Stellantis has lost about 70% of its value since its peaks in early 2024. Even the purchase of a new Maserati — the Stellantis brand with the unenviable reputation for the fastest depreciating cars — would have struggled to obliterate value at that pace. And in the meantime, you would at least have had something beautiful to look at.
Beauty isn’t enough in the modern economy, as evidenced by Maserati’s continued decline within Stellantis. Shipments of the iconic brand fell 19% year on year in the third quarter, with the crisis at Maserati highlighting many of the mistakes made by the broader industry in losing its identity and alienating buyers. Despite what European governments wish were true, the reality is that most consumers still aren’t particularly interested in electric cars — especially not from sports car brands. Even in typical commuter car categories, the electric demand owes much of its existence to government subsidies.
If you go on YouTube and look for the recent Hemi V8 campaign by Stellantis brand Dodge, you’ll find one of the best corporate apologies imaginable, accompanied by thundering car noises that tug at the heartstrings of good ol’ boys in the Midwest. This is just one example of a new approach Stellantis is taking to get back to its core DNA. We are talking about a group that inexplicably dropped the Jeep Cherokee brand in 2023 as part of broader cost-cutting measures under previous CEO Carlos Tavares. The road to corporate success definitely isn’t paved with decisions that destroy multi-decade brand value.
This new approach seems to be resonating with customers, with North American shipments up 35% year on year in the latest quarter. Group shipments were up 13% for the quarter, so things have improved dramatically since the awful results for the first half that reflected a 7% decline in volumes.
Group shipments were up 13% for the quarter, so things have improved dramatically since the first half
This couldn’t have come a moment too soon. Recently appointed CEO Antonio Filosa hosted his first earnings call in July, a month after taking the top job, and it was a baptism of fire. The analysts certainly didn’t go easy on him, as Filosa has been with the group for about 25 years and therefore isn’t given the same grace period an external appointment would receive.
As things turned out, that earnings call was also the last time CFO Doug Ostermann would be presenting the numbers. As part of a raft of management changes announced in recent weeks, Ostermann is out and is being replaced by Joao Laranjo. Filosa is bringing in a trusted associate, as they’ve worked together for about 15 years. In an incredibly tough situation, you want to know exactly who you have in the room with you. This type of behaviour is nothing new, as corporate turnarounds inevitably include management changes that go beyond the CEO.
And make no mistake, this is a desperate turnaround situation. In the first half of the year, the decline in volumes was accompanied by lower pricing and a 13% revenue drop. Things only got worse at operating income level, as the base period included the last of the artificially inflated prices of the Covid era due to supply constraints (and thus unsustainably high margins). But even if we ignore the prior period, the harsh reality is that cash flow generation in the first half wasn’t even enough to cover the group’s capex requirement.
This is why analysts put immense focus on the cash burn in the group, as a healthy balance sheet can quickly shift from a going concern to an ongoing concern if the burn isn’t addressed. This is especially true based on the US strategy around finance offers, with Stellantis having to invest vast sums in its financing business to help drive sales.
On the call, Filosa acknowledged the poor results for the first half and looked ahead to important new model releases in the second half expected to be catalysts for improvement. He also noted that total inventory was down 16%, putting the firm in a position where inventory levels had normalised. To further appease investors, he spoke about putting a stop to initiatives with questionable paths to profitability, such as the fuel cell projects in Europe.
Talk is always cheap. Results are what matter. With the Stellantis share price having tracked sideways since April this year, it seems like it may have found a bottom. The latest shipment data means Stellantis is showing signs of life. Overall, with numerous changes to management and hints of a capital markets day early next year, Stellantis is in an interesting space right now.
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