Stellantis, the automaker behind Jeep and Ram, is searching for a new CEO to succeed current leader Carlos Tavares, as part of what the company describes as a standard leadership succession plan.
The company, based in the Netherlands, clarified on Monday (September 23) that Tavares' contract, which runs until 2026, remains in place for now, but the board is exploring options to ensure a smooth transition of leadership in the coming years.
Stellantis' Financial Struggle
Tavares has been under heavy criticism from US dealers and the United Auto Workers (UAW) union after Stellantis faced significant financial challenges during the first half of the year.
The automaker was caught off guard with too much high-priced inventory on dealer lots, leading to a drop in US sales by nearly 16%. This poor performance, despite a 2.4% increase in overall vehicle sales in the US market, prompted calls for change.
Tavares took control of Stellantis in January 2021, after the merger between PSA Peugeot and Fiat Chrysler Automobiles. While the company's North American operations were once a primary source of profit, they have faced growing difficulties this year due to shifts in the auto market and higher vehicle prices that have discouraged buyers.
In the first half of 2023, Stellantis reported a 48% drop in net profits compared to the same period last year.
A combination of high prices and increased inventory has placed pressure on dealers to clear their lots. The head of the US dealers council urged Stellantis to increase discounts and incentives to move vehicles faster., according to AP News.
These challenges have fueled frustration within the company's US operations, as they continue to lose market share to competitors like General Motors and Ford.
In addition to dealers, the United Auto Workers union has also voiced dissatisfaction. UAW President Shawn Fain has called for Tavares' removal, particularly after Stellantis delayed the reopening of its Belvidere, Illinois factory and postponed the construction of an electric vehicle battery plant.
These delays, the company argues, are necessary due to slow sales and market uncertainty. However, the UAW sees them as failures in leadership, especially as other automakers continue to move forward with their production plans.
Stellantis signed a new labor contract with the UAW following a six-week strike last year, but tensions have remained high. The union has even filed grievances and threatened further strikes if the company does not address its concerns about job security and investment in the US market.
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CEO Search
While Stellantis maintains that its search for a new CEO is part of a regular leadership review, experts suggest that the company's leadership may have already decided that Tavares' time at the helm is nearing an end.
Erik Gordon, a professor of business and law at the University of Michigan, noted that such announcements usually indicate that the board is preparing for a change.
In response to the criticism, Stellantis has been actively working to reduce expenses. This includes postponing certain factory openings, implementing layoffs for union workers, and offering buyouts to salaried employees, said The Washington Post.
Tavares has acknowledged that Stellantis allowed inventory levels to grow too high in North America and that the company's efforts to address the problem were not enough in the first half of the year.
He admitted that high prices often deter customers from purchasing vehicles, even when discounts are available. Despite these challenges, Stellantis has committed to addressing its issues and is working closely with its dealers to manage inventory more effectively.
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