Dodge maker Stellantis drops profit warning

Shares of European automakers fell sharply on Monday morning as Stellantis and British luxury brand Aston Martin issued profit warnings, citing broader industry challenges and difficulties in the world’s largest car market, China.

On Monday, Stellantis cut its annual forecast for 2024 on deteriorating “global industrial dynamics” and strengthened competition from China, sending Milan-listed shares lower at the open.

The French-Italian conglomerate, known for brands including Chrysler, Dodge, Jeep and Maserati, warned of lower-than-expected sales “in most regions” in the second half of the year. It currently estimates adjusted operating income (AOI) margin of 5.5% to 7.0% for full-year 2024, compared to a double-digit forecast.

“The deterioration in the global industry reflects a lower market outlook for 2024 than at the beginning of the period, while competitive dynamics have intensified due to both increasing supply in the industry and increased competition in China,” the automaker said.

It also lowered its industrial free cash flow guidance to a range of minus 5 billion euros ($5.58 billion) to minus 10 billion euros compared to earlier “positive” forecasts as a result of lower projected AOI margin and temporarily higher working capital in the second half this year.

The automaker further attributed the changes to its guidance to “a decision to significantly increase remediation of performance issues in North America,” but did not provide any additional details. Earlier this year, Stellantis was sued by U.S. shareholders who claimed the automaker defrauded them by hiding growing inventories and other items, Reuters reported.

This month, U.S. dealership network Stellantis criticized CEO Carlos Tavares for the company’s recent sales declines, factory production cuts and other decisions they deemed harmful to the automaker’s business.

As of 10:15 a.m. London time, the carmaker’s shares were down 13%.

British luxury carmaker Aston Martin, whose iconic models rose to prominence thanks to their appearances in the James Bond film series, also signaled cuts to profit margins and production targets for this year.

It announced a reduction of about 1,000 units in response to “supply chain disruptions and continued macroeconomic weakness in China,” expecting its 2024 earnings before interest, taxes, depreciation and amortization (EBITDA) will now be lower than that of previous year. efficiency.

The company said it no longer expects to achieve positive free cash flow in the second half of this year and noted that its full-year gross margin is expected to be below 40% compared to its previous target of around that threshold.

Aston Martin said it “addresses supply chain challenges and continues to recognize the significant market opportunities presented by China as its macroeconomic environment improves.”

The company’s shares were down about 23% at 10:15 a.m., with Reuters reporting that the company was poised for its worst one-day decline since March 2020, following a short-lived decline of just 26% earlier in the session.

The profit warnings for Stellantis and Aston Martin came days after German carmaker Volkswagen on Friday once again lowered its annual guidance, which now projects an operating rate of return on sales of 5.6% in 2024, from the previous range 6.5–7.0%.

In a Google-translated stock report, it attributed its lowered forecasts to delayed development of passenger car and commercial vehicle brands, as well as “the deterioration of the macroeconomic environment, creating further risks, particularly for the Core brand group.”

European carmakers are struggling to maintain their position in China, whose own carmakers are now seeking to boost sales of electric vehicles in Europe. The broader shift to electric vehicles “is increasingly putting European carmakers under pressure, while total new car sales in their domestic markets are not returning to pre-pandemic levels,” ING analysts warned earlier this month.

At 10:14 a.m. London time, Volkswagen shares were down 2.8%.