Why Stellantis CEO Carlos Tavares was fired

Stellantis chairman John Elkann, a member of the Agnelli family, spent Sunday calling officials in Rome and Paris to inform them of a far-reaching decision: auto chief executive Carlos Tavares has resigned.

The movement associated with Stars The move to part ways with the outspoken Tavares comes after deep differences in the company’s energy strategy, and controversy over his short-term plans to restore its reputation, which was tarnished by the club’s financial collapse, according to people familiar with the matter. discussion.

Two of them said that a recent problem was the pressure on Tavares to use the electric power system to meet the strict EU regulations, while the organization prefers a flexible way to improve its industrial operations and profits. Tavares’ resignation was approved at a board meeting on Sunday.

Its sudden exit leaves the world’s fourth-largest automaker scrambling to find a replacement, as peers Volkswagen and Ford grapple with tougher emissions regulations, factory closings and job losses to quell sluggish consumer demand for EVs and intensifying competition from Chinese competitors.

“The Stellantis problem is an example of Europe’s lack of vision in its automotive sector,” said Enzo Peruffo, professor of engineering at the Luiss University in Rome. “After setting ambitious climate goals, there has been a lack of action in line with industry standards.”

Tavares has shocked Italian politicians with its anti-establishment approach and threatened to close plants without an increase in EV subsidies. In the US, its most profitable market, it raised prices in its main markets, which left retailers with more resources, and less sales.

The 66-year-old has led the carmaker since 2021, when France’s Peugeot owner PSA and Italy’s Fiat Chrysler Automobiles merged. Through brutal logging, the self-proclaimed “performance psychopath” initially boosted profits and built a strong portfolio that allowed Stellantis to outperform its European competitors with a record profit last year.

However, despite its strong performance and push for EVs, sales fell in Europe and the US, forcing the group to issue a profit warning in September. Shares of Stellantis are down 47 percent this year, and the stock was down nearly 10 percent on Monday.

After halving its profits in September, Stellantis announced that it had done so he began to search to Tavares’ successor, saying he would step down at the end of his term in early 2026. A shakeup in his company’s management a month later appeared to put an end to rumors that Tavares would retire before the end of his tenure.

But people familiar with the negotiations said that tensions between Tavares and the board have intensified in recent weeks as they engage in a battle with government agencies, suppliers and distributors, especially in the US, to improve the club’s finances and restore its reputation.

Tavares, people close to the negotiations said he was surprised by the damage to his name due to the sudden collapse of the company.

Until then, the Portuguese had a long history, rescuing PSA from near insolvency and pulling off a megamerger that brought 14 brands under the Stellantis umbrella.

“What he did is amazing,” said one of the people, adding that problems arose when Tavares wanted to move as quickly as possible to change his mind about how he works.

The person added that Tavares tried to deal with the revised conditions in 2024 by raising the funds of Stellantis through suppressing sellers, but the board felt that the shortcuts were not sustainable.

In an interview with the Financial Times in October, Tavares expressed confidence that he could turn things around by the end of the year. Stellantis on Sunday confirmed that it will keep its 2024 guidance.

“This matter . . . there is a limit to cut costs, blah blah blah, please tell the consumers,” Tavares said in October. “I think today, if we don’t please the consumers . . . we disappear.”

He also spoke out against industry calls to loosen European regulations to reduce emissions, saying delaying the EV revolution could cost more.

“Carlos believes that you don’t change the rules in the middle of a game. You have to be historically correct,” said a well-informed person.

Tavares did not respond to a request for comment.

His cost-cutting measures were frowned upon within the company, with critics saying he was “cutting to the bone”. At one point, IT costs were reduced to the loss of thousands of vehicles in France, according to people familiar with the situation.

In another case, a supplier was told that he would not be paid because the payroll manager was on maternity leave and the company was not hiring.

Guests invited to his factory in Ellesmere Port in the UK this year were offered drinks from a coffee machine that was transported more than 100 kilometers from his plant in Luton, because the workers there were not allowed to buy it.

People close to Stellantis said that the company is on a path to improve revenue. But finding a replacement for Tavares will be difficult even for Elkann, who is known for his ability to scout for talent after appointing Sergio Marchionne from obscurity to lead the struggling Fiat in 2004.

The head of the Agnelli family also appointed Benedetto Vigna, an electronics expert from STMicroelectronics, to lead Ferrari in 2021, and the luxury car brand has prospered under his leadership.

People familiar with the discussions said there are “good internal candidates” to replace Tavares but the board will also look outside. The group said the process of choosing a new leader will be completed by the first half of 2025.

On Monday, Stellantis appointed nine executives to a new interim board, to be chaired by Elkann, who will run the company until its next CEO takes over.

They include Maxime Picat, head of purchasing at Stellantis, who was seen as a candidate to replace Tavares even before he stepped down.

Philippe Houchois, an analyst at Jefferies, said Elkann’s record suggests that the “extensive search” for Stellantis’ next CEO will not be confined to the automotive industry.

Exor, the Agnelli family group with assets worth €33bn in 2023, has a 14.2 percent stake in the Paris-based car maker, making it the largest shareholder in Stellantis.

Since the merger, successive Italian governments have expressed their frustration at not being able to take part and chair the bloc, unlike their French counterparts. State-owned Bpifrance has a 6 percent stake, worth more than €2bn.

The standoff with Rome came to a head in October when Tavares was criticized by Italian lawmakers, who blamed price pressures on demand for causing “conflicts” in the supply chain. “This is not rocket science. All of this was obvious,” said the head of the organization mockingly.

“It was time for Tavares to go, but a change in management requires responsibility, protecting jobs and talent,” Tommaso Foti, a senior member of Prime Minister Giorgia Meloni’s Brothers of Italy party, said on Monday.

Lawmakers in Italy are hoping for assurances about the group’s performance at home and long-term prospects for workers, but employers there and in France fear that cuts could be exacerbated by his successor.

“The new manager should reform the team as we continue to lose,” said the head of the union. “They just focused on the salary and benefits and forgot about the market even though the famous equipment is under its umbrella.”

Additional reporting by Leila Abboud in Paris