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Stellantis(STLA.US) issues disastrous profit warning, CEO seeks to push management "big shake-up"

AInvestThursday, Oct 10, 2024 6:50 am ET
1min read

Intellidex learned that Stellantis(STLA.US) CEO Carlos Tavares is planning a major overhaul of the management as a response to the disastrous profit warning, according to people familiar with the matter. The people said Tavares is likely to present his proposal at the board meeting this week in the US. The reform could lead to management changes across departments from finance to regional operations to individual brands.

Board members are also expected to discuss the future of the 66-year-old CEO during the two-day meeting, the people said. The event was already planned before media reports last month that Elkann, the chairman, had started looking for Tavares' successor. Tavares' contract expires in early 2026.

After weeks of setbacks, Tavares, who is keen on cost-cutting, is trying to regain control after the carmaker slashed its profit and cash flow expectations for this year. While most European rivals are also struggling with falling demand, the severity and timing of the profit warning has raised questions about the management of the carmaker.

It is unclear whether directors will support Tavares' management overhaul plan, with several other outcomes still possible, the people said. They said board members will also focus on the turnaround efforts in the US, which is Stellantis' biggest single profit source.

The maker of Jeep and Dodge brands has been struggling with inventory expansion, high-profile departures and falling US sales after hiking prices more than rivals. Elkann, who is also CEO of Stellantis' largest shareholder Exor NV, has become increasingly frustrated with the situation in North America, according to reports last month.

After the board meeting, Tavares will travel to Italy, where he will address a parliamentary hearing amid concerns over falling car production in the country. He is planning to attend several events at the Paris auto show, which opens on Monday, to showcase Stellantis' latest electric vehicles and boost sales. Last week, Tavares made a provocative comment during a tour of the company's factory in Sochaux, France, saying he would stick to his mission and that the current headwinds "will never" question his strategy.

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