(Bloomberg) -- Leaders of Stellantis NV’s US dealer network criticized Chief Executive Officer Carlos Tavares for the “rapid degradation” of the automaker’s brands and urged him to spend more money to clear old inventory off their lots.
Retailers accused Tavares of “short-term decision making” that boosted profits last year and padded the CEO’s compensation. The moves ended up shrinking the company’s market share and hurting the Jeep, Ram, Dodge and Chrysler brands, the national dealer council said in an open letter to Tavares dated Sept. 10.
Tavares has been cutting jobs and slashing capacity at American factories since a plunge in US sales sliced first-half earnings nearly in half. Stellantis has taken steps this year to clear vehicle inventories, including cutting prices and bringing back incentives. But those steps have been insufficient as the company tries to protect its prized profit margins, according to dealers.
“For over two years now, the US Stellantis National Dealer Council has been sounding this alarm to your US executive team, warning them that the course you had set for Stellantis was going to be a disaster in the long run,” the group said in the letter. “A disaster not just for us, but for everyone involved — and now that disaster has arrived.”
Stellantis said in a statement Wednesday that it takes “absolute exception” to the letter. The automaker developed a plan last month with dealers that led to sales and market shares gains in August, it said.
“This is the result of working together with our dealer network and we want to thank them for their constant support and engagement,” Stellantis said. “We meet and talk monthly, have weekly calls and personal conversations at the highest level. This is where such dialogue should take place.”
Stellantis’ US shares were little changed in after-hours trading on Wednesday. The stock is down roughly 35% this year, compared with a 16% gain by the S&P 500 Index.
Aging Products
Dealers fear Tavares’ recent production cuts will further erode market share. They’ve also criticized him for thin investments in the carmaker’s aging product lineup, such as ending production of the Jeep Cherokee without an immediate replacement in the popular midsize SUV segment.
Jeep’s US sales fell 9% in the first half of this year, while deliveries of the profitable Ram pickups tumbled 20% from the prior-year period.
Despite the struggles, shareholders rewarded Tavares earlier this year with a €36.5 million ($40.2 million) compensation package that made him the highest-paid CEO of a traditional car manufacturer.
In June, Tavares conceded he should have moved more quickly to detect the “convergence” of various issues in the US, including inventory build-up and manufacturing problems.
“We were arrogant,” he told investors gathered at the company’s US headquarters in Auburn Hills, Michigan, at the time. “I should have acted immediately.”
Stellantis inventories remained well above most peers in August, despite above-average consumer incentive spending during the month at the Chrysler, Ram and Jeep brands, according to researcher Cox Automotive.
But dealers are still at loggerheads with the manufacturer because they want more consumer-facing incentives to draw buyers into their stores. They also want help boosting interest in older model-year trucks with expensive technology packages that are out of reach for many consumers.
In the letter, the retailers said they hoped to see Tavares at their next council meeting in Auburn Hills on Oct. 15.
“The problem is only getting more expensive and worse with time,” the four members of Stellantis’ national dealer council leadership said in the letter. “We urge you to stop delaying and do the right thing now.”
--With assistance from Albertina Torsoli and Peter Vercoe.
(Updates with Stellantis comment, additional details from the fifth paragraph.)
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