Stellantis CEO’s Strategy for Higher Profits Pushes Away Loyal Buyers

When 24-year-old Elena Aragon set out to purchase a new car last year in her hometown of Cadiz, Spain, she considered several budget-friendly brands, including Stellantis’ Fiat and Peugeot. However, she found the basic models unappealing, while the more advanced ones—featuring extras like blind-spot sensors and rear-view cameras—were priced too high. Ultimately, she chose a Hyundai.

This is just one example of how Stellantis CEO Carlos Tavares, who resigned suddenly on Sunday, has lost touch with core customers since taking the reins in 2021. Tavares focused on boosting margins by raising prices higher than competitors and delaying discounts when demand slowed. This approach alienated price-sensitive buyers, including those who once helped make Jeep the company’s top moneymaker.

The company’s big bet on reviving the Jeep Wagoneer and Grand Wagoneer in the United States is starting to show cracks, too. Jeep’s lineup is heavy on larger, higher-priced SUVs at a time when many consumers prefer smaller and fuel-efficient models such as the Toyota RAV4, Chevrolet Trax, and Honda CR-V.

Moreover, the company is battling a tarnished image in some markets. It has been accused of shoddy artistry and using illegal labor in some plants. And it faces the prospect of a worker strike, which could slash production and hurt sales. A UAW-Chrysler National Training Center strike would be particularly damaging because it could send a message that Chrysler and its other brands aren’t safe to drive.

Even if a strike is avoided, the company’s long-term outlook is grim. The industry is shifting rapidly toward electric vehicles and self-driving cars. Stellantis is far behind rivals in developing such technology, requiring tens of thousands of employees working shifts around the clock to install and test equipment. That will be a challenge for any company, especially for one already losing market share to Tesla and other competitors.

In his resignation letter, Tavares cited “difficult circumstances that have recently arisen.” That may mean a long slog for the company to return to profitability. However, its future may also depend on how fast it can resolve the issues that hampered sales in the first place. The sooner it fixes those problems, the more likely Stellantis will be to regain some of the customer loyalty that helped it survive past upheaval in the auto industry. The company’s Milan-listed shares were down 7% on Monday. That’s more than double the broader market’s decline. The stock has tumbled almost 40% this year alone. The company’s board named Chairman John Elkann as interim CEO. The company also announced it’s cutting jobs in North America and Europe. That will save about $600 million annually. Moving manufacturing work overseas to lower-cost countries will save about $1 billion. But it says it will not shut down plants or stop building some models. The plan is to make up the difference in profits from other parts of the business, such as financial services and technology.