Stellantis Shares Plummet Following Profit Warning and Revised Forecast

Shares of Stellantis, the parent company of brands such as Chrysler, Dodge, Jeep, and Maserati, plummeted on Monday after the company issued a profit warning and revised its annual forecast for 2024. The warning cited declining global industry dynamics and increased competition from Chinese manufacturers as key factors.

Revised Financial Projections

Stellantis adjusted its forecast for the adjusted operating income (AOI) margin for the full year of 2024 to a range of 5.5% to 7.0%, a significant decrease from its previous expectation of a double-digit margin. Additionally, the company reduced its forecast for industrial free cash flow to between 5 billion and 10 billion in negative cash flow, a stark contrast to its previous positive guidance.

Impact on Share Prices

The profit warning led to a sharp decline in Stellantis' share prices. At the market's opening, shares were down by nearly 11%, reflecting investor concerns over the company's financial outlook.

Challenges in the US Market

Stellantis is facing significant challenges in the US market, including a decline in shipments of 200,000 vehicles in the second half of the year compared to the same period last year. The company plans to accelerate efforts to turn around its US operations by reducing dealer inventory levels to no more than 300,000 vehicles by the end of 2024 and offering higher incentives on 2024 and older models.

Leadership and Operational Changes

The company is also in the process of finding a new CEO to succeed Carlos Tavares, who is under pressure from US dealers and the United Auto Workers union following a dismal first-half financial performance. Stellantis insists that the search for a new CEO is part of a normal leadership succession plan.

Industry-Wide Challenges

The automotive industry is grappling with weak demand, rising costs, and supply chain backlogs. Stellantis, like other carmakers such as Volkswagen, is facing a turbulent time with production cuts, strikes, and logistical issues. The company is also experiencing stiff competition from Chinese electric vehicle manufacturers, which are offering cheaper EVs and attracting more consumers.