Tavares Clashed with Stellantis Board Over Cost-Cutting Plan

Carlos Tavares, the former CEO of Stellantis, found himself at odds with the company’s board over his approach to revitalizing the struggling automaker. Sources close to the situation have revealed that Tavares, renowned for his leadership, focused primarily on cost-cutting efforts rather than pursuing a long-term strategy. This shift in priorities led to a growing rift between the CEO and Stellantis’ board, ultimately resulting in his sudden resignation.

According to Reuters, several shareholders, analysts, and bankers familiar with the situation indicated that Tavares’ focus on reducing expenses was not well-received. “The board was concerned that his emphasis on cost-cutting was leading to quality issues, potentially limiting Stellantis’ ability to innovate and produce new models,” one investment banker stated. Tavares’ approach, while aimed at quick fixes, was seen as neglecting the importance of investing in future products and maintaining brand integrity, which alienated both customers and dealers.

Stellantis has been facing significant challenges in its key North American market, including bloated inventory and increased competition from Chinese manufacturers, particularly in the electric vehicle (EV) sector. At the same time, Stellantis has been struggling to adjust its pricing strategy in Europe, where inflation has impacted consumer purchasing power.

Tavares’ cost-cutting measures specifically hurt his relationship with U.S. dealers and the United Auto Workers (UAW) union, according to sources. In September, Kevin Farrish, President of Stellantis’ National Dealer Council, expressed his concerns in a letter to Tavares. He noted that the pursuit of short-term profits had led to the “rapid degradation” of key Stellantis brands like Chrysler, Dodge, Jeep®, and Ram. Farrish bluntly stated, “You created this problem.”

The UAW also voiced its frustration with the company’s delayed investments, threatening to strike over the matter. The board’s frustration with Tavares reached a peak as tensions rose over his hardline stance on EU emissions regulations. With stricter emissions standards looming, Stellantis is under pressure to increase its EV sales mix, a challenge that became more difficult as demand for EVs began to slow. Despite this, Tavares remained firm in his commitment to meet EU emissions targets, which alienated some investors who feared that the company might struggle to meet the new rules.

Tavares’ resignation, announced unexpectedly, has sent shockwaves through the company, causing Stellantis’ shares to drop by as much as 10%, their lowest point since July 2022. This sudden leadership change leaves the company in a precarious position as it navigates an uncertain future, grappling with overcapacity, rising competition, and the need for a more sustainable long-term strategy.

Despite Tavares’ exit, analysts believe the challenges at Stellantis are far from over. “The problems are deep, and they’re not easily fixed,” said Stephen Reitman, an analyst with Bernstein. The auto giant faces an uphill battle in regaining its footing, and its next CEO will need to find a balance between cost management and long-term growth to turn things around.