Stellantis reduces earnings estimates due to investments in United States
Date
10/1/2024 8:39:46 AM
(MENAFN) Stellantis, the world's fourth-largest automaker, announced on Monday that it has revised its earnings forecast downward due to significant investments aimed at revitalizing its operations in the U.S. This adjustment comes in the context of a broader downturn in the automotive industry and intensified competition from Chinese manufacturers. The company’s decision highlights the challenges it faces in navigating a rapidly changing market landscape, which has prompted a reassessment of its strategies in North America.
In a bid to improve its performance in the region, Stellantis is accelerating its efforts to streamline dealer inventory levels, aiming to reduce them to no more than 300,000 vehicles by the end of the year. This marks a shift from the initial target of achieving this goal by the first quarter of 2025. The move comes as Stellantis anticipates a reduction in shipments of 200,000 vehicles in the second half of the year compared to the previous year, a figure that is double what the company had initially predicted. To stimulate sales, Stellantis plans to offer increased incentives on its 2024 models and older vehicles.
The company issued a profit warning, projecting a negative cash flow ranging from 5 billion euros to 10 billion euros (approximately $5.6 billion to $11.2 billion) for the year, a stark contrast to its previous expectations of positive cash flow. Additionally, Stellantis has lowered its operating profit margin guidance to between 5.5% and 7.0%, abandoning earlier forecasts of double-digit margins. This news sent the company’s shares tumbling, with a significant drop of 14.45% observed during midday trading in Milan, bringing the stock price down to 12.45 euros.
Amidst these challenges, Stellantis is also in the process of seeking a new CEO to replace Carlos Tavares, who has faced criticism from both U.S. dealers and the United Auto Workers union following a disappointing financial performance in the first half of the year. While the company has characterized the search for a new leader as a routine part of its leadership succession planning, it underscores the urgency for Stellantis to regain its footing in a competitive market. As the automotive landscape continues to evolve, Stellantis’s ability to adapt and respond to these pressures will be crucial for its long-term success.
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