Stellantis’ outgoing chief executive has clashed with the automotive group’s board of directors over his plans to quickly restructure its U.S. operations through cost cuts rather than focusing the company on long-term strategy, investors and bankers familiar with the matter said on Monday.
Shares in the Jeep, Fiat and Peugeot vehicle maker fell as much as 10%, as investors worried about the vacuum left at the top of the world’s fourth-largest automaker following Tavares’ resignation on Sunday.
Stellantis is struggling to shed excess production capacity and bloated inventory in the U.S. at a time when global demand remains sluggish and competition from Chinese rivals is intensifying.
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In addition to difficulties in the US, Stellantis’ focus on raising prices for its mass-market brands has alienated customers in its other key market, Europe.
Stellantis had said shortly after a performance warning in September that surprised the market that Tavares would retire in early 2026, at the end of his current term. The process of selecting a new chief executive was initially scheduled to be completed by the last quarter of 2025.
Interviews with half a dozen shareholders, bankers and analysts show how quickly disagreements have since deepened between Tavares – long one of the most respected executives in the automotive sector – and Stellantis’ management over how to resolve the crisis.
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A senior investment banking executive briefed on the matter said Monday that Stellantis’ board of directors was concerned about Tavares’ turnaround strategy.
In recent months, and with just over a year left until the end of his contract, Tavares has focused mainly on cutting costs, the executive said. Management feared this was leading to quality problems and also hurting the company’s ability to develop and design new models. Customers and dealers were furious with Tavares’ strategy, the source said.
The launches of some important models, such as the new version of the popular Peugeot 3008 medium sports utility vehicle (SUV) and the economical city car Citroen C3, with its electric version e-C3, were delayed.
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A source familiar with the matter told Reuters on Sunday that tensions grew because the board felt Tavares was focused on finding short-term solutions to save his reputation rather than working in the best interests of the company.
Stellantis declined to comment and Reuters was unable to contact Tavares on Monday.
Critical points
Tavares’ cost-cutting has especially damaged his relationships with U.S. dealers and the U.S. United Auto Workers union, according to analysts.
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In a letter sent to Tavares on September 10, Stellantis U.S. dealer chairman Kevin Farrish complained that the pursuit of short-term profits meant a “rapid degradation” of the Jeep, Dodge, Ram and Chrysler brands, adding: “You created this problem.”
The UAW threatened to strike against the automaker over delayed investments, which led Stellantis to file a lawsuit accusing the union of breach of contract.
Another sticking point for investors was Tavares’ hard-line approach to the European Union’s stricter emissions targets at a time of slowing electric vehicle sales, said Massimo Baggiani, founder of Niche Asset Management and shareholder in Stellantis. This “scared” investors and major shareholders, he said.
Tavares has repeatedly confirmed Stellantis’ promises to meet EU targets and said last-minute changes or delays to regulation, as proposed by European auto lobby ACEA, were unfair.
The new rules, known as Corporate Average Fuel Economy (CAFE), starting January 1 will require that about 21% of the company’s total sales in 2025 come from electric vehicles. If it does not reach the target, Stellantis will have to pay other companies with lower emissions to join a pool that will reduce its average CO2 emissions. The other option is to pay a fine. Stellantis’ current electric vehicle sales mix in the EU is around 12%.
The head of Stellantis Europe, Jean-Philippe Imparato, warned last month in an interview with Italian newspaper Milan Finanza that fines could reach 3 billion euros if the company failed to meet the target.
Tavares’ early departure, despite his determination to turn things around before 2026, shows the severity of the group’s problems, said Stephen Reitman, an analyst at Bernstein.
“This points to what we have been saying for a long time – that the problems are very deep and will not be easily resolved now,” he said.