Major Auto Manufacturer’s Stock Plummets Amid Global Market Concerns
Stellantis, the parent company of iconic brands like Dodge, Ram, and Jeep, saw its stock value plummet by 13% on Monday morning after issuing a dire warning about its North American operations. The company cited performance issues and a deteriorating global market, particularly in China, as the primary reasons for its revised forecast.
To mitigate these challenges, Stellantis plans to implement significant remediation actions, including reducing North American shipments by over 200,000 vehicles in the second half of 2024, increasing incentives for 2024 and older model year vehicles, and launching productivity improvement initiatives to optimize costs and capacity. These measures will result in a reduced adjusted operating income margin of 5.5% to 7% for fiscal year 2024, a significant drop from its previous double-digit projections.
The company’s industrial free cash flow is also expected to take a hit, with a predicted loss of 5 billion to 10 billion euros ($5.58 billion-$11.17 billion) for the year. This news sent ripples through the automotive industry, with shares of General Motors, Ford, and Toyota also experiencing declines on Monday.
Stellantis’ struggles in North America are no secret, with swelling inventories, expanding price cuts, and dealer complaints about company mismanagement plaguing the company. The United Auto Workers (UAW) is considering labor strikes, alleging that Stellantis violated its agreements to restart operations at the shuttered Belvidere, Illinois assembly plant.
Stellantis is not alone in its struggles, as other major automakers face similar structural and macroeconomic challenges. Volkswagen is planning layoffs in Germany due to overcapacity and declining sales, while Nissan will cut production of its Rogue SUV and Frontier pickup due to rising inventories and global sales dropping over 5%. The entire US auto sector has been downgraded by Morgan Stanley’s autos and mobility team, citing rising inventories and concerns from China as primary catalysts.
Despite the gloomy outlook, Morgan Stanley maintains its Overweight rating on Tesla, citing the company’s AI and self-driving capabilities. Tesla’s highly anticipated robotaxi event is slated for next week, on October 10.
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