The global automotive industry is grappling with significant challenges, and the latest development at Stellantis — the parent company of Jeep, Fiat, and Peugeot — reflects these difficulties. Recently, Carlos Tavares, the company’s CEO, announced his resignation due to disagreements with the board, unsatisfactory sales figures, and mounting internal and external pressures.

This departure follows a sharp decline in Stellantis’ sales, resulting in unsold vehicles piling up at dealerships, layoffs across multiple factories, and calls for Tavares’ removal by the United Auto Workers (UAW), the union representing Stellantis employees in the United States.

Henry de Castries, Stellantis’ lead independent director, stated that Tavares and the board had conflicting views, leading to his resignation. Tavares, a 66-year-old Portuguese executive, played a pivotal role in the 2021 merger between PSA Group — the maker of Peugeot — and Fiat Chrysler, which created Stellantis, now the world’s fourth-largest automaker by sales, trailing Toyota, Volkswagen, and Hyundai Motor Group. Before the merger, Tavares served as PSA’s chairman.

Initially slated to retire in 2026, Tavares’ early departure has expedited the search for a permanent successor, with the process expected to conclude by mid-2025. In the interim, a new executive committee led by John Elkann, Stellantis’ chairman, will steer the company.

Impact on Stellantis’ Performance

Following the announcement, Stellantis’ stock plummeted by over 8%, though it later rebounded, gaining 11.5% in value after the initial drop. Analysts at UBS noted that accelerating the CEO replacement process by six months could reduce the period of uncertainty, potentially enabling Stellantis to achieve a long-anticipated turnaround in 2025.

However, Stellantis faces daunting challenges. High vehicle prices in North America have alienated core customers, significantly impacting sales. In 2023, the average price of Stellantis’ Jeep, Ram, Dodge, and Chrysler vehicles reached $58,000 in the U.S., a level deemed unsustainable by industry experts.

Though prices have since declined, the average vehicle price remained the second highest in the industry at $55,000 in Q3 2024. As a result, global sales volume dropped by 10% in the first half of 2024 and by 20% in Q3. U.S. sales alone fell by 17% in the first nine months of the year.

Layoffs and Production Cuts

In response to declining demand, Stellantis has implemented workforce reductions. Approximately 1,200 employees were laid off at the Ram truck factory in Warren, Michigan, coinciding with the cessation of Ram 1500 Classic production.

Another 1,000 workers will be furloughed indefinitely in January 2025 as the company cuts a shift at its Toledo Assembly Complex South, which produces the Jeep Gladiator. These layoffs have sparked threats of further strikes by the UAW, drawing parallels to Volkswagen’s recent labor disputes in Germany.

Criticism of Leadership

Tavares faced intense scrutiny for prioritizing profit margins over affordability, a strategy that culminated in record profitability for Stellantis in 2023. His compensation package — €36.5 million — provoked backlash from unions and dealer representatives.

Kevin Ferish, chairman of Stellantis’ American dealer council, criticized Tavares’ focus on short-term gains, blaming it for the company’s declining market share and factory closures in the U.S. Ferish argued that decisions aimed at maximizing 2023’s profitability had predictable, detrimental effects on the U.S. market.

In October, Stellantis revised its 2024 earnings forecast downward, citing declining sales and profits. Despite these challenges, the company remains committed to its reduced profit projections for the year.

What Lies Ahead?

The resignation of Carlos Tavares marks a significant turning point for Stellantis. While unions have welcomed his departure as an opportunity to rectify the company’s trajectory, the path forward is fraught with uncertainty.

How Stellantis navigates these challenges — balancing affordability, profitability, and labor relations — will determine its future in an increasingly competitive automotive landscape.

Do you hold shares in Stellantis or other automakers facing similar challenges? What are your thoughts on these developments, and how would you address them? Share your insights in the comments.