Stellantis Trims 2024 Profit View On China Woes

Stellantis NV issued a profit warning Monday, revising its annual forecasts downwards due to several factors, including intense competition from Chinese manufacturers in the electric vehicle sector, declining global industry dynamics, and higher costs associated with overhauling its operations in the U.S.

In a press release, the French-Italian conglomerate stated that the revision in its 2024 financial guidance reflects decisions to "significantly enlarge remediation actions on North American performance issues, as well as deterioration in global industry dynamics."

The automaker said it has accelerated its "planned normalization of inventory levels in the U.S. targeting no more than 330,000 units of dealer inventory by year-end 2024, from a prior timing objective of the first quarter of 2025."

According to Stellantis, it will cut North American shipment in the second half of 2024 by more than 200,000 units year-on-year, double the prior guidance. It will also offer increased incentives on 2024 and older model year vehicles, and productivity improvement initiatives that encompass both cost and capacity adjustments.

Based on the new and updated 2024 market outlook of the company, the adjusted operating income margin (AOI) for FY 2024 is expected to be between 5.5-7.0%, down from the prior "double digit." Approximately two-thirds of the slashed AOI margin is attributed to corrective actions taken in North America, the company said.

Stellantis also lowered projections for its industrial free cash flow to a range between -5 billion euros ($5.58 billion) and -10 billion euros, from a "positive" guidance previously, as a result of a lower anticipated AOI margin and temporarily higher working capital over the second half of this year.

"Deterioration in the global industry backdrop reflects a lower 2024 market forecast than at the beginning of the period, while competitive dynamics have intensified due to both rising industry supply, as well as increased Chinese competition," the automaker said.

Earlier this year, the company's shareholders in the U.S. filed a case against the automaker, alleging that they were defrauded by the company when the latter hid rising inventories and other weaknesses in the business before it posted earnings that clearly disappointed, resulting in its stock prices to fall.

Aside from this, the United Auto Workers (UAW) union also filed federal unfair labor charges against Stellantis, alleging that the company breached contract terms by refusing to provide information about plans to move production of an SUV out of the United States.

Despite all these, the company is optimistic that with the corrective actions in place, it will have a "stronger operational and financial performance in 2025 and beyond."

The automaker's warning on its profit came several days after German automaker Volkswagen announced another cut in its annual outlook in a matter of three months. The move added more pressure to the European Union as it finalizes on plans about a possible tariff on electric vehicles, Reuters reported.