown that is affecting their members.

Market share in the United States is declining, which is a major driver of profit; Production cuts and layoffs are mounting, even at pickup and SUV plants like Metro Detroit’s Warren Truck and Jefferson North; and in a recent statement, the company signaled that after record profits last year, Stellantis would seek to separate expensive inventory clogging dealer lots.

“The Act was created in connection with the decisions you made to plan for profits in 2023.” – wrote the leaders of the Stellantis National Dealer Council in an open letter to Tavares – “and your attempt to land softly on the backs of your employees, your dealers and your suppliers are simply wrong. We didn’t create this problem, the federal government didn’t create this problem, the UAW didn’t create this problem, and your workers didn’t create this problem – you created this problem.

Strong words for a difficult situation, the carmaker comments, but nevertheless described it as a “public, personal” attack “on our CEO.” The statement received praised “the action plan developed together with the dealer, which has already delivered results. August sales increased 21% compared to July, market share increased by 0.7 points, and dealer inventories decreased for two consecutive months by 42,000 units, or approximately 10 total.”

Yet a lot of collateral damage has been done to the most important audiences that every automotive CEO needs to succeed or keep their job. Apart from a stint in bankruptcy during the 2008 global financial meltdown, the last Detroit CEO to so undeniably come into conflict with workers and dealers was the CEO of Ford Motor Co. Jacques Nasser. He was fired in 2001 and replaced by Executive Chairman Bill Ford.

Tavares might consider drawing attention to this because he, too, works for a company controlled by another of the founding families of the global automotive industry, the Agnelli clan. Instead of lowering the temperature, Tavares appears determined to raise it, allaying fears about the revolving door in his North American executive suite in Auburn Hills, arranging sparring sessions with the UAW, partnering with Chinese company Leapmotors to build electric vehicles in Europe, and (at least the talk) matching to the lower cost structure set by Chinese players.

His claim that the industry is entering a “Darwinian” phase that could crush weaker players may be accurate, even if he sounds more like a CEO using harsh rhetoric to gain a tactical advantage. That may be true, but without strong operating results to dispel doubts about Tavares’ once-masterful modus operandi, the Stellantis boss looks more like an industry novice who’s losing his sense of humor.

Investors are taking notice: Stellantis’ market capitalization is around $43 billion, up from $86 billion in just six months. CEO John Elkann, Agnelli’s heir apparent, is reportedly considering candidates to succeed Tavares should the parent company’s board decide to fire Tavares in favor of a new CEO after (or before) the expiration of the incumbent’s contract in 2026. At this point, it would not be surprising if executives make a move leadership changes because it can be almost impossible to recover from such a multi-front battle.

In less than 12 months, the automaker that Tavares merged with Fiat Chrysler Automobiles NV and Groupe PSA of France went from Detroit’s financially strongest automaker to its smallest, from home to some of the Motor City’s hottest brands (Jeep and Ram) to complaints of incomplete lineups and an anticipated few replacements, from the graveyard of growling, gas-powered muscle cars to the expensive wait for successors, electric or otherwise.

The result: the U.S.-stable Tavares brand is relatively old and overpriced. His relationship with the revitalized UAW leadership is damaged beyond repair. Stellantis’ planned launch of electric vehicles risks missing out on the market as buyers cool to electric vehicles widely considered too expensive and too inconvenient to charge at home or away.

Arrogant cannot describe such an epic mistake. We know them when we see them in this city, unfortunately we are accustomed to seeing more than we think. Tavares inherited an enviable group of brands – including Jeep with global appeal and price flexibility – but it is fading because instead the desire to accumulate additional revenue and greater margins has left a nasty hangover.

Tavares is considered an intelligent and experienced executive, which makes Stellantis’ stumble in North America even more troublesome. He is said to be doing quite well at leading a global automaker. Now he has a chance to prove it.

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@DanielHowesTDN

Daniel Howes is senior editor/business and columnist for The Detroit News.