What went wrong at Stellantis? Why Carlos Tavares had to go

Carlos Tavares resigned as chief executive of Stellantis, home to marques including Vauxhall, Peugeot and Jeep, after he clashed with the board over his strategy for turning the huge carmaker around.
That Tavares left so abruptly indicates the size of the row between him and John Elkann, Stellantis chairman and scion of the billionaire Agnelli family who own 14 per cent of the group. It had already been flagged this year that the 66-year-old would be retiring as chief executive by 2026.
The board had become concerned that Tavares was focused on finding short-term solutions to save his own reputation rather than working in the best, long-term interests of the company.
Stellantis’s stock on the Euronext exchange had already more than halved since the spring and fell a further 7 per cent in Monday trading to its lowest point since the deal that created it. In the three months to the end of September, group sales volumes fell 20 per cent and revenues collapsed by €12 billion or 27 per cent to €33 billion. The company admitted it wasn’t selling enough vehicles in the United States and that it was struggling operationally with the electric car transition in Europe.
Stellantis was formed from the merger during the pandemic of the French brands Peugeot and Citroën with the Italian-American group Fiat Chrysler Automobiles. Vauxhall had been acquired from General Motors, its owner for much of the previous century, by Peugeot-Citroën for a nominal €1 in 2017.
Recently, Tavares had focused mainly on cutting costs, leading the board to become increasingly concerned that this was leading to quality issues and also inhibiting the company’s ability to develop and design new models.
Launches of some key models, like the new version of the popular Peugeot 3008 mid-size SUV and the budget Citroen C3 city car, with its electric version e-C3, have faced delays.
In the US, meanwhile, Tavares’s cost-cutting had hurt the company’s relationship with its dealers and the United Auto Workers’ Union.
In a letter to Tavares on September 10, Kevin Farrish, president of the Stellantis National Dealer Council, complained that the pursuit of short-term profits meant “rapid degradation” of the Jeep, Dodge, RAM and Chrysler brands, adding: “You created this problem.”
United Auto Workers has threatened to strike over delayed investments, prompting lawsuits from Stellantis accusing the union of breach of contract.
In Europe, Tavares took a hardline approach to the European Union’s forthcoming tougher emissions targets at a time of slowing sales of electric vehicles, said Massimo Baggiani, founder of Niche Asset Management and a Stellantis shareholder. It “frightened” investors and major shareholders, he said.
The Tavares legacy also includes the fallout from deliberately picking fights with national governments when so many automotive executives, aware that good relations are a good idea, keep their own counsel. And none more so than in the UK with his decision last week to shut the century-old Luton van-making plant, putting 1,000 jobs at risk.
Tavares dressed up this decision as part of his row with the UK government over its failure to incentivise sales of electric cars and vans and at the same time impose punitive sales targets on manufacturers under the zero-emission vehicle mandate.
This was, perhaps, disingenuous. As Tavares had alluded to several times in the past decade, the decision was that with Ellesmere Port as well, two automotive plants in the UK was at least one too many; especially after the Brexit referendum, the result of which he said would have “dramatic consequences” for his continuing investment in the UK.
Having subsequently taken tens of millions of pounds of UK taxpayers’ money to convert Ellesmere Port, the old Vauxhall Astra plant, into an electric van factory which today is operating nowhere near capacity, the option to consolidate operations and shut Luton was more than obvious.
In short, the Luton axe looks like pure corporate cost-cutting, which Tavares blamed on the UK government for failing to properly oversee the energy transition.
The Luton closure has now left ministers fumbling over whether they should abandon the zero-emission vehicle mandate because of Tavares’s argument that carmakers cannot possibly make enough products profitably under such structures. Yet at the same time Tavares has been overseeing a €3 billion handout to shareholders through a share buy-back programme.
• Dominic O’Connell: Vauxhall’s Luton shutdown hides a deeper threat to our car industry
None of that has made him a friend of the pro-electric car lobby in Britain — especially so if Tavares’s ultimate legacy is a reining back of this country’s zero-emission ambitions.
However, his immediate legacy is a company in crisis. The agglomeration of Stellantis brands also includes Maserati, Alfa Romeo, DS, Lancia and Abarth and in the US Dodge, Jeep and RAM. Too many brands with similar profiles, too many not making money and just too many is the general synopsis.
“Tavares leaves the group without leadership at a time of critical decisions on brand management to reverse market-share loss and excess industrial capacity in Europe and North America,” Philippe Houchois, analyst at the stock broker Jefferies, said.
Strategically the company is at a crossroads, with many questioning whether the house that Tavares built ever had the right foundations.