A year after the transatlantic merger that created Stellantis NV, experts say the company is looking at two potential futures.
The maker of Jeep SUVs and Ram pickup trucks has outlined a vision for electrification and software, announced strategic partnerships and pressed through an unprecedented microchip shortage. It moved forward on cost cuts in early efforts to transform itself into the tech mobility company required by changes in the industry that its predecessors, Fiat Chrysler Automobiles NV and French rival Groupe PSA, concluded they couldn't handle alone.
Still, the world's fourth largest automaker has yet to launch a fully electric vehicle in North America, it has underutilized plants and brands with overlapping audiences in Europe, and it continues to lose money in China, the world's largest autos market.
Enter the two paths evident to analysts: One is akin to today's Ford Motor Co., an automaker entering the EV space behind others with strong product such as the Mustang Mach-E SUV and soon beating the industry with the launch of the F-150 Lightning truck this spring. The other more closely resembles the General Motors Co. of several decades ago when size worked against it and its brands competed against themselves.
"The biggest worry is that Ford and GM have been the showstoppers," said Daniel Ives, analyst at investment firm Wedbush Inc. "Stellantis falls into the trap of potentially being viewed as the little brother. That's a perception they have to fight, but it's really going to be through execution."
To that end, analysts and Stellantis partners view positively the leadership of CEO Carlos Tavares. He approached FCA about the merger with PSA, where he stabilized the company's finances and quickly turned around GM's money-losing Opel and Vauxhall divisions.
"When (Ford CEO Jim) Farley took over from (Jim) Hackett, that was night and day in terms of speed and announcements," said Carla Bailo, CEO of the Center for Automotive Research in Ann Arbor who formerly worked with Tavares at Nissan Motor Co. Ltd. Tavares "is similarly charismatic with a vision for 'here are the things we are going to do.' Their new CEO has ideas and is going to make them happen."
Since closure of the Stellantis deal on Jan. 16, 2021, the automaker has announced partnerships with iPhone contract manufacturer Foxconn Technology Group and Amazon.com Inc. It acquired a captive finance arm for its U.S. business. It brought on Daimler AG's Mercedes-Benz as a collaborator in developing and producing EV batteries in Europe. And it announced joint ventures with battery manufacturers for two battery plants in North America. Plus, Chrysler gets a 10-year chance to become a fully EV brand.
"It's truly been an historic year," said Mark Stewart, Stellantis' chief operating officer in North America, in a statement. "We didn't just form a new company, then spend the next 12 months developing our vision. Our global teams immediately got to work, rolled out our purpose and values, and began executing.
"And we're just getting started. We have a huge opportunity as Stellantis. The scale, the broad access to technology — across all of our brands and markets — further enables our transformation to a sustainable tech mobility company."
Meanwhile, amid a global semiconductor shortage that contributed to a 2% decrease in U.S. sales last year, the company opened its new assembly plant in Detroit to build three-row as well as the next generation of two-row Jeep Grand Cherokee SUVs, though an odor from the plant is causing it problems with neighbors and the state of Michigan. Warren Truck Assembly Plant also began production of the full-size Wagoneer and Grand Wagoneer from the Jeep team.
"This thing drives like a dream," said Geoffrey Hardee, 41, of Columbia, South Carolina, of the top-of-the-line Grand Wagoneer Series III he bought last month after an accident has kept his '17 Cadillac Escalade in an auto shop for five months because of a scarce part. "They really have raised the bar. There is no reason they can't compete with the Escalade or even Land Rover."
Jeep also began deliveries of the Wrangler 4xe, last year's best-selling plug-in hybrid SUV in the United States, according to the company. The launches have filled out missing segments from the automaker's lineup, an effort begun under former FCA CEO Sergio Marchionne.
"When it came to allocating money, their biggest priority was what they were getting profitably and the product lineup to match Ford and GM," said Philippe Houchois, a London-based analyst at investment bank Jefferies Group LLC. "All those gaps have been filled. That was a priority. Electrification was neglected."
The company last summer said it's investing $35.5 billion in electrification and software within five years, and every nameplate will have an EV option by 2030. Still, as the F-150 Lightning launches this year, and the electric Chevrolet Silverado does next year, an all-electric Ram isn't expected until 2024.
Accordingly, Stellantis shares on the New York Stock Exchange closed up 43% on Friday from before the merger while Ford's were up 156%. GM's rose 22%.
"The perception is that it matters," Houchois said of the late EV truck launch. But "the early movers haven't always been rewarded. If you're a follower, if you can learn from others, and if you're fast, you can make up the difference. That's what you see with Ford: They were late, but effectively once Ford got on the roll, they leapfrogged the competition."
That's the goal, Tavares said earlier this month: "We have the opportunity to adjust the competitiveness and the appeal of our own trucks to what they are doing, which is a competitive game, which is a fantastic situation for the consumer."
Too much competition, however — especially among an automaker's own brands — can lead to reduced sales or market share. Globally, Stellantis has 14 brands, and Tavares is giving each 10 years to show they can be profitable and grow. Cannibalization is a particular concern for Stellantis in Europe, where FCA and PSA had overlapping footprints. Vehicle sales there in 2021 are estimated to be more than 1 million less than pre-pandemic levels in 2019.
"It could be the same story as with GM 50, 40, 30 years ago when it had all these undifferentiated brands," said Ferdinand Dudenhöffer, a professor of automotive economics at the Center for Automotive Research at the University of Duisburg-Essen in Germany. "It didn't convince customers.
"Looking into the future, it would be important for Stellantis to not just look at cost reductions, however, but always to think about customer values and innovations in the product. There's no special brand story. More sexy, of course, is Tesla."
Stellantis has promised more than $5.5 billion in annual cost savings resulting from the merger. It hired nearly 1,100 salaried employees in North America last year with more to come as it emphasizes software. But the automaker offered a buyout in October with more than 330 retirement-eligible workers leaving "as a part of our transformation to a sustainable tech mobility company," spokesman Mike Palese said in a statement.
Although the company has hired 5,500 Detroiters at plants in Metro Detroit and Ohio, manufacturing jobs elsewhere have taken a hit. Stellantis cited the chip shortage in eliminating the second shift at the Jeep Cherokee plant last summer in Belvidere, Illinois. Some workers were able to transfer.
Discussions continue over the possibility of future investment there after funding allocation was passed last fall to support EV investment in the state, said Pamela Lopez-Fettes, executive director of the Growth Dimensions Economic Development nonprofit in Boone County. Industry forecasters have predicted the Dodge muscle cars could move there, which would leave the plant in Brampton, Ontario, without product.
Stellantis also plans to cut a second shift at the Chrysler minivan plant in April in Windsor, Ontario, though Canadian autoworkers union Unifor says the company intends to return the plant to three shifts following an investment for EV production there.
John Barbosa, 51, of Clinton is a millwright apprentice at Toledo Assembly Plant in Ohio. He's started to notice the company is less likely to approve spare parts like nuts and bolts for repairs.
"It takes longer to do repairs because you have to track down the parts you need," he said. "That's more downtime. Time is money in production. After being in the auto industry 17 years, whenever they care about nothing but the bottom line, generally, morale suffers, customer satisfaction suffers."
The merger itself, company executives have said, won't result in the closure of any plants. Underutilization in Europe, however, persists. Stellantis had a 45% average capacity utilization of its 27 plants on the continent in 2021 compared to 52% for the industry overall, according to forecaster LMC Automotive. Twelve plants are expected to run under 50% capacity this year with an average of 28% utilization.
Performance was better in North America: Stellantis plants ran at 59.2% of capacity in 2021 compared to 59.7% for the industry overall. In a normal year without a chip shortage, a healthy capacity is usually above 60%, LMC analyst Katelyn Drake said. LMC's forecast, however, does predict most underutilized plants will be seeing products in the coming years.
"If you have the utilization lower than ideal or lower than the industry is at, you're spending money on a plant and not making money off that," Drake said. "Stellantis is clearly addressing the issue and finding solutions for plants that are currently underutilized. They're playing plant musical chairs with the products moving around. They're developing that framework and don't want to close plants."
U.S. dealers, meanwhile, have seen cuts to their co-op, a program where Stellantis reimburses some of their costs for marketing and advertising, said Dave Kelleher, chair of Stellantis' U.S. dealer council. The company has taken a top-down approach such as encouraging dealers to get evaluated for EV charging infrastructure that can cost a small retailer $2,500 and a larger one $10,000 or working toward having all dealers use the same website design instead of one of several options.
"It's been a very challenging year," Kelleher said. "These guys have clearly identified ideas, and I think most of those ideas you should be excited about. They want a high level of (customer) satisfaction and have high demands on themselves for product. They want to do a whole bunch of things and do it as least expensive as possible. To change cultures is to change the way people look at things; there's going to be some bruises."
He hopes in the near future Tavares will address dealers to help bring everyone on board with the vision: "The dealer model in other parts of the world is quite a bit different than the dealer model in the United States. I don't think there's a full understanding of how important, how much we achieve, how much of the sales that come because we're not delivery stations like we are in some parts of the world. We're small business people with an independent business model that drive a lot of the business for the company."
Elsewhere, not driving much business is Stellantis' operations in China, a weakness for both FCA and PSA prior to their tie-up. Stellantis sales represent roughly 0.5% of the market.
The company is expected to share more details of its strategy for China in March. So far, it only has said that it plans to introduce Opel there as an EV brand. But this comes as native Chinese brands have taken leadership of its EV market, contributing to a 254% increase year-over-year in EVs and plug-in hybrids, according to Hong Kong-based consulting firm ZoZo Go LLC.
Tavares has said any global automaker must be a player in China. The country's margins "are still quite attractive" for the industry overall, Jefferies' Houchois said. "The Chinese were early adopters of Tesla and software connectivity. In many ways, the case of Chinese consumers are ahead and interesting for global development."
Added Dudenhöffer: "They have to build up more strength in China. It's the most important market for the future."
