Making cars is hard. Just ask Carlos Tavares, the CEO of Stellantis. Aside from saying unprofitable brands could be killed off, he made another interesting disclosure this week. The man in charge of the world's fourth-largest automaker admitted there's a problem with the factories in the United States. He pointed out Sterling Heights in Michigan where the Ram 1500 is manufactured.
Too many freshly built trucks need repairs before being shipped to dealers for customers to drive home. Tavares said the direct run rate at some Stellantis plants "is not good," at Sterling Heights in particular. In case you're unfamiliar with the direct run rate, DRR refers to the total number of vehicles that get the seal of approval from quality control without having to undergo any repairs. In other words, the cars roll off the assembly line in perfect condition and then head straight to the dealer.
Tavares pointed out several major issues that stem from this. Not only do manufacturing costs increase but deliveries are also delayed. In addition, the Stellantis boss says there's a risk of other problems arising if the fixes are not applied properly. Having to work on newly built vehicles drags an automaker down in more ways than one.
But there are other problems with the Ram 1500 beyond quality. Tavares cites poor timing for the higher-end trim levels, as he believes the more expensive trucks were not available at the ideal moment. He argued that Stellantis should have built more configurations of the pickup that were in higher demand, instead of the less popular ones that sat on the dealer's lot.
"We have not always been able in the production planning to make a production mix that aligns with the sales mix. If we don't do that, if you don't align the production mix to the sales mix, at one point in time, your inventory is distorted against what the real demand is. If it is distorted, some of the models and versions and trims, they stick in the dealer yard, and then you have an inventory problem."
The 65-year-old Portuguese businessman is happy to report that quality is improving but the process "has been painful" as Stellantis had to "clean the mess." There have been some interruptions in the supply chain that negatively impacted production, along with quality issues at other factories beyond the Sterling Heights site.
Stellantis sales in North America were down by 18 percent through the first six months of the year, and one of the main culprits was the Ram 1500. However, shipments of the truck were lower than usual because of the mid-cycle facelift's launch. When an updated version of a vehicle is introduced, it slows down production due to the preparations necessary for the changeover.
Ram hopes to post stronger sales numbers in the latter half of the year now that the 2025 1500 is out, along with its high-performance RHO derivative. But Ram is just one of the 14 brands that operate under the same corporate roof at Stellantis. Tavares said he isn't afraid to shut down unprofitable brands.
Ram is in no danger of getting the axe but who knows what will happen to the likes of Chrysler and Dodge. On the European side, Lancia, DS Automobiles, and Abarth are not exactly printing money either. Tavares did say in 2021 that Stellantis would keep all 14 brands for a decade and invest in all of them, but that no longer appears to be the case.
