Carmaker Stellantis has embarked on what industry executives expect to be a lengthy and deeply challenging effort to replace star chief executive Carlos Tavares after a sudden reversal in the fortunes of the company that builds the Peugeot, Fiat and Jeep brands.
The world’s fourth-largest carmaker by volume confirmed this week that chair John Elkann and the Stellantis board had formally begun a search in preparation for the end of Tavares’s contract in early 2026. One person familiar with the discussions said it was not impossible Tavares’s contract would be extended. But that was “unlikely”, the person conceded.
Although two people familiar with the process said the search was not directly related to the company’s performance, Stellantis reported a 48 per cent decline in net profits for the first half of 2024 compared with the same period last year. The shares have fallen 47 per cent from their peak, while vehicle inventories have piled up in North America. Disgruntled factory workers in Italy and the US have threatened strikes following steep production cuts.
Only six months ago, by contrast, Stellantis was considered an industry winner and briefly overtook German rival Volkswagen in market value. The group, born out of a 2021 merger between Fiat Chrysler and France’s PSA, owner of Peugeot, boasted a strong balance sheet, a vibrant US operation and a flexible electric strategy.
Yet analysts said the company was still setting itself a formidable challenge in trying to replace a highly regarded leader who had built the company around himself.
Jefferies analyst Philippe Houchois said it was “very healthy” for a company to think about succession.
But he added: “What’s not clear is who is the person to replace him. At companies where there are collegial or shared management styles, there are people in key functions. At Stellantis, you have Tavares and 30 different people who report to him.”
Another person who has worked with Tavares said: “He’s cleared the decks a bit internally around him and there’s no natural internal successor.”
Tavares joined PSA in 2014, saved it from near insolvency and helped forge Stellantis by buying Germany-based Opel from General Motors. The €50bn merger with Fiat-Chrysler followed.
But the group is far from finished with the complex task of fully integrating its French, Italian, German and US operations, which now have 14 brands and a fledgling Chinese one it is helping to move to Europe.
The industry more broadly has been battered by the rise of cheaper Chinese cars, slowing growth in electric vehicles sales and tougher emissions regulations.
Chris Donkin, managing partner at executive search firm Savannah, said it was difficult to see any automotive chief executive other than Taveres leading such a “complex agglomeration of companies”.
“He is the one who built it,” Donkin said, adding that the board might need to look outside the automotive industry for strong candidates.
Tavares, a car fan who enjoys racing vintage models in his spare time, has long been admired in the auto industry, blending bluntly expressed views about the sector’s difficult future with down-to-earth charm.
But critics say ruthless cost cuts and Tavares’s single-minded focus on margins have starved its brands of investment. The high prices Stellantis until recently had charged for some vehicles have turned away consumers, they add.
Meanwhile, workers, facing scrutiny for every euro they spend, reacted bitterly to the €36.5mn pay package awarded to Tavares in 2023. The executive, though not known for a flamboyant lifestyle, has said the package is a simple outcome of his contract.
Benoit Vernier, a union representative for France’s CFDT at Stellantis, said the point had arrived when no more cuts were possible. Everything from internal postal services to travel and ordering parts had become laborious and restricted, he said.
“You’re cutting to the bone,” he said. “[Tavares] was the saviour once, but he’s going too far.”
Earlier this year, Tavares also caused a political backlash in Italy by raising doubts about the future of the Fiat factory in Turin and a plant near Naples if Giorgia Meloni’s government refused to offer further subsidies for electric vehicles.
In the US, the United Auto Workers union is preparing for a possible strike against Stellantis, which it has said has reneged on a promise to reopen a mothballed auto plant in Belvidere, Illinois.
UAW president Shawn Fain told reporters last month that Taveres wanted to “cut his way to profitability”.
“It’s a failed, flawed path,” Fain said. “He’s the problem . . . If our workers performed as piss-poorly as he did, they’d be fired.”
Stellantis is seeking to reduce its US vehicle inventory — 430,000 at the end of June — by 100,000 vehicles by early 2025. The sell-off will further increase discounts at the group’s dealerships.
“When times are tough, you get friction everywhere,” chief financial officer Natalie Knight said at a conference on Monday.
Whether Stellantis will survive in the same shape by early 2026 is unclear, given growing pressure on Tavares to make hard choices on underperforming brands. Suppliers are also in a mutinous mood, having been asked to bear the brunt of cost cuts and seen sourcing shift to low-cost countries. They say Tavares will have no choice but to find savings in another form eventually.
“We’re reaching the limits of the Carlos Tavares system and his way of operating,” said an executive at one car parts maker.
The person described Stellantis as more brutal than any of its rivals, sometimes reneging on factory contracts and cancelling orders.
Managers often justified such steps by quoting a mantra from Tavares about the company being in a “Darwinian” survival race, the person added.
“Another issue is . . . he has a lot of brands that cost a lot of money,” the person said, pointing to the high cost of ensuring each of the many brands remains competitive. “At some stage maybe he’ll have to sell.”
Tavares indicated for the first time over the summer that he was willing to axe some brands. According to collaborators and unions, he has long responded to complaints about cuts by saying only the company’s performance would save it in the end, not government subsidies or other help.
Yet Tavares, 66, appears undeterred by the growing internal discontent. A person close to Tavares said he would be involved in the discussions to find his successor.
A relaxed-looking Tavares told French TV channel M6 in an interview released this month that he was built to “never stop”.
The interview showed him touring his vineyards in Portugal’s Douro region this summer, on his return from strategy talks in Detroit.
“Like the winemakers, I have a taste for rigour, and for the search for perfection without ever reaching it of course,” he said. “That’s part of my DNA.”
Additional reporting by Silvia Sciorilli Borrelli in Milan
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