Commentary: Making The Cut(s)

This should not be news to anyone. It has been said before years ago. Now, Stellantis CEO Carlos Tavares is being serious.

Last month, Tavares made it very clear that any brands within the company that do not achieve profitability will be shut down. This is not a threat – apparently. It sounds more like a promise.

The global company’s profit margin has taken a hit. In the first half of 2024, adjusted operating income dropped by 40 percent. Stock share prices have dropped 22 percent. Net revenue dropped by 14 percent with net profit dropping by 48 percent. 

As for sales, North American volumes dropped by 18 percent compared to the first half performance of 2023. Even European and South American sales are down. The only good news is that Fiat tripled sales in the Middle East and Africa, setting a sales increase for the entire group of just three percent. 

Things are not looking good for the entire Stellantis group right now. We might see some cuts in the number of brands. After all, there are 14 brands within the group that are under Tavares’ microscope. 

After the merger was finalized, Tavares stated that he would give each brand 10 years to turn a profit or be eliminated, He also created a dictum that every brand should have one battery-electric vehicle in their lineup by the latter part of this decade. 

If we take the electric vehicle mandate off the table, there is still the question of the existence of 14 brands. Rather, the disposition of those brands.

It is no secret that Lancia and DS are not doing well, and might become the first victims of brand eliminations due to the ten-year mandate. Maserati may become sell-off bait. Alfa Romeo, Chrysler, and Dodge appear to be “on the bubble.” This according to several reports across the automotive and business media. 

These same sources point to brands, such as Peugeot, Fiat, Opel/Vauxhall, Jeep, Citroen, and Ram as strong enough to stick around. These represent both global and regional brands that have string lineups, platforms, and manufacturing bases. 

There are plenty of takeaways from the latest talk out of Stellantis’ global base – whether that may be these days. One, is historic. The North American side of the company has always struggled with the rollercoaster that is their existence. Even before Daimler AG knocked on the door at Auburn Hills, there were times when the company was on the brink of extinction.  Some would say that these fiscal and management issues never went away. Only the players and the economy had changed. 

Both the Italian and German/British side of the group have benefitted from the French to some points. Peugeot’s EV platform became the basis of the resurgence at Opel and Vauxhall. Those platforms are now showing up at Turin. The first fruit of this is the latest Fiat 500e. 

One of the biggest problems at Stellantis is focus. What are they focusing on realistically? What will their focus be after the reduction of brands, as stated by Tavares?

Could Tavares' visit to Auburn Hills this past week help to reverse at least one part of the merged company's fortunes? Or, even respond to the United Auto Workers President Shawn Fein's threat of a strike against the company due to "broken promises" for the currently idled Belvidere, Illinois plant?

Well…here’s my $.03…

Tavares and his executives must decide which brands will be sold globally. These should be your core brands that should have a presence in every market you have a footprint in.

The first brand that fits that criterion is Jeep. In an SUV-driven world, this iconic brand has a following worldwide that is culturally relevant.  It is what attracts people to Jeep. As long as products are created for specific markets surrounded by a global core lineup, Jeep should be the first brand on Stellantis’ brand portfolio. 

The next two brands that should maintain global status across the Stellantis corporate footprint should be Peugeot and Fiat. Not only should they be the core brands for Europe, Fiat and Peugeot also have strong roots in South America, the Middle East, and Africa. 

This brings up brands that should be maintained for regional markets. The European market should continue to see Citroen, Opel, and Vauxhall. The only question I have is whether the Vauxhall brand should continue. Yes, Brexit is one reason for the brand’s existence. Yet, I question whether that’s even relevant when the lineup is produced mostly on the continent. Only the Astra is assembled at Ellesmere Point and some commercial vehicles are assembled in Luton.

Over in North America, you have Dodge, Ram and Chrysler as true regional brands. Promises to add more vehicles to the Chrysler’s lineup are becoming hollow as the 10-year mandate is approaching. You cannot sustainably sell a single vehicle under your brand’s banner. Plain and simple. 

Which brings us to Alfa Romeo and Maserati. The two Italian sporting legacies must continue in one form or another. If it means selling off Maserati, then the buyer of the brand should be one that understands what it stands for. Thus, fueling its lineup with luxurious and performance-based offerings. 

Let’s talk about commercial vehicles for a moment. The Italian plant that builds the Fiat Ducato sells this popular van for almost every brand in Europe. The same van is also assembled in Mexico for Ram. What if Stellantis can consolidate all commercial vehicles sales unto one brand? Perhaps, two? 

North America could continue selling Ram trucks and vans, while the rest of the world should only be sold under the Fiat Commercial label. Not exactly ideal on the French and German/British side of the house, but if you’re looking to reduce footprint, you can maximize the segments you work in under one label. Just food for thought…

There are no simple answers for Tavares and his fellow executives towards making Stellantis leaner and more profitable. When this merger came up, there were skeptics that feared not only the elimination of several brands from its portfolio, but how these cuts will affect the many global production facilities building some of the vehicles sold under these brands. 

If Stellantis wants to prepare for the inevitable, they should execute a more aggressive campaign towards platform and propulsion/driveline consolidation. I’ve said this before – all sides of this merger should be able to utilize the strongest assets across the company towards making a core lineup shared by most – if not, all – brands. 

Over the next few years, let’s keep on watching what happens between Paris, Turin, Auburn Hills, Russelsheim, and the many facilities worldwide displaying the Stellantis sign out front. 

Cover photo by Randy Stern