It is no secret that Stellantis (STLA) has been in deep trouble lately.
Last week, the multinational automaker and parent company of some of Detroit's biggest names confirmed it is looking for a new CEO. Though the automaker said that such procedures are entirely routine, the move comes amidst an unfortunate pattern of events that stemmed from its first-half 2024 earnings report in July 2024.
In a call with investors, CEO Carlos Tavares reported dismal results stemming from a "challenging industry context" and its own "operational issues," particularly in one of its most valuable markets.
"We have significant work to do, especially in North America, to maximize our long-term potential," Tavares said.
Related: Stellantis seeks new CEO amidst fervent auto industry pressure
However, the automaker followed through on drastic measures like voluntary buyouts for white-collar employees and layoffs of more than 2,450 assembly-line workers following the discontinuation of the Ram 1500 Classic.
Additionally, its press office has been busy deflecting jabs from a coalition of US-based Stellantis-brand dealers, Shawn Fain, and the United Auto Workers over business decisions that have affected their respective groups.
However, a new report shows that a bigger concern is holding one of the big three back.
Stellantis
Too many [unsellable] cars, so little time
According to Stellantis' own data, sales of its American brands, such as Jeep, Ram Trucks, Chrysler, and Dodge, are struggling in the United States. From January to June this year, Chrysler sales fell by 8%, and Jeep sales fell by 9%.
Dodge sales are down 16%, and Ram sales fell catastrophically by 26%.
With sales struggling across the board, it is easy to point out that an inventory crisis is looming. Dealers are struggling with large lots filled with unsold vehicles. In their letter to Carlos Tavares dated September 10, American Stallantis brand dealers blamed Tavares for the “rapid degradation” of their brands. They urged him to spend more to help clear excess and old inventory off their lots, calling the current situation "a disaster."
According to an analysis by auto shopping website CarEdge, six out of the ten slowest-selling cars belong to Stellantis properties. Specifically, the Alfa Romeo Giulia tops the list with 617 days supply, Alfa's Stelvio crossover SUV is in third with 456 days supply, and the Fiat 500e is below it in fourth with 454 days supply.
Towards the bottom, the small Jeep Renegade is in eighth with a supply of 332 days, while its larger sibling, the Jeep Grand Wagoneer L, is in ninth with a supply of 327 days, while the ten spot goes to the Dodge Hornet with a supply of 323 days.
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In an announcement made early on Sept. 30, Stellantis gave a little more color to the bigger picture.
The automaker said that it has "accelerated its planned normalization of inventory levels in the U.S.," which has prioritized its target to have "no more than 330,000 units of dealer inventory by year-end 2024" instead of 2025.
In addition to reduced output from its factories, one other alarming action it explicitly mentioned was "increased incentives on 2024 and older model-year vehicles," which suggests the possibility that an outsized presence of unsold older cars sitting on dealer lots may exist.
According to CarEdge, the Jeep Renegade has been a slow-selling car, with dealers holding onto a 332-day supply. The company crossover SUV was discontinued in the US and Canada after the 2023 model year.
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Nonetheless, the move in North America contributed to Stellantis reducing its adjusted operating income margin guidance from "double digits" to between 5.5 - 7.0% for 2024. Additionally, the automaker now expects a negative cash flow of between 5 billion and 10 billion euros ($5.58-$11.17 billion).
The automaker also blames weakening global demand and intensified competitive dynamics, which are due to rising industry supply and increased competition from China.
In a note published by Bernstein analysts on Sept. 30, they wrote that the company had been slow to address concerns over the size of its U.S. inventories, which the dealers initially mentioned.
"Stellantis was criticized for seemingly not acting fast enough, so this begins to address that complaint, but the scale of the hit to margins far exceeds our already reduced expectations," the analysts said.
Stellantis, which trades on the New York Stock Exchange, is down 13.86% today, trading at $13.83 per share at the time of writing.
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