Stellantis NV CEO Carlos Tavares speaks during a press conference at the Fiat Automobile Manufacturing Plant in Kragujevac, Serbia, Monday, July 22, 2024.
Oliver Bunnick | Bloomberg | Getty Images
Strantis Chief Executive Carlos Tavares on Thursday left the door open to possible dividend cuts and stock buybacks next year, dismissing problems in the U.S. business that led to a major profit warning this week as “minor operational errors.”
The automaker's shares fell 4% to their lowest level since July 2022 as investors worried that soaring costs to revive the automaker's U.S. operations would threaten its generous dividend payments to shareholders.
Monday's size warn It also undermines investor confidence in management.
While touring a factory in eastern France, Tavares said the company was experiencing operational difficulties in the United States but that they would be resolved before his contract ends in 2026.
He added that he intends to honor the contract and believes the board agrees, but in a tough market mistakes will be scrutinized more closely.
“When you're in a cutthroat and more demanding environment, if you make a small operational error, it shows up immediately,” he said, adding that he viewed it as a “wake-up call” and Very serious.
Shares in the owner of the Chrysler, Jeep, Fiat, Citroën and Peugeot brands have fallen more than 55% since March, the worst performer among European auto stocks, with the company's valuation also slashed by 47 billion euros ($52 billion).
Investors have Reduce investment in European cars There have been concerns in recent months about the difficulties of the transition to electric engines, fierce competition from Chinese newcomers and increasingly price-sensitive consumers.
Although Stellantis has pledged to pay a dividend in 2024, Tavares said it was too early to confirm plans for next year.
He said: “The time for 2025 has not yet arrived. We will see what happens at the end of 2024 and then discuss and decide on 2025.”
“Too complacent”
Barclays downgraded the stock from “overweight” to “equal weight” and cut its 2024-26 earnings before interest and tax (operating profit) forecast by 33-45%. Stellantis' sharp cut in free cash flow raises questions about its dividend and buyback potential, the company said.
“We made a mistake on Stellantis by being too slow to acknowledge its U.S. inventory issues and eroding EU/U.S. market share,” Barclays analysts said in a note.
They also pointed out that just a week before the profit warning, Stellantis finance chief Natalie Knight had broadly confirmed a double-digit EBIT margin forecast.
“Frankly, we are still shocked by the magnitude of the cuts in such a short period of time,” they said.
Shares in Stellantis, Europe's fifth-largest carmaker by market value, were down 4% as of 12:40 GMT, with the auto index down 2%.
Under Tavares, Stellantis was seen as a beacon of constructive management, with a strong focus on inventory control and pricing, Bernstein analysts said in a note.
“Investors can 'sleep at night' and believe that the store is safe,” they said. “But… we are too complacent.”