Italy's Stellantis becomes latest car giant to issue profit warning

Stellantis, the world's fourth largest car maker, has slashed its earnings forecast for 2024, citing investments to turn around its US operations amid a wider industry slump and increased Chinese competition.

The company said it was accelerating efforts to turn around its North American operation, including bringing dealer inventory levels to no more than 300,000 vehicles by the end of the year, instead of the first quarter of 2025 as previously planned.

The action is off the back of a decrease in shipments of 200,000 vehicles in the second half of this year compared with a year earlier, twice as many as the company had forecast. The company says it will offer higher incentives on 2024 and older models.

In its profit warning, Stellantis said it expected to finish the year with a negative cash flow of between €5bn and €10bn.

The car maker, created in 2021 from the merger of PSA Peugeot with Fiat Chrysler Automobiles, also dropped its operating profit margin guidance to between 5.5% and 7%, instead of double digits.

The company reported first-half net profits down 48% compared with the same period last year. First-half sales in the United States were down nearly 16%, even though overall new vehicle sales rose 2.4%.

The struggling maker of Jeep and Ram is looking for a new CEO to succeed Carlos Taveres, who is under fire from US dealers and the United Auto Workers union after a dismal first-half financial performance. The company insists the search is just part of a normal leadership succession plan.

Stellantis is also under pressure in Italy, home to one of the main shareholders, due to production cuts. Workers have announced a one-day strike on 18 October.

The car industry has been facing a turbulent time in the past few months, with vehicle production increasing, but supply chain backlogs still being slow to ease. This has led to transport and logistical problems, as well as raw material scarcities. 

A rising number of Stellantis strikes have also contributed to the auto company's problems over the past few weeks, with the company facing allegations of breach of contracts. Stellantis layoffs, such as the recent Warren assembly plant layoffs in Michigan, have also further exacerbated this situation. 

In the electric vehicle segment, the company has faced increasingly stiff competition from China and its cheaper EVs. Car buyers have also been slow to buy EVs, with costs cited as one reason for their reluctance.