Last week, Stellantis CEO Carlos Tavares resigned unexpectedly. The company has been struggling with declining sales both in Europe, where production of the electric Fiat 500e has been slowed or stopped several times this year, and in America, where the ever popular Jeep brand has been somewhat less popular this year. Jeep used to be a cash cow for whoever owned the brand and was considered a key asset when Stellantis was created out of the remains of the former Fiat Chrysler organization. Tavares’ resignation comes less than two months after the company announced he would retire at the end of his contract in early 2026. At the time, Stellantis said it planned to name a successor by the fourth quarter of next year.
Stellantis said that the process leading to the appointment of a new CEO is “well under way” and that it expects to conclude the search during the first half of next year. Until then, the company said it will establish a new interim executive committee led by Chairman John Elkann. “Stellantis’ success since its creation has been rooted in a perfect alignment between the reference shareholders, the Board and the CEO. However, in recent weeks different views have emerged which have resulted in the Board and the CEO coming to today’s decision,” Henri de Castries, Stellantis’ senior independent director, said in a press release reported by CNBC. A Stellantis spokesman declined to disclose any additional information regarding the resignation.
“The market will inevitably ask why the Stellantis board considered that not having a permanent CEO for some months was preferable to keeping the current CEO in situ,” Bernstein analyst Daniel Roeska said in an investor note. “We struggle to identify any scenario under which these events can be positively spun as far as the stock price is concerned.” Stellantis on Sunday reconfirmed its previously lowered guidance for the year, which included an adjusted operating income margin of between 5.5 percent and 7 percent and industrial free cash flow between minus 5 billion euros ($5.3 billion) and minus 10 billion euros. Shares in Stellantis are down about 43 percent since the start of the year.
Volkswagen Facing Angry Employees
The Volkswagen brand is facing an open revolt from its workers as it contemplates shuttering up to three factories in Germany, something that has never happened before in the long history of the company. CFO Arno Antlitz said at a conference hosted by Goldman Sachs in London on December 5, 2024, that Volkswagen Group needs to take “decisive action” at its German factories to return them to full operating capacity, according to Bloomberg. “Our aim is for our factories to be humming with activity,” Antlitz said. “The alternative is highly detrimental. Each underutilized factory gradually bleeds out, becoming inefficient and continuously losing competitiveness.”
Capacity utilization across VW’s German factory network has fallen over the past two decades to less than 60 percent, Bernstein analysts wrote in a November note, with an estimated unused capacity of as much as 800,000 units. Volkswagen saw nearly 100,000 workers walk out of factories recently over its plans for unprecedented job cuts to make the company competitive. With a fourth round of talks and more walkouts set for December 9, there is little indication that management and labor leaders are close to a deal.
Industry analysts fear there is more trouble ahead. They point to the potentially bruising effects of a full blown trade war with the US when you know who returns to the White House next month. If exports to the important US market take a hit because of new tariffs, it would add to the massive pressure to cut costs to stop profits from eroding further. The industry “faces an almost perfect storm,” UBS Group analysts led by Patrick Hummel said in a note to clients recently. “Pricing pressure, market share losses in China, tighter CO2 regulation, tariff risk, and continued lackluster demand will likely drive sector earnings down further, despite intensifying restructuring efforts.” That is what might be called a grim picture.
Europe And The Auto Manufacturing Sector
A key employer across Europe, the automotive industry has been the worst performing industrial sector so far this year. Even with company valuations some 30 percent below historical averages, investors are cautious as the timing for a broader and sustained market rebound remains uncertain. “For as long as the end of the downgrade cycle isn’t visible, any potential bounce from current lows will likely be short lived,” UBS said. The Ifo Institute, one of Germany’s most renowned economic research centers, echoed UBS’s sobering outlook, saying in a recent report that sentiment in the nation’s auto industry was “deteriorating rapidly.”
The car industry had long been buoyed by full order books after the Covid-19 pandemic and supply bottlenecks left manufacturers without enough semiconductors to meet demand. But now those backlogs have been worked down, and with demand for EVs stagnating and growth in China failing to pick back up, new orders are only trickling in. The decline has left carmakers with excess capacity, Ifo Institute automotive expert Anita Wölfl said. As a result, manufacturers are having to cut back. Ford plans to reduce its European workforce by about 14 percent, primarily in Germany and the UK, by the end of 2027. Germany’s luxury car makers Mercedes-Benz and Porsche are also looking to slash costs. The downturn is rippling through the supply chain. Robert Bosch, Continental, and ZF Friedrichshafen combined have announced around 20,000 job cuts in the German home market where auto parts makers are a key part of the economy. Schaeffler AG plans to close two sites to save money and will eliminate or relocate thousands of positions.
The job losses add to a dim picture for Europe’s biggest economy, which has continued to stagnate this year with a shrinking manufacturing sector. Factory orders dropped again in October, though less than economists predicted, raising the prospect that the country’s multi-year industrial recession may at least have started to bottom out. There is little concrete evidence yet that a meaningful, sustainable economic rebound is in sight, especially in the auto sector.
Carmakers’ dire outlook will be visible again on Monday, when Volkswagen reconvenes for another round of negotiations with its powerful labor union IG Metall over job cuts affecting the Volkswagen brand. Management has said it needs to close factories in Germany to address a drop in EV demand, rising operational costs, and intensifying competition. Executives last week rejected labor’s counter-proposal — a €1.5 billion ($1.6 billion) package of additional cuts that included lower dividend payouts as well as reduced bonuses and a fund to pay for possible layoffs and shift reductions. With the two sides still far apart, more walkouts and protests could follow in coming weeks in the run-up to Christmas season. Daniela Cavallo, VW’s top labor representative, said the meeting on Monday “is likely to determine the way forward — compromise or escalation.”
The Takeaway
There is a dark tinge to this news. The auto industry is a huge part of the German economy. 20,000 workers being laid off by the Tier One parts suppliers is troubling news not just because of the blow to the economy but also because of the boost it gives to disaffected workers looking for someone to blame for their ills. There is a direct link between the job market and the political sphere. Unhappy citizens tend to gravitate toward leaders who claim they have solutions; whether they actually do or not is largely irrelevant. There is an echo here of the lyrics from a Bruce Springsteen song — “Foreman says, ‘These jobs are going, boys, and they ain’t coming back.'” The only difference is now the workforce is not a male-only society, but nevertheless, the message is the same.
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