Stellantis, the automotive giant owning brands such as Jeep, Chrysler, and Dodge, reported a significant decline in profitability for the first half of 2024, underscoring the challenging environment for automakers grappling with excess inventory and cooling demand. The company's net profit plunged by 48% year-over-year to €5.65 billion ($6.13 billion), while revenues fell 14% to €85.02 billion.
The disappointing results were a stark reminder of the difficulties facing the industry, particularly in North America. Stellantis' CEO Carlos Tavares acknowledged the company's underperformance, attributing it to both a challenging industry context and internal operational issues. "The Company's performance in the first half of 2024 fell short of our expectations," Tavares said. "We are taking decisive actions to address these challenges."
The automaker's struggles are reflected in its stock performance, with shares dropping 8% in premarket trading following the announcement. The company cited its "North American share and inventory performance" as a significant drag on results, alongside restructuring and foreign exchange costs.
Stellantis' earnings report comes amid a broader industry slowdown. Automakers are facing cooling demand as inflation impacts consumer spending, and the demand for electric vehicles has also waned. This week, Ford Motor reported second-quarter earnings that missed expectations and maintained its full-year guidance, while General Motors raised its outlook despite unexpected losses in China. Tesla, too, posted a 45% year-over-year decline in profits due to lower average selling prices.
Stellantis reported adjusted earnings per share of $1.09, slightly above Wall Street's expectations of $1.05, on revenues of $14.33 billion, just below the anticipated $14.36 billion. However, these numbers did little to assuage concerns about the company's financial health.
In North America, Stellantis saw a sharp decline in performance. Net revenues in the region dropped from €45.9 billion to €38.4 billion, while adjusted operating income fell from €8 billion to €4.4 billion. The company's vehicle shipments in North America also decreased significantly, from over one million to 838,000 units.
Tavares described the results as "disappointing and humbling" but stressed that corrective measures are underway. "We have significant work to do, especially in North America, to maximize our long-term potential," he said. He emphasized that the company's profitability in North America dropped from No. 1 to No. 4 and that restoring it to the top spot is a priority.
Despite the bleak financial report, Stellantis is sticking to its full-year guidance, aiming for a double-digit margin in adjusted operating income and positive industrial free cash flow. The company highlighted several upcoming electric vehicle launches, including the Dodge Charger Daytona, Jeep Wagoneer S, and Ram 1500 REV, as part of its strategy to reinvigorate sales.
The broader automotive industry is facing turbulent times, with Tavares predicting several challenging years ahead. "It's to me a no-brainer that this industry is going to be in turmoil," he remarked, indicating the severity of the issues plaguing the sector.
Stellantis has also been dealing with lower sales in the crucial U.S. market and significant executive turnover. The company reported a 21% decline in U.S. sales in the second quarter of 2024 compared to the same period in 2023. To address these issues, Stellantis plans to reduce production in the third quarter of this year.
During a roundtable with reporters, Tavares hinted at potential job cuts in the Detroit area but suggested that the company is primarily looking at its marketing strategies to resolve some issues. He also pointed to problems at U.S. plants, particularly the Sterling Heights Assembly Plant, which produces the Ram 1500 pickup. The plant's direct run rate, or the number of vehicles needing rework before shipment, remains a significant issue.
Stellantis' situation contrasts with other automakers like Ford and General Motors, which also reported earnings this week. Ford posted a net income of $1.8 billion for the second quarter, while GM reported $2.9 billion in net income, highlighting the varying fortunes within the industry.
