(Bloomberg) -- Stellantis NV slashed its forecasts for the year, citing plans to lower production and spend more on promotional incentives in a slowing and more competitive auto market.
Adjusted operating income margin will slump to 5.5% to 7% this year, down from a previous forecast for a double-digit percentage, the carmaker said Monday. Stellantis is also now projecting industrial free cash flow will range from negative €5 billion ($5.6 billion) to negative €10 billion, a dramatic pullback from prior guidance for a positive result.
The darker outlook sent the company’s stock plunging the most intraday since March 2020 and dragged on shares of European and US rivals.
While Stellantis is the latest in a series of automakers to have lowered profit projections recently — including Volkswagen AG, which just issued its second warning in three months — Chief Executive Officer Carlos Tavares has come under particularly intense pressure. Investors, dealers and unions have taken the CEO to task over sliding sales, a dated US vehicle lineup and bloated inventory.
Bloomberg first reported last week that Chairman John Elkann had started a search for a successor to the CEO, whose contract ends in early 2026.
Stellantis is now vowing more aggressive action to bring vehicle supply back in line, targeting no more than 330,000 units of dealer inventory by year-end, rather than by the first quarter of 2025.
The manufacturer aims to pull this off by making 200,000 fewer vehicles in the second half — double its previously planned reduction — and increasing incentive spending.
The Stellantis announcement adds to a litany of profit warnings from European automakers. Volkswagen and Mercedes-Benz Group AG are struggling with sagging China sales, BMW AG has been tripped up by an expensive recall, and Volvo Car AB is getting hit by rising tariffs on electric vehicles.
Aston Martin Lagonda Global Holdings Plc on Monday joined Stellantis and the others in lowering its outlook, citing supply chain disruptions and economic weakness in China. The British carmaker’s stock plummeted as much as 28% in London.
Stellantis slumped as much as 15% in Milan trading, leading declines among the 13-member Stoxx 600 Automobiles & Parts Index. In the US, General Motors Co. and Ford Motor Co. shares fell as much as 3.4% and 2.9%, respectively.
Stellantis is unique among European automakers in that its issues are most acute in North America. Leaders of the company’s US dealer network accused Tavares earlier this month of damaging brands including Jeep, Dodge, Ram and Chrysler, and urged him to spend more money to clear inventory off their lots.
“The magnitude of this morning’s cut is a shock and raises significant questions about management’s visibility on the business and its credibility with investors,” Oddo BHF analyst Michael Foundoukidis said in a note to clients.
Doubts had already been growing about whether Stellantis would hit its previous targets. Chief Financial Officer Natalie Knight last week described the company’s target for at least a 10% adjusted operating margin “ambitious” and “not a walk in the park.”
Foundoukidis cut his rating to the equivalent of a hold and slashed his price target to €12, from €22, citing a loss of faith and trust in Stellantis management.
“Given its magnitude, such a warning should have come much earlier,” he wrote. “It therefore raises too many questions on the governance at the head of the group to play any turnaround story soon and confirms that the conflictual approach taken with all stakeholders (employees, dealers, suppliers, governments and now even investors) was not the right one.”
--With assistance from Phil Serafino, Kit Rees and Blaise Robinson.
(Updates with US automakers’ shares falling in the third paragraph.)
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