The operational strike power of Stellantis general manager Carlos Tavares has been hit again … and this Wednesday’s publication of the group’s first financial results, born a year before the merger of PSA and Fiat. And again it’s very difficult for Chrysler. The new company, which claims to be the fourth-ranked automaker in the world, has achieved remarkable results since it recorded operating profit of € 18 billion against sales of € 152 billion. This is an operating profit of 11.8%, well above the industry standard of at most about 8%. Even the premium group shows a rate of return of 9-10%.
This performance is even more noteworthy in that it takes place in the most disadvantaged situations of rising raw material costs and shortages of semiconductors. This prowess has been described in Carlos Tavares’ way, and has been successfully applied many times in the past and is now being replicated on a larger scale.
Anyone who defines himself as a “performance psychopath” is said to be a boss with an iron hand. Operational and commercial discipline, obsession with “price-determining power”, frugality at all levels … Velvet Globe’s Iron Hand, but the results are indisputable.
The org chart, set up the day after the merger, was left to clearly reach out to PSA’s management, experiment with it, and preach the Italian-American part of Fiat Chrysler. In a few months, Italian brands quickly stopped selling at discounts, concessions to large inventories … anything that could affect price and residual value (resale prices).
Alfa Romeo causes noble dynamics
Thus, Alfa Romeo quickly enjoyed the benefits of this recipe with higher average prices and higher proportions of equipment and finishes. The premium sports brand, led by Jean-Philippe Impalato, an avid advocate of “price-determining power” when he ran Peugeot, gained almost one point in power. Therefore, it will be relocated just above the average of the brands in the segment (+0.1 points). Not so many, but the brand is hoping for positive dynamics that have resolved the breach and are now energized by an ambitious product plan of five new models by 2026.
All 12 brands in the group are subject to this commercial discipline and therefore participate in this profitability dynamics that raises the average purchase price.
But the Tavares method is also brewed behind the scenes … The Stellantis Group has thoroughly reviewed its industrial organization, rearranged the missions of each site, and some of them, especially in terms of surface area. Reduced size … Italian factory, long accused of being underutilized, all screened for “Tavaresque” cost killer: Termoli site (east) converted to Gigafactory , Other sites will be assigned a new model.
Flex office, house arrest
Around the world, support features are being targeted by new organizations that support telework to create m2 office space. In France, the old site of Trap, which brings together the FCA France offices, will be sold and 250 employees will play in the flex office and join Poissy’s headquarters. Frugality … Maserati France has no offices and each employee is now assigned to a place of residence in any work office.
However, the following areas are designed on the same platform, so the synergies of the industry are not yet complete. This should expand the economies of scale for each model. Management estimated that the synergistic target of € 3.2 billion in 2021 would be exceeded, but the initial target was to reach € 5 billion in annual synergies in 2024.
However, Stellantis has received strong support to bring about such financial results. First, the PSA Group was particularly profitable on the eve of the merger with a margin of 8.5%, and the rise of new Citroën or Opel products promised a new source of profit. On the FCA side, activities in North America have contributed significantly to profitability. Jeep and RAM are very beneficial and eliminate Chrysler’s difficulties. Thus, the market, which still has sales of 70 billion euros, recorded a profitability of over 16% … that is, a ratio close to Porsche. Finally, as difficult as 2021, the demand was so high that it was possible to sell more luxury cars at even higher prices without promotion.
The Tavares method seems to be deploying like a steamroller throughout the industrial structure. However, the group still needs to solve some major strategic issues, such as China, which is Stellantis’ true blind spot in terms of sales volume. This group also needs to address key technical challenges, whether electric vehicles or software. In addition, questions continue to arise for certain numbers of brands, such as the DS and Lancia, whose sustainability questions that Tavares has decided to reconnect are very Liliptian. Finally, the industrial restructuring is still far from complete. Carlos Tavares will finally unveil his strategic roadmap next Tuesday, March 1st.
Next Tuesday, March 1st, Strategic Road.