FYI: Stellantis signals potential brand closures as profits plunge significantly in 2024.
Stellantis May Drop Underperforming Brands Amid Profit Decline
Stellantis Chief Executive Officer Carlos Tavares announced a potential shake-up in the company’s extensive brand lineup following a notable decrease in profitability. The multinational automotive manufacturer revealed on Thursday that its net profit for the first half of 2024 plummeted by 48% compared to the same period in the previous year.
Background and Current Situation
Formed in 2021 through the merger of Fiat Chrysler Automobiles and France’s PSA Group, Stellantis has since fostered a diverse portfolio of 14 brands, including Chrysler, Dodge, Jeep, and European luxury names such as Alfa Romeo and Maserati. The portfolio has recently expanded to include China’s Leap Motor, resulting from a joint venture to produce and market Leap Motor electric vehicles globally.
Pressure to Perform
Carlos Tavares reaffirmed the company’s strategy to invest in every brand within the portfolio for a decade. However, the ongoing financial strain has led the CEO to issue a stern warning about the future of underperforming brands.
"If a brand fails to be profitable, it will face closure," Tavares emphasized in a discussion with reporters. "We don’t have the luxury to maintain an unprofitable brand."
Potential Targets for Discontinuation
Analysts have suggested that Maserati could be a potential candidate for sale, while niche regional brands like Lancia and DS may be phased out given their limited market appeal.
Financial Performance
Stellantis reported a net profit of 5.6 billion euros ($6 billion) for the first half of the year, a significant drop from the 11 billion euros ($12 billion) earned during the same period in 2023. Additionally, overall revenue for the first half reached 85 billion euros ($92 billion), reflecting a decline of 14%.
Challenges in the U.S. Market
High inventory levels and a reduction in market share in the United States have been highlighted as primary contributors to the financial downturn. Tavares underscored that tackling these issues is now a key priority.
"Our efforts in Europe have paid off. However, we still have significant work to do in the U.S.," Tavares mentioned, underscoring the need for inventory reduction in this critical market.
Conclusion
Stellantis’ decision to potentially cut underperforming brands signals a pivotal moment for the company as it navigates through financial challenges. The next steps will be closely watched by industry observers, stakeholders, and consumers alike as Stellantis seeks to stabilize and thrive in a competitive global market.
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Donald Smith, Editor of Automotive.fyi
