You may or may not have heard the name Stellantis, but you certainly know at least some of its 14 brands, four of them American. Stellantis is the fifth-largest automaker in the world. It had a banner year in 2023, but six months later, the company is struggling. After hitting a high in March 2024, shares have fallen by more than half, and shareholders are losing enthusiasm. The whole discussion on Stellantis has basically collapsed. We're not talking about free cash flows. We're not talking about long-term EV strategy. We're not talking about market position or the China LEAP Motor joint venture. We're only talking about how much will it cost the company to get rid of the US inventory. As a result of the disappointing US sales, profits have fallen by nearly 50%, and market share is down. It is an understatement to say that H1 2024 results were disappointing and humbling. The dealer body and evidently the UAW as well believe

We're on a bad track. It was all self-inflicted. On September 30th, 2024, the company slashed its forecasts for full-year profitability and cash flow. The stock plunged nearly 13% by closing. There is mounting pressure on Stellantis CEO and calls for him to step down. So how did Stellantis get to this place, and can it recover? Check out these charts where Stellantis's financial results for the first half of 2024. The stock's full-year performance as of early October, shares have fallen from a high of $29.51 in March to just above $13, and it's mostly due to poor US sales of its American brands. It isn't the only automaker going through tough times, but it is one that has lost significant market share to its rivals over the last three years. In September, several officers of Stellantis's National Dealer Council sent an open letter to the company accusing management of being behind the

troubles. Dave Kelleher is a Dodge Jeep, Ram, and Chrysler dealer in Pennsylvania. Three years ago, dealers like Kelleher were earning profits of about 4.5% of sales, which is strong for the industry. The benchmark is 4%. But now, Kelleher says, the average is less than 1%. That's caustic. We have 900 dealers in the country that are actually losing money, and a bunch that are really close to it. In the same time period, the values of those dealerships have plummeted from 5 to 5 and a half times earnings to 1 to 2 times, depending on the dealership's location. Kelleher is selling 100 cars a month, whereas he used to sell about 185. As of mid-September, he had 473 cars on his lot, collectively worth about $27 million. Bear in mind dealers buy their cars directly from the automaker. Kelleher has been selling these cars his

entire career and has seen the ups and downs. This time, he says, the troubles are of Stellantis's own making. Dealer morale is low. Corporate morale is at an all-time low. So I would suggest that this company, I don't know what their end plan is because they certainly don't tell us. But for two and a half years, we've explained to them that we think we're on a bad path, and nothing's been done to it. The dealers aren't the only discontent stakeholders. The United Auto Workers union has been threatening to strike again, and earlier in 2024, Stellantis suppliers were halting production over pricing disputes. The disputes have spilled into the courts. North America operations were, you know, highly profitable and kind of seen as a little bit of a cash cow. Maybe the idea was it could run itself with not much influence, but it still needed support. Stellantis has only existed for about three and a half

years. It was created out of a merger of two major automakers: France's Groupe PSA, sometimes known as Peugeot, and Fiat Chrysler, which was itself a merger of two other companies, the Italian maker Fiat and the American Chrysler, a company with a long and tumultuous history. Chrysler has always been the weakest of the three major producers in the United States. It had the smallest market share of the Detroit Three, the three major automakers based out of Detroit, Michigan. Here's what volumes look like for the Detroit 3 in 2007, one year before the financial crisis. By 2009, Chrysler and GM both went bankrupt. Chrysler will file for bankruptcy after failing to reach a deal with some of its debt holders. Then came the merger with Fiat. The continuity of Chrysler was at risk. So whether you like this decision or not, it is the only path that kept Chrysler alive. It's gone through certainly more than one near-death

experience in my lifetime. And it's a testament, really, to the brains and work ethic of the people at the company that have really pushed Chrysler back from the brink each time. A revival followed under the leadership of former FCA CEO the late Sergio Marchionne, whose turnaround at Chrysler was at times considered miraculous and at others marred by controversy. He went in and he understood that he needed to make these brands like superstars. So he went into the engineering and he built the entire product portfolio. He found these people that really were terrific, like a Tim Kuniskis, for example, who took Dodge brand and just made Dodge brand vibrant again. The Jeep, Dodge and Ram brands all set sales records in 2018. The Ram truck was taking share from its competitors, the F-150 and the Silverado. The Dodge Challenger was a muscle car: a declining segment, and the car itself saw few significant updates over its lifetime. But that didn't matter.

It eventually outsold both the Chevrolet Camaro and the Ford Mustang. Despite all the success, Fiat Chrysler's board was long known to be looking for a deal, first with the American GM, then the French maker Renault, and then Peugeot. Welcome back Jeep parent company Fiat Chrysler, merging with European automaker Peugeot to create the fourth-largest automaker in the world. Peugeot had a strong presence in Europe. The company had already bought GM's Opel and Vauxhall brands. In some sense, it seemed like a natural fit. The two companies, in that sense, were already very accustomed to co-developing products together. They knew each other's cultures already because they've been in heavy collaboration for, you know, since the 80s on those commercial vehicles. So culturally, it made sense. But there was also the opportunity to cut costs and save billions of dollars through synergies, such as sharing parts and platforms. This could also reduce the burden of investing in

extremely expensive new technologies like EVs, automated driving, and software, and of course, pay money out to shareholders. And at first, the market was quite doubtful whether Stellantis could pull off the $5 billion in synergies between the two companies that they had announced. They didn't only manage to pull out the 5 billion; they managed to pull out kind of 8 billion, and then they stopped counting. In the middle of the merger, the coronavirus pandemic hit. The factory shutdowns, supply chain disruptions, and materials shortages severely constrained supply. Dealers made up for the lack of inventory by raising prices on the cars they could sell. Customers paid, and dealers made profits. Now, everybody knew that this was a short-term situation, that eventually people would go back to work, supply chains would correct, and vehicle profits would go back down towards where they were. As the pandemic rolled on, automakers started raising prices, too. Stellantis did it much more aggressively than others.

So a Jeep Wrangler, which used to be a pretty, you know, basic vehicle, very affordable vehicle, increased 30 plus percent during the pandemic. That's more than comparable vehicles did. The company also started releasing some very pricey new models, including the Wagoneer and Grand Wagoneer two three-row SUVs, priced starting at around $60,000 and going all the way up to 120. That's a stratosphere that Jeep has never been in before. Now you're competing with Range Rover. You're competing with Escalade. The price hikes, along with the internal cost cuts, provided Stellantis with a year of record sales, profits, and cash flow. But things were already beginning to slip. Over the course of the pandemic, products weren't being refreshed. Products were kind of starting to languish, yet the positioning and pricing was going up, and consumers certainly voted with their pocketbooks and went elsewhere. There were product quality issues, including on new and

high-priced vehicles such as the Wagoneer models. Do you want to charge a premium price for your product? The consumer is going to expect extra features, extra benefits. They want to enjoy that product, and if it's in the shop a lot, because the fan is so loud in the Wagoneer or the AC doesn't reach the third row or other quality issues that Stellantis has had with its products, they're not going to recommend that vehicle to their friends. At the same time, the company cleaned house, removing models it no longer considered sufficiently profitable or worth producing. For example, the Jeep Renegade, Jeep Cherokee, and the Chrysler 300. But the Cherokee was a mass-market midsize SUV that used to compete with top sellers like the Toyota RAV4 and Honda CR-V. The Renegade was in the popular and relatively inexpensive subcompact Compact SUV segment. The Chrysler 300 was one of the automaker's last sedans. Key to bringing customers into the brand and

hopefully keeping them for years or even a lifetime. We had the best SUV lineup in America. We had a great Ram truck, we had commercial vehicles, we had sedans, and I had a full menu. We don't have that anymore. The Charger and Challenger were folded into one nameplate. The closely related Chrysler 300 is gone, and the company's big V8 engines are being swapped for smaller inline six ones. Which really bothers our Ram customers. And the turbo engine is not a bad engine, and actually, it can give you the same horsepower and torque as the Hemi, but that doesn't matter to our customers. I mean, that Hemi was legendary. The Dodge Hornet, a newish small SUV based on an Alfa Romeo product, hasn't sold well. The Hornet, as you know, has been sort of a flop in the marketplace. It has one of the highest day supply of any vehicle in the US market right now.

It's not priced right. And it's too small compared to the competition. Of all the brands in the US, Stellantis brands are among those sitting on dealer lots. The longest five of the eight brands with the most days supply are all Stellantis brands, including every Chrysler brand. That means they aren't selling. Dealers like Kelleher say this is due to high prices overall. He estimates that the average price of the cars on his lot is about $60,000. The average price for all dealers is far lower. The market is really worried that to move those cars that are sitting on dealer lots, Stellantis will need to give hard, cold cash to dealers to get those cars out the door. Dealers and analysts say the company is starting to offer some incentives to try to move cars off their lots and make way for the 2025 models Stellantis is hoping to sell them. We appreciate the fact that they finally heard us and

gave us some money to help us sell these cars, but it's probably not enough. From an equity perspective, it would have been much cleaner if they had kitchen-sinked on Q2 or the Capital Markets Day and said, look, we're just going to take a bunch of money, put that on the cars, we'll get the cars moving, and we'll go back to a good business. But that's not what they did. Basically, Carlos set targets for the North American team, and when the North American team did not achieve those targets, he simply started exchanging management. A lot of former top Chrysler executives have left the company in recent years, such as former Dodge CEO Tim Kuniskis and former Jeep and Ram executive Jim Morrison, whom Kelleher credits with playing a part in reviving the Jeep brand. He was an integral part of that. You know, we've lost some guys that know how to sell cars in North America, and they left for two reasons.

One is they were being turned down on every initiative they came up with, and then two is when they didn't succeed, I think they were taking, you know, extraordinary emotional beatings over it. They were led to think that they failed, even though they, you know, they were handed a shotgun with one bullet and asked to go out and shoot six deer. So in the short term, Stellantis needs to sell more cars and clear out dealer lots. Long term critics say Stellantis doesn't have enough fresh product and the right kind of product. And that's what Marchionne understood, that, you know, you needed to build a dynamic lineup, and you needed to have a plan that replaced these cars on a regular regiment. And I don't think we have that plan right now. There are several vehicles on the way. The company plans to replace the Cherokee with a new SUV in 2025. It is one of several new products slated for release.

in the coming years. Despite the fact that Chrysler Group brands are struggling in the US right now, there is a lot of innovation coming down the pipeline. The Jeep Recon, an electric SUV that would compete with products from companies like Rivian. The revamped Charger is set to hit dealers by the end of 2024, including the electric version. Even Chrysler is said to have at least three new products starting in 2026, including an electric Pacifica minivan and two electric crossovers. RAM is slated to release a fully electric pickup and another truck called the Ram Charger. It's electric, but comes with an onboard generator that charges the battery. This helps with towing and long-distance travel. Range is important and all that, and that's one of the things that has been keeping a lot of potential electric truck customers from, you know, pulling the trigger. There are competitive products already in the lineup. Jeep's 4XE hybrid technology can go 20 or 30 miles on

electric power. Stellantis plug-in hybrids, including the Wrangler 4XE, are top sellers. Mostly, these are being used to go get groceries or pick up the kids from school or go to work. But nevertheless, that's a technology that has been selling very well. Jeep is on a tear and a lot of new products and can generate a lot of interest and excitement. Upcoming products are too heavy on EVs for Kelleher's taste. I think either Mr. Tavares or somebody has got to take a more aggressive strategy on what our product plans are and understand that electric, if it's an immediate product plan, is going to be a complete failure. However, Stellantis's new Stella platform can accommodate gas-burning, internal combustion vehicles, hybrids, and EVs. When Stellantis introduced the strategy, its inclusion of three different powertrains seemed like a waste at a time when EVs were expected to rapidly take

over the market. I think that flexibility to kind of insulate Stellantis a little bit from the pace of electrification. That's going to be a real benefit in the upcoming years, and what we're seeing right now is kind of a tactical issue, something they'll need to work through. So I think on the strategic side, Stellantis has done a very good job or as good a job as an automaker can in these challenging times. But they took their eye off the ball in North America, and it will take probably another 6 to 12 months to correct that. Stellantis declined CNBC's request for an interview, but said that it built an action plan designed to turn the corner in the second half and beyond. Stellantis also said in a public response to the dealer letter, We have started a path that will prove successful. We will continue to work with our dealers to avoid any public disputes that will delay our ability to deliver results and reduce dealer inventory.

by 100,000 vehicles by the beginning of 2025. The plan takes into account input from our dealer partners, and those efforts are paying off.

Why Jeep And Dodge’s Parent Company Stellantis Is Struggling

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