Stellantis shares dropped just over 8% in Europe after news storied CEO Carlos Tavares had stepped down just over a year before his contract expired.
Stellantis shares have lost almost 60% of their value since March, when falling sales in the U.S. and burgeoning stocks shook its financial position.
This led to a profit warning in September which included a forecast of a cash burn of up to €10 billion ($10.5 billion) in 2024. Stellantis cautioned shareholders that the profit margin in 2024 would be closer to 5.5 to 7.0%, not 10%. German automakers also issued profit warningsat the same time, but not on this scale.
Around the same time Tavares described reports of an imminent merger with Renault as “speculation” while Renault CEO Luca de Meo called them “rumors”.
In late morning trading in Europe, the shares stood at €11.59, down just over 7.5%, according to Reuters data.
Stellantis brands in the U.S. include Dodge, Ram, Jeep and Chrysler. Tavares has been Stellantis CEO since it was formed in 2021 by the merger of Fiat Chrysler and Peugeot. This included Citroen, Fiat, Alfa Romeo, DS, Opel, Vauxhall and Maserati.
Stellantis said Tavares was leaving early because his views on the company’s future clashed with the board. It didn’t elaborate. Tavares had said the future of the 14 brands would depend on their financial performance, which would have jeopardized weak performers like DS and Alfa Romeo.
Chairman John Elkann will take over as interim CEO.
Investment bank UBS said the timing of Tavares’ exit was a surprise, but the fact the replacement process was already under way would lessen the impact on the stock price.
“The last few quarters at Stellantis have been characterized by dealing with the excessive U.S. inventory situation and delays in European launches, alongside deteriorating financials and tensions with various stakeholders like the UAW, U.S. and EU dealers,” UBS said in a research note.
UBS said on the positive side Stellantis left its September profit warning unchanged, while the expected CEO replacement process had been brought forward by about six months
Investment researcher Bernstein didn’t like the potential uncertainty.
“The market will inevitably ask why the Stellantis board considered that not having a permanent CEO for some months was preferable to keeping the current CEO in situ. We struggle to identify any scenario under which these events can be positively spun as far as the stock price is concerned,” Bernstein said in a report.
Investors lauded Tavares for his success in bringing together the 14 brands under the Stellantis umbrella, which often appeared to fight against each other for sales. His methods made impressive profits quickly, as overlapping technologies were dropped and economies of scale exploited.
But his credibility was undermined by the collapse of profitability in Stellantis’ North American operations which had caused the profit warning, according to Bernstein.
Investment researcher Jefferies said the early departure of Tavares left Stellantis without leadership at a critical time when brand decisions were required and with excess capacity in Europe and the U.S.
“From various sources, we understand Carlos Tavares was determined to actively contribute to turning around performance. We can only assume the board sanctioned his proposed course of action and/or his management style,” Jefferies said in a report.
Jefferies wondered if multi-brand groupings like Stellantis and Volkswagen could survive the industry upheavals, currently led in Europe by the forced switch to electric vehicles.
“The difficulties of Stellantis continue to cast doubts about the global brand conglomerate business model – GM in the past, Ford and VW currently – as well as CEO longevity in an industry as structurally and cyclically challenged as Autos,” Jefferies said.
At the Paris Car Show in October Tavares was able to point to launches from its Chinese affiliate Leapmotor, which has allowed Stellantis to keep ahead of the European competition with locally assembled models like the TO3, and C10. A new model, the B10 compact SUV, was unveiled at the show.
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