Stellantis CEO Tavares calls out problems in the U.S. market, including at Ram

You know how sometimes you set yourself a challenge you know might hurt, then get a third of the way into the challenge and realize, “This is, um, too much hurt?” That might be what’s happened at Stellantis. In May 2021, CEO Carlos Tavares said at the Financial Times’ Future of the Car event, “We’re giving each (brand) a chance, giving each a time window of 10 years and giving funding for 10 years to do a core model strategy. The CEOs need to be clear in brand promise, customers, targets, and brand communications.” With results for the first half of 2021 hitting Stellantis with a 48% drop in net income, Tavares started firing public warning shots to some the conglomerate’s 14 brands, underlined with, “If they don’t make money, we’ll shut them down.” Analysts began writing about the suddenly shaky ground under Italian brand Lancia and French brand DS, while Maserati took the brunt of the hit, Stellantis CFO Natalie Knight saying, “There could be some point in the future when we look at what’s the best home for [Maserati].”

Even profitable brands heard their names called over the public intercom. Ram prints money for the corporate mothership, and is in large part responsible for Stellantis’ average transaction price in the U.S. being $57,266 in May, a whopping 18% above average. But after Tavares left a Carlos Ghosn-led Renault to take over PSA Peugeot-Citroen and fixed the balance sheet, then bought GM’s European Opel/Vauxhall division and got it back into the black, he earned a reputation as a CEO who coaxes profits out of industrial barrens. You don’t mess with the man’s money.

Automotive News covered Tavares chiding a subset of Stellantis’ U.S. factory operation for less-than-acceptable build quality, singling out the Sterling Heights Assembly Plant that builds Ram 1500 pickups as an example. He told reporters, “The direct run rate of some of our plants, starting with SHAP — Sterling Heights — is not good. And that is something that we need to fix with our plant management team.” The direct run rate (DRR) is the number of vehicles off the line that don’t need more work before being sent to dealers; the closer to 100%, the better. A declining direct run rate not only means more vehicles held up at the plant, costing the automaker money, it opens the door to follow-on problems from incorrect fixes, costing even more money. In dire situations, it can hinder production or cause a plant shutdown. Ford got mired in DRR problems when launching the latest Explorer and Lincoln Aviator in 2019; thousands of SUVs off the Chicago factory lines were first driven to Ford’s Flat Rock plant outside Detroit for fixes instead of being driven to dealers.

Pickup assembly isn’t the only issue in the U.S. — Tavares also noted a suboptimal inventory model mix that kept dealers from receiving enough of the most popular trims, a contributor to Stellantis’ overall issue of having some of the highest inventory figures among automakers. On top of that, ineffective marketing is said to have kept buyers out of showrooms. This is an interesting one, because Tavares isn’t putting the blame on high MSRPs, he’s blaming the fact that buyers aren’t finding out about incentives that would lower the MSRP early enough in the buying process. AN wrote, “Tavares said the company needs to do a better job of presenting incentive offers.”

And another issue besides all of this is Stellantis’ disputes with suppliers, in at least a couple of cases needing to go to court to compel the stream of components.

The CEO comes to the U.S. in August with work to do on all of these points. “The job is not done in the U.S. and we are now going to take care of that work,” he said.