In a recent rundown of European automotive shares, Swiss bank UBS judged only one car maker's stock worth buying: Stellantis.
Its 2025 outlook was published two days after the announcement that Stellantis CEO Carlos Tavares had been ousted – an event that might be seen to have a negative impact on the company.
Tavares was instrumental in stitching together Stellantis from the merger of PSA and FCA in 2021. It was his relentless focus on costs and productivity that produced two stellar years with profit margins in the double figures – almost unheard of for a volume car maker. So why has there been no fallout from his exit?
Stellantis's shares did fall dramatically immediately following the announcement, but they've now returned to above their previous level, despite there being no information yet on Tavares’s successor.
His exit was precipitated by the company’s admission in October that it would shift 200,000 fewer Jeep, Ram and Chrysler vehicles in its key US market this year, slashing its predicted profit margin for the full year to between 5.5% and 7%, down from 13% last year.
Tavares blamed a poor marketing strategy from his US team, but ultimately it exposed tensions between him and the board. They fell out “over what the priorities should be and how to run the business in the remaining time of his tenure”, Stellantis CFO Doug Ostermann said during the Goldman Sachs autos conference on 4 December.
They also clashed over Stellantis’s famously fractious relationship with unions, dealers, suppliers and governments, none of whom will be mourning Tavares’ departure.
“Clearly we need to build back trust,” Ostermann said – but he also said there weren’t “any real disagreements in terms of long-term strategy”.
The groundwork that Tavares laid down was lauded by UBS in its decision to choose Stellantis as its sole ‘buy’ rating among European car makers.
“Stellantis is potentially the highest return stock in our European autos coverage, despite execution risks,” UBS analyst Patrick Hummel wrote in the note.
Three positives stood out for the bank.
The first positive was that Stellantis had mostly solved the excessive amount of unsold cars on its US forecourts by cutting ambitious prices and reducing production.
“We came into the year with pricing on many of our vehicles that was $2000 to $3000 above our main competitors,” Ostermann said.
The company is also filling gaping holes in its range, including next year finally launching a new Jeep Cherokee after axing the old one in 2023.
Add your comment