Stellantis CEO Carlos Tavares Resigns Amid Declining Sales and Criticism

Carlos Tavares Resigns from Stellantis CEO Role Amid Declining Sales | Mr. Business Magazine

Category: News

Source: finance.yahoo_.com

Stellantis, the parent company of brands like Chrysler, Jeep, Fiat, and Peugeot, announced on Sunday that its CEO Carlos Tavares has stepped down. The resignation comes in the wake of declining sales, internal criticism, and growing pressure from labor unions and dealers. The company cited differences between Tavares and the board of directors as the reason for his departure.

Challenges During Tavares’ Tenure

Carlos Tavares’ resignation follows a challenging period for Stellantis. The automaker experienced a steep drop in global sales, a growing inventory of unsold vehicles, and multiple layoffs at its manufacturing plants. The United Auto Workers (UAW), representing Stellantis’ U.S. workforce, had repeatedly called for Tavares’ removal, citing dissatisfaction with his leadership. A council of U.S. dealers also strongly criticized his policies, accusing him of neglecting core customers while prioritizing profits over affordability.

Global sales for the company fell by 10% in the first half of this year and plunged 20% in the third quarter. U.S. sales dropped 17% in the first nine months of 2023. Analysts attributed these losses to high vehicle prices, which alienated the company’s traditional customer base. By the end of 2023, the average price of a Stellantis vehicle in the U.S. was $58,000, the second-highest in the industry. Although this figure dropped slightly to $55,000 in the third quarter, it remained unaffordable for many consumers.

In addition to declining sales, Stellantis laid off approximately 1,200 workers at its truck plant in Warren, Michigan, coinciding with the discontinuation of the entry-level Ram 1500 Classic pickup. The company also announced plans to cut one of two shifts at its Toledo Assembly Complex South plant in January, affecting around 1,100 workers.

The layoffs and Stellantis’ delayed efforts to reopen its Belvidere, Illinois, plant have further strained its relationship with the UAW. The union has accused the company of violating labor agreements and has threatened a new strike. Stellantis, however, denies these allegations and plans to challenge the legality of any potential strike action.

Leadership Transition and Company Strategy

Stellantis stated that the process to appoint a permanent CEO is underway and will conclude in the first half of 2025. In the interim, an Executive Committee chaired by John Elkann will oversee operations.

The company acknowledged that Tavares’ leadership was instrumental in creating Stellantis through the merger of PSA Group and Fiat-Chrysler in 2021. However, growing dissatisfaction with his focus on profit margins and executive compensation overshadowed his achievements.

Earlier this year, Stellantis paid Carlos Tavares a total compensation package of $36.8 million, making him the highest-paid CEO in the automotive industry. This figure drew criticism from unions and dealers alike, particularly as workers faced layoffs and customers dealt with rising vehicle costs.

Criticism from Key Stakeholders

The UAW welcomed Carlos Tavares’ resignation, calling it a step in the right direction for a company they believe has been mismanaged. In a statement, the union expressed hope that Stellantis would prioritize its workforce moving forward.

Kevin Farrish, chairman of Stellantis’ U.S. dealers’ council, had previously criticized Tavares for focusing too heavily on short-term profits. In a letter sent earlier this year, Farrish highlighted the negative impact of decisions that prioritized record-breaking profitability at the expense of market share and competitive pricing.

Farrish also pointed to Stellantis’ declining presence in the U.S. market and the consequences of plant closures. While he acknowledged some improvements in company strategy, such as executive changes and buyer incentives, he maintained concerns about the overall direction of the business.

Future Outlook

Stellantis has reaffirmed its lowered profit forecast for 2024, citing declining earnings and sales. As the company works to recover from its recent challenges, the appointment of a new CEO will be critical in shaping its future strategy and addressing the concerns of stakeholders.

For now, the company must navigate ongoing labor disputes, rebuild trust with dealers, and make its vehicles more affordable to regain market share and ensure long-term success.