Stellantis's CEO's Departure Explained and Its Implications for the Company's Shares
On a sun-soaked Sunday, automotive giant Stellantis (STLA, -1.60%) declared that they'd parted ways with their CEO, Carlos Tavares. This separation came after just a year in the driver's seat, a role he'd claimed when Stellantis was born in 2021 from the marriage of Fiat Chrysler Automobiles and French automaker PSA Peugeot.
Tavares had sold this merger on the promise that, under his leadership, the company could impressively boom year after year, scattering double-digit percentage operating margins like confetti. This wasn't just talk—for a short while, it worked. But in the end, his methods started to falter, and it seemed the board had had enough.
Stellantis's Statement on Tavares's Departure
In a formal communique, Stellantis shared that their board had accepted Tavares's resignation, and they anticipated hiring a new permanent CEO in the first six months of 2025. The disagreements between Tavares and the board were centered around dealing with slumping sales and a shrinking company stock price, though the details are still hanging in the shadows.
By midday on Monday, the company's shares had dropped around 47% year to date. Tavares had previously planned to retire in 2026.
In his stead, the company would be guided by an interim executive committee, chaired by John Elkann. Elkann, the great-great-grandson of Fiat founder Giovanni Agnelli, is both Stellantis's chairman and the figurehead of the Agnelli family investment vehicle, Exor NV.
Soaring Highs and Crashing Lows
Not so long ago, Tavares still radiated genius. In 2023, Stellantis reported an astounding record profit of 18.6 billion euros (just under $20 billion USD), with an adjusted operating margin of 12.8%. This figure smashed past Tavares's goal of hitting 12% by 2030.
But there was a catch. The company's stockpiles had ballooned. Stellantis held practically 1.5 million vehicles in its U.S. inventory at the end of 2023, more than 50% than the previous year.
Why so much stock? Because Stellantis would record revenue when vehicles were shipped to dealers—regardless of whether they were promptly purchased by customers or sat on dealer lots. But as car prices climbed under Tavares's watch to support his margin goals, customers were becoming increasingly reluctant to shell out.
The struggle to sell the inventory backlog had become the defining narrative of 2024 for Stellantis.
In September, the company warned that its 2024 adjusted operating margin would discover an unpleasant ceiling at 7%, far below earlier projections of over 10%. This dire prediction was tied to a plan to reduce American vehicle shipments by over 200,000 in the second half of 2024 and to offer increasingly enticing incentives on the 2024—and 2023—vehicles still occupying dealer lots.
But it seems Tavares and the board had divergent opinions on what the company's next steps should be—opinions that ultimately cost Tavares his leadership role.
Should You Buy Stellantis Stock?
In my humble yet well-researched opinion, I'd advise caution before diving into Stellantis's stock.
The company's currently grappling with a crowded brand roster, excessive inventory, pricey vehicles, and potentially unnecessary factories. Without a clear visionary at the helm, addressing these concerns has become an even more daunting task.
I'd like to hear Stellantis's strategy for reconstructing itself on a sustainable path before even considering an investment. It's a vulnerable position, and any steps to correct the situation may temporarily harm the stock's value.
After the departure of Tavares, Stellantis's board indicated that they were looking to hire a new CEO by the first half of 2025. This decision came as Stellantis was struggling with slumping sales and a declining stock price. (money, finance)
In the period leading up to Tavares's departure, Stellantis's stock had dropped approximately 47% year to date, and the company was grappling with a large inventory of unsold vehicles. To address this issue, Tavares had implemented a strategy of recording revenue when vehicles were shipped to dealers, regardless of customer purchases. (investing, money)
