World's fourth largest carmaker issues profit warning amid industry slump

Stellantis shares were down 14.45%, trading on midday Monday in Milan at 12.45 euros

Stellantis, the world's fourth largest car manufacturer, has cut its earnings forecast due to investments in revamping its US operations amid a broader industry downturn and increased competition from China.

The company is fast-tracking efforts to turn around North America, aiming to reduce dealer inventory levels to no more than 300,000 vehicles by year-end, rather than Q1 2025 as previously planned. This comes on the back of a drop in shipments of 200,000 vehicles in H2 this year compared to last year, double the company's forecast. Stellantis will also offer higher incentives on 2024 and older models.

In its profit warning, Stellantis said it expected to finish the year with a negative cash flow of 5 billion euros to 10 billion euros, ($5.6bn to $11.2bn) instead of positive. The carmaker, born out of the 2021 merger between PSA Peugeot and Fiat Chrysler Automobiles, also lowered its operating profit margin guidance to 5.5% to 7.0%, down from double digits.

Stellantis shares fell 14.45%, trading at €12.45 in Milan on Monday afternoon. The struggling Jeep and Ram manufacturer is seeking a new CEO to replace Carlos Taveres, who is facing criticism from US dealers and the United Auto Workers union following a poor first-half financial performance.

The company has described the search as a standard leadership succession plan. Last week, UAW leadership convened to discuss contract violations and what they labelled as illegal behaviour by Stellantis. In a letter to Stellantis, UAW President Shawn Fain indicated that the union is gearing up for a strike.

The company lost 3bn euros ($3.2bn) in revenues due to an autoworkers' strike last year. Stellantis is also facing pressure in Italy, where one of its main shareholders resides, due to production cuts. A one-day strike has been announced by autoworkers on Oct. 18.

The company's first-half net profits have dipped by 48% compared to the same period last year. Despite an overall increase in new vehicle sales by 2.4%, first-half sales in the United States dropped nearly 16%.