Cost-cutting, China in focus | Wilnesh News

Detroit – Since spearheading the merger to create star In 2021, Chief Executive Carlos Tavares is on a mission to cut costs. This is starting to pay dividends for the company and investors.

How the transatlantic automaker expects to maintain that momentum amid uncertainty about all-electric vehicles and growing competition from Chinese automakers is expected to be in focus this week, with Tavares scheduled to speak at Headlining Thursday’s Investor Day event.

Tavares and other executives are expected to address China competition, capital discipline, upcoming products, software plans and possible further cost reductions as the company plans to hit ambitious financial targets through 2030.

When Tavares’ PSA Groupe merges with Fiat Chrysler in January 2021, the newly combined company plans to reduce spending by 5 billion euros (about $5.4 billion) a year. The company said it will achieve this goal by 2024, a year earlier than originally planned.

Recently, Tavares said the parent company of brands like Ram and Jeep would need to cut costs by 40 percent to profitably produce and sell electric vehicles to mass-market consumers, citing the higher cost of manufacturing vehicles. Need affordable models.

“We’re not in a race to transition to electric vehicles, we’re in a race to cut the cost of electric vehicles,” Tavares said at a Bernstein investor conference in late May.

The cuts are part of Stellantis’ strategic plan to increase profits and double revenue to 300 billion euros by 2030. Wait for the target.

Cost-saving measures include reshaping the company’s supply chain and operations as well as job cuts.

Several Stellantis executives told CNBC that the layoffs were difficult but effective. Others, who spoke on condition of anonymity because of the potential impact, described the activities as exhausting and even excessive.

Since agreeing to merge in December 2019, Stellantis has reduced its headcount by 15.5%, to about 47,500 employees by 2023, according to public filings. Additional layoffs in the U.S. and Italy this year involving thousands of factory workers have sparked outrage from unions in both countries.

Meanwhile, billions in related operating cost savings helped the automaker’s adjusted operating income rise 31% from 2021 to last year. Its adjusted profit margin also improved, rising 0.4 percentage points during the period to 12.8%.

Stellantis Chief Technology Officer Ned Curic said the company is operating much more efficiently than before, including “proper systems engineering” to ensure the design and functionality of new vehicles are optimized.

Curic joined the company at Amazon The company said it will make layoffs, including laying off about 400 U.S. engineers in March, after completing many of its systems for the next decade in 2021.

“We’ve been laying off employees, but we really don’t need that many,” he said in an interview last month, adding that the company still employed about 50,000 engineers. “Designing systems for our ten-year roadmap is complete.”

“We’ll see,” Tavares said last month when asked whether the U.S. needed further cuts. He said officials “still have work to do” to make electric vehicles as profitable as traditional combustion engine vehicles.

“There is no magic bullet here. You need to put in 40% additional costs because the middle class in the United States, like the middle class in Europe, they need to buy electric vehicles at the price of internal combustion vehicles,” he told the media at a May roundtable. “It’s not surprising. You can look at my reviews for the past five years. I’ve been doing the same thing for five years.”

In early May, Cox Automotive According to reports, Stellantis’s vehicle supply days for its Jeep and Ram brands are more than double the industry average of 76 days.

Meanwhile, the threat of cheaper Chinese-made electric cars looms.

Tavares called the Chinese automaker his “first competitor” and said the company was adopting an “asset-light” strategy. These include plans to rapidly increase China’s automobile exports through a joint venture with China’s Leap Motors controlled by Strantis.

“Share price reaction[on Capital Markets Day]will likely be affected by how these near-term concerns are addressed,” UBS analyst Patrick Hummel wrote in a note to investors on Thursday. “We do not anticipate any announcements. New financial goals.

Hummel and other analysts note that Stellantis’ stock performance is consistent with General Motors and Ford.

Stellantis’ U.S.-listed shares are down more than 6% this year and are down about 30% from a record high of more than $29.50 a share in March. By comparison, GM shares are up more than 30% this year, while Ford shares are essentially flat.

RBC Capital Markets analyst Tom Narayan pointed out that Stellantis has a market value of approximately US$68 billion and should return 7.7 billion euros to shareholders by 2024, of which 4.7 billion euros are dividends and 3 billion euros are buybacks.

Redburn Atlantis analyst Adrian Yanoshik said in a note last week that expectations were largely flat, raising Stellantis’ potential to beat estimates.

—CNBC Michael Bloom contributed to this report.