(Bloomberg) -- Stellantis NV Chairman John Elkann has started a search for a successor to Chief Executive Officer Carlos Tavares, whose contract runs out in early 2026.
The automaker confirmed the decision and said it’s part of regular succession planning after questions from Bloomberg News. Pressure on the CEO is rising due to Stellantis’ poor performance in markets including the US, its biggest single profit pool.
Elkann has no plans for an immediate leadership change and Tavares will be included in the search process, according to people familiar with the matter. Still, the chairman is increasingly dissatisfied with the situation in North America, where sales have been slowing and several executives left the company, said the people, who asked not to be identified discussing internal matters. Elkann is also CEO of Exor NV, the largest shareholder in Stellantis.
Tavares, 66, has pursued a stringent cost-cutting course as Stellantis contends with weakening demand for electric cars and intensifying competition from Chinese manufacturers. In the US, the Jeep and Chrysler maker is struggling with high levels of inventories, quality issues and declining market share.
It’s “normal” for the board to start looking into succession planning given the CEO position’s importance, “without this having an impact on future discussions,” as there still is the possibility of Tavares staying on longer, a Stellantis spokesperson said. A spokesperson for Exor declined to comment.
Stellantis’ US shares rose as much as 3.9% after the news. The stock is still down more than a third this year.
Earlier this month, leaders of Stellantis’ US dealer network criticized Tavares for presiding over a “rapid degradation” of the manufacturer’s brands that also include Ram and Dodge, urging him to spend more money to clear old inventory off their lots. The company also faces the possibility of more strikes in the US and Italy in coming weeks.
Fixing the US issues will be a “top priority” for Stellantis until the end of this year, Chief Financial Officer Natalie Knight said late Monday, adding that the company is working hard to find solutions that satisfy all stakeholders, including dealers. Stellantis recently pledged to invest more than $406 million in three Michigan sites.
Still, Tavares has been demanding additional budget cuts to protect profitability, stoking worries that his aggressive efficiency push may ultimately endanger longer-term projects and revenue flows, the people said.
The CEO has been cutting jobs and slashing capacity at American factories since a plunge in US sales sliced first-half earnings nearly in half. He’s selling more assets and floated the possibility of shedding one or more of the group’s 14 brands to protect profits.
Stellantis’ board of directors is due to meet in the US on Oct. 9 and 10 to evaluate plans put in place to turn around the business in the region, the people said.
The CEO won praise for his efficiency drive in the years following the 2021 merger of Fiat Chrysler and France’s PSA because it made the group leaner, bolstering returns. In the months following the pandemic, Stellantis benefited from pent-up demand and high vehicle prices, with the shares peaking six months ago. In July, the automaker reported a 48% slump in first-half net income.
“The economic prospects of the automotive sector require that investments be reviewed with the objective of focusing on those that represent a maximum contribution to customer satisfaction, to the performance of the company without any compromise on compliance with regulations, in particular CO2,” the Stellantis spokesperson said.
(Updates with shares in sixth paragraph.)
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