Stellantis shares fall following the sudden resignation of CEO Carlos Tavares

Outgoing CEO Carlos Tavares clashed with Stellantis’ board over his plans to quickly turn around its struggling U.S. business by cutting costs rather than focusing on a long-term strategy, investors and bankers familiar with the matter said Monday .

Shares of the Jeep, Fiat and Peugeot maker fell as much as 10%, hitting their lowest level since July 2022, as investors worried about the vacuum at the top of the world’s fourth-largest automaker after Tavares resigned on Sunday was. The shares closed down 6.3% in Milan trading.

Stellantis is struggling to reduce excess capacity and bloated inventory in its key North American market at a time when global demand remains sluggish and competition from Chinese rivals is increasing, particularly in electric vehicles.

In addition to the difficulties in the U.S., the company’s focus on price increases on its mass-market brands has caused the company to drive away inflation-hit customers in its other key market, Europe.

Stellantis had said shortly after a shocking profit warning in September that Tavares would retire in early 2026, at the end of his current term. The process to select a new CEO was originally expected to be completed in the last quarter of next year.

Interviews with a half-dozen shareholders, bankers and analysts show how quickly disagreements between Tavares – long one of the auto industry’s most respected executives – and the board over how to resolve the crisis have escalated since then.

A senior investment banker briefed on the matter said Monday that the board was becoming increasingly concerned about Tavares’ strategy to turn things around.

The banker said that in the last few months, since his contract still runs for a year, the CEO has focused primarily on cost reductions. The board feared that this would lead to quality problems but also limit the company’s ability to develop and design new models.

Customers and traders are angry about Tavares’ strategy, the banker said.

There have been delays in the market launch of some important models, such as the new version of the popular mid-size SUV Peugeot 3008 and the budget Citroen C3 city car with its electric version e-C3.

A source familiar with the matter told Reuters on Sunday that tensions rose because the board felt Tavares was focused on finding short-term solutions to save his reputation rather than working in the company’s best interests.

Stellantis declined to comment and Reuters was unable to reach Tavares on Monday.

Stellantis’ board is considering its head of North American operations, Antonio Filosa, and procurement chief Maxime Picat as internal candidates for the CEO position, a source familiar with the matter said on Monday.

Sticking points

Analysts said Tavares’ cost-cutting particularly hurt his relationship with U.S. dealers and the United Auto Workers union.

In a Sept. 10 letter to Tavares, Kevin Farrish, chairman of the Stellantis National Dealer Council, complained that the pursuit of short-term profits meant “rapid deterioration” of the Jeep, Dodge, Ram and Chrysler brands, adding: “You have this Problem created.”

The UAW has threatened a strike against the automaker over delayed investments, prompting lawsuits from Stellantis accusing the union of breach of contract.

Another sticking point for investors is Tavares’ hardline approach to the European Union’s upcoming tougher emissions targets at a time of declining electric vehicle sales, said Massimo Baggiani, founder of Niche Asset Management and a Stellantis shareholder.

It “scared” investors and major shareholders, he said.

CEO Tavares reiterated commitments from Stellantis to meet EU targets and said last-minute changes or delays to the regulation, such as those proposed by European auto lobby ACEA, were unfair.

New rules called Corporate Average Fuel Economy (CAFE) from January 1 require that around 21% of the company’s total sales come from electric vehicles in 2025.

If it misses the target, it will have to pay other companies with lower emissions to pool their emissions and reduce their average CO2 emissions, or face a penalty.

Stellantis’ current EV sales mix in the EU is around 12%.

Europe chief Jean-Philippe Imparato warned in an interview with Italian newspaper Milan Finanza last month that fines could reach up to 3 billion euros ($3.1 billion) if it fails to comply.

Tavares’ early exit despite his determination to turn things around before 2026 shows how serious the problems in the group are, said Bernstein analyst Stephen Reitman.

“It shows what we have been saying for a long time – that the problems are very deep and are not easy to solve now,” he said.