Stellantis chair John Elkann, a member of the Agnelli industrialist dynasty, spent Sunday calling senior officials in Rome and Paris to inform them of a decision with far-reaching ramifications: the carmaker’s chief executive Carlos Tavares was stepping down.
The unanimous move by the Stellantis board to part with the outspoken Tavares came after sharp differences emerged over electrification strategy and clashes over his short-term focus on restoring his reputation tarnished by a collapse in financial performance, according to people familiar with the deliberations.
Two of them said a particular point of friction lately had been Tavares’s push for an aggressive electric vehicle strategy to meet the EU’s tough emissions rules, while the board preferred a more flexible approach to sustain its plant operations and profit margins. Tavares’s resignation was accepted at a board meeting on Sunday.
His abrupt exit leaves the world’s fourth-largest carmaker scrambling to find a replacement, just as rivals including Volkswagen and Ford grapple with tougher emissions rules, plant closures and job losses to address slow EV demand and competition with Chinese rivals.
“The Stellantis crisis is an example of Europe’s lack of vision for its auto sector,” said Enzo Peruffo, business strategy professor at Luiss university in Rome. “After imposing ambitious climate targets, there has been a lack of implementation in terms of industrial strategy.”
Tavares unnerved Italian politicians with his confrontational approach and threats to shut down plants in the absence of an increase in EV subsidies. In the US, its most profitable market, he raised prices across its mass-market brands that left dealers saddled with inventories, causing tensions in the supply chain.
The 66-year-old had led the carmaker since 2021, when France’s Peugeot owner PSA and Italy’s Fiat Chrysler Automobiles merged. Through ruthless cost cuts, the self-styled “performance psychopath” initially boosted profit margins and built a solid balance sheet that allowed Stellantis to outperform its main European competitors with record profits last year.
However, despite his early successes and a push on EVs, sales slumped in Europe and the US, forcing the group to issue a steep profit warning in September. Shares have plummeted 47 per cent this year, with the stock down nearly 10 per cent on Monday.
After halving its profit margin outlook in September, Stellantis announced that it had begun the search for a successor to Tavares, saying he would step down at the end of his term in early 2026. A management shake-up across its marquee brands a month later appeared to quell rumours that Tavares would resign before the end of his term.
But people with knowledge of the discussions said tensions between Tavares and the board had risen rapidly in recent weeks as he engaged in a tug of war with public institutions, suppliers and dealers, especially in the US, in a bid to improve the group’s financials and restore his own reputation.
Tavares, people close to the discussions say, was shocked by the damage to his name from the sudden deterioration in the company’s performance.
Until then, the Portuguese had a stellar record, saving PSA from near insolvency and pulling off the megamerger that brought 14 brands under the Stellantis umbrella.
“What he’s done is extraordinary,” one of the people said, adding that problems emerged when Tavares sought to move as quickly as possible to improve the perception of his own performance.
The person added that Tavares tried to beat the revised financial target for the 2024 target by improving its cash flow position through squeezing suppliers, but the board felt that the short-term measures were not sustainable.
In an interview with the Financial Times in October, Tavares expressed confidence that he could normalise the situation by the end of the year. Stellantis on Sunday confirmed that it would maintain its 2024 guidance.
“The narrative is . . . there’s a limit to reducing costs, blah blah blah, please tell that to the consumers,” Tavares said. “I think that today, if we don’t make the consumers happy . . . we disappear.”
He also spoke out against industry calls to water down European regulations to cut carbon emissions, warning that delays to the EV transition would ultimately bring higher costs.
“Carlos believes you don’t change the rules in the middle of the game. You have to be on the right side of history,” said a person familiar with his thinking.
Tavares did not respond to a request for comment.
His cost-cutting measures were infamous inside the company, with critics saying he was “cutting to the bone”. At one point, IT spending was cut back to such an extent that it lost track of thousands of vehicles in France, according to people with knowledge of the situation. In another case, one supplier was told they could not be paid because the person to process the payment was on maternity leave and the company had not hired a cover.
Guests invited to its Ellesmere Port factory in the UK this year were served with drinks from a coffee machine that had been driven more than 100 miles from its plant in Luton, because staff there were not allowed to buy one.
People close to Stellantis said the company was on track to improve its financial performance. But finding a successor to Tavares to lead the task will pose a challenge even for Elkann, known for his talent-spotting abilities after selecting Sergio Marchionne from obscurity to run the nearly bankrupt Fiat in 2004.
The Agnelli family scion also picked Benedetto Vigna, an electric components specialist from STMicroelectronics, to head Ferrari in 2021, only for the luxury sports car brand to thrive under his leadership.
People with knowledge of the deliberations said there were “good internal candidates” but the board would also explore external options. The group has said the process to appoint a new chief executive will be concluded by the first half of 2025.
Philippe Houchois, an analyst at Jefferies, said Elkann’s record suggested “a wide search” not limited to the automotive industry.
Exor, the Agnelli family holding group with assets worth €33bn in 2023, owns a 14.2 per cent stake in the Paris-listed carmaker, making it its single largest shareholder.
Since the merger with PSA, successive Italian governments have voiced their frustration at not having been able to take a stake and a board seat in the group unlike their French counterparts. State-owned Bpifrance has a 6 per cent stake, valued at more than €2bn.
Tensions with Rome reached a peak in October when Tavares was grilled by Italian lawmakers, blaming cost pressures on regulatory requirements that had created “tensions” in the supply chain. “This is not rocket science. All of this was predictable,” said the defiant car chief.
“It was time for Tavares to go, but the management transition requires responsibility, safeguarding jobs and competences,” Tommaso Foti, a senior member of Giorgia Meloni’s Brothers of Italy party, said on Monday.
Italian lawmakers hope to receive reassurances about the group’s domestic operations and the long-term prospects for workers, but labour bosses there and in France fear cuts may increase under his successor.
“The new chief is going to have to restructure the group as we continue to lose out,” said a union chief speaking on condition of anonymity. “They focused on margins and dividends and forgot about the market despite the iconic brands under its umbrella.”
Additional reporting by Leila Abboud in Paris
