Former Stellantis CEO Carlos Tavares was fixated on near-term costs and profits to the detriment of the business and the company’s products, several former or current leaders and other U.S. employees told CNBC.
Stellantis, the fourth-largest automaker in the world, mismanaged its U.S. operations, the people said.
Whoever succeeds Tavares will need to reconcile relationships with suppliers, hourly and salaried U.S. employees, dealers and politicians.
Carlos Tavares, Chief Executive Officer of Stellantis, attends the Paris Automotive Summit during the 2024 Paris Auto Show in Paris, France, October 15, 2024.
Benoit Tessier | Reuters
DETROIT — “Arrogant.” It’s the word former Stellantis CEO Carlos Tavares used in June to describe mistakes that led to the automaker’s troubles in the U.S. It’s also how executives who worked with him described the automotive veteran to CNBC over the past year.
Several former or current leaders, as well as other U.S. employees with the trans-Atlantic automaker, said Tavares’ relentless focus on cost-cutting, his goal of achieving double-digit profit margins under his “Dare Forward 2030” business plan, and a reluctance, if not unwillingness, to listen to U.S. executives about the American market led to the company’s current situation and, ultimately, Tavares’ departure last week.
The sources, who agreed to speak on the condition of anonymity in order to talk freely and avoid repercussions, were interviewed at various times throughout 2024, including several last week.
They described the Portuguese-born executive as being fixated on near-term cost reductions and profits to the detriment of the business as well as to the company’s products, employees and relationships with suppliers, unions and dealers.
The problems included a lack of support for new products and sales, squeezing supplier costs, and mismanagement of plants and products in North America, the sources said.
“If you think you know everything, you’re not going to listen to anybody else,” one source told CNBC, saying the pressure to cut costs felt like having a pistol “to your head.”
Another source said Tavares had a tendency to cast blame on U.S. executives while ignoring any of his own mistakes: “If you don’t know the market, you don’t know the customers, you can’t make the right decisions,” the person said.
Investors also had turned on the chief executive, with U.S.-traded shares of Stellantis off 43% in 2024 prior to his departure. That compares with General Motors, up 55%, and Ford Motor, off 9%, during that time frame.
Such issues ultimately led to Tavares’ resignation, with the company saying Dec. 1 that he was leaving immediately because of “different views” with Stellantis’ board. French financial newspaper Les Echos reported that Tavares’ departure was a negotiated resignation that came after the company’s board decided to terminate the executive.
The board’s actions surprised many inside and outside Stellantis, which Tavares had led since spearheading a merger in January 2021 between his French automaker, PSA Groupe, and Fiat Chrysler. Stellantis is the fourth-largest automaker in the world and owns brands such as Jeep, Dodge, Fiat, Chrysler and Peugeot.
The New York Stock Exchange welcomes Stellantis N.V. (NYSE: STLA), in celebration of its listing on the NYSE following the merger of Fiat Chrysler Automobiles N.V. and Peugeot S.A. To honor the occasion, John Elkann, Chairman, and Carlos Tavares, Chief Executive Officer, virtually ring The Opening Bell, Jan. 19, 2021.
Tavares’ departure came less than two months after the board backed him to stay through the remainder of his contract in early 2026. He also was expected to assist with the selection and transition of his successor during that time.
Stellantis said it’s now expecting to name a successor during the first half of next year. Until then, the company has established a new interim executive committee led by Chairman John Elkann, scion of Italian automaker Fiat.
Tavares, 66, was publicly viewed as a business mastermind who could ruffle a few feathers along the way but got things done in the end, as he did with drastic turnarounds of PSA Groupe and General Motors’ former Opel European operations.
A prodigy of former Nissan executive Carlos Ghosn, he was an avid proponent of cost-cutting, mergers and synergies — a trait he also shared with late Fiat Chrysler CEO Sergio Marchionne. Such traits made many believe he was one of the few executives capable of running such an automaker, but they also contributed to his downfall.
“CEOs in this industry are celebrated like Formula 1 drivers when things go right, but a single misstep can lead to a spectacular spinout,” Bernstein analysts, led by Daniel Roeska, wrote in a Friday investor note about auto company CEO exits. “Just like a F1 race, transformational leadership requires not only vision but also consensus-building among the team, a robust understanding of what the organization (or car 😉 is capable of, and careful timing!”
Wrong turns
Carlos Tavares unveils the B10, at porte de Versailles, in Paris, Oct. 14, 2024.
Magali Cohen | AFP | Getty Images
For Tavares, an avid racer who liked to spend up to one week a month at his ranch in Portugal, there were several wrong turns.
Some sources said his perceived arrogance toward some U.S. hourly and salaried employees peaked this summer when Tavares — who lives in Europe and was compensated nearly $40 million last year in salary, stock and other benefits — publicly announced that he would spend time in North America for a few days to fix problems during his summer break. Such a break is a regular occurrence in Europe but not in the U.S., where sources said it rubbed some employees who don’t get a monthlong vacation the wrong way.
Meanwhile, U.S. leaders, due to the time difference, dealt with regular hourslong meetings in the middle of the night — before having to work their full U.S. day — as well as a smug sense of intellectual supremacy from Tavares and a dismissal of opinions, specifically regarding product planning, the sources said.
“When Tavares started, he said the center of the company is somewhere in the Atlantic … but it became very clear to us that the center of the company was in France,” said a former Stellantis executive.
Several sources said executives tried multiple times to deprioritize the company’s emphasis on electric vehicles or, at the very least, launch gas-powered models before EV models to maintain sales, but Tavares was dismissive of such actions.
Sources said Tavares’ cost-cutting measures also included simplifying vehicles such as the Jeep Grand Cherokee while increasing its pricing above market norms; outsourcing critical engineering work to lower-cost countries and consultants such as France-based Capgemini; and micromanaging budgets and decisions to a point where U.S. leaders felt they had their hands tied behind their backs. A notable one included killing the automaker’s popular V-8 Hemi engines.
“Everybody wanted to keep [Hemi],” said one source. “But it was, ‘You need to be greener'” and there was little to nothing they could do to change the decision.
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Stellantis stock since Jan. 19, 2021
Those issues came even as executives said they were dealing with previously reported problems with delays in new products, cutting low-margin vehicles such as the gas-powered Jeep Cherokee and Dodge Charger and Challenger without any replacements ready, and waging battles over costs with suppliers, dealers and the United Auto Workers union, among other “arrogant” mistakes in the U.S.
“Those are areas where, I think, clearly, you know, we need to build back trust,” Stellantis Chief Financial Officer Doug Ostermann said during a UBS conference Wednesday. “I think there’s a strong desire among the management team today to really work on that. And it will take time.”
Ostermann said such problems with key stakeholders, as well as some disagreements on what Stellantis’ priorities should be during the next 15 to 16 months, were the main drivers for Tavares’ departure.
Stellantis is currently in litigation with the UAW following the union planning strike actions against the company, as well as with at least five notable suppliers, largely due to disputes over pricing and costs.
In Europe, much like the U.S., the budget cuts were excessive. For example, the Financial Times reported guests invited to a factory in the UK this year were served with drinks from a coffee machine that had been transported more than 100 miles from another plant because staff there were not allowed to buy one.
Mismanagement of U.S. operations
A 2021 Jeep Grand Cherokee L goes through the Framer 1 section of the assembly line at the Stellantis Detroit Assembly Complex-Mack on June 10, 2021 in Detroit, Michigan.
Bill Pugliano | Getty Images
The mismanagement of U.S. operations led to Stellantis having bloated new vehicle inventories compared with its peers, slashing plant production, undergoing significant head-count reductions and pricing many of its traditional consumers out of the market for its crucial Ram, Jeep and Dodge brands.
“We were arrogant. No excuse,” Tavares said during a June investor event, citing problems with some U.S. plants and his own lack of action to alter business plans amid changing market conditions.
Three executives or top-line managers said Tavares many times dismissed any input that didn’t meet goals in his “Dare Forward 2030” plan, which included doubling net revenues and sustaining double-digit adjusted operating income, or AOI, margins through this decade, led by EVs.
Stellantis’ Ostermann said the company’s board and Tavares didn’t necessarily disagree over long-term plans, but he declined to reconfirm the company’s plans for double-digit AOI. “Whether or not the environment going forward, if double digit is the right number or not, we’ll have to see,” Ostermann said Wednesday.
Tavares also put a level of bureaucracy and budgeting over brand CEOs who had previously had more free range and trust from Fiat Chrysler’s Marchionne to do their jobs, the sources told CNBC.
Such issues led to an exodus of executives, such as Tim Kuniskis, a prior Swiss Army knife for the automaker, who this week returned to the company; global Jeep head Christian Meunier; longtime Jeep North America executive Jim Morrison; and newer leaders, such as Mamatha Chamarthi, who headed the automaker’s software business development, and Chief Financial Officer Natalie Knight. Stellantis North America head Mark Stewart left the company in January to become CEO of Goodyear Tire and Rubber Co.
Other executives, such as Chief Technology Officer Ned Curic, who remains with the automaker and was named last week to its interim executive committee, in June told CNBC that Tavares’ cost cuts were difficult but effective.
But others in the company weren’t so sure, describing the cuts around that time as grueling to the point of excessiveness and leading to the problems in the U.S.
Read more CNBC auto news
Tavares, when asked in July about the cuts being responsible for the company’s U.S. problems, said that was categorically false.
“The narrative about the budget cuts is wrong. … What is requested to the local team is profit, share and customer satisfaction,” Tavares said in July. “When you don’t deliver for any reason … you may want to use a scapegoat. The budget cut is an easy one. It’s wrong.”
Competitors, consciously or not, also tried to distance themselves from what Stellantis was doing.
GM President Mark Reuss, when discussing the automaker’s own cuts in October, noted that companies aren’t able to cut to growth.
“It’s been said time and again you can’t cut your way to growth. No way,” he said during GM’s investor day in October. “You have to make things that people want, that people must have. We are doing both and we are set up for success over the long haul.”
Damage control
A Stellantis sign is seen outside its headquarters in Auburn Hills, Michigan, U.S., June 10, 2021.
Rebecca Cook | Reuters
Whoever succeeds Tavares will need to continue to reconcile relationships with suppliers, hourly and salaried U.S. employees, dealers and politicians.
Stellantis has reduced employee head count by 14%, or roughly 40,600 employees, between 2020 and the end of 2023, including roughly 15% reductions in the enlarged Europe North America region, according to public filings. That doesn’t include further head-count reductions and layoffs in 2024.
UAW President Shawn Fain, who has been calling for Tavares’ firing for months, applauded the chief executive’s departure, calling it “a major step in the right direction for a company that has been mismanaged and a workforce that has been mistreated for too long.”
U.S. dealers also had been frustrated, but were growing more optimistic given recent changes even before Tavares’ departure.
The head of Stellantis’ U.S. dealer council, Kevin Farrish, commended the company for its recent efforts to support dealers, specifically newly appointed North American Chief Operating Officer Antonio Filosa.
Filosa and Elkann, Stellantis’ chair, were part of a meeting Monday with the Stellantis U.S. dealership council, Farrish confirmed.
“Antonio’s hitting the ground running,” Farrish, who slammed Tavares in September, told CNBC on Friday. “We have a great deal of confidence in Antonio, and we look forward to working with him. … It’s very optimistic to see this much action happening.”
Stellantis Chairman John Elkann speaks during the presentation of the new Fiat Panda as Fiat celebrates the 125th anniversary of its brand in Turin, Italy, July 11, 2024.
Massimo Pinca | Reuters
Meanwhile, damage control surrounding Tavares’ departure was swift, especially in the U.S. and Italy — major markets for the company’s operations and previous headquarters of the former Chrysler and Fiat automakers.
Bloomberg News reported that Elkann alerted Italian Prime Minister Giorgia Meloni prior to Tavares’ resignation. The move came after Stellantis had made significant head-count reductions and production cuts in the country.
Elkann last week also took part in a global tour of Stellantis’ sites in the U.S., Italy and France. A source who attended a leadership meeting last week at the automaker’s sprawling North American headquarters in suburban Detroit said Elkann focused on finishing 2024 and optimism that 2025 would be a better year for the company.
Stellantis did not immediately respond to requests for comment on the visits, including whether the company intends to review Tavares’ past decisions, such as closing and selling the company’s Arizona Proving Grounds.
The source who attended the U.S. town hall said Elkann made no indication of revisiting any decisions. However, they confirmed the company has ended a surgical cost-cutting program internally named “Darwin” — a nod to Tavares saying the auto industry was in a Darwinian period, in which only the strongest survive.
“Darwin is dead because we intend to survive,” Elkann said, according to the source. More
