Stellantis CEO slams US build quality

STELLANTIS CEO Carlos Tavares has taken aim at the group’s US production facilities this week saying too many Ram 1500 and other models are leaving the production line with issues that require repair.

Mr Tavares said the issues have lowered the company’s “direct run rate”, which is the number of vehicles produced “that get quality certified at the end of the production line with no rework”.

Rightly, he said returning to address issues in newly assembled vehicles adds to production costs.

“The other impact is that it slows down your shipments to the market,” he said.

“The third impact is that it many create other quality issues if you don’t do it (the repair) well. When you are making a repair outside of the main line, you can always fix what you have to fix, but create another problem.

“The direct run rate of some of our plants, starting with SHAP – Sterling Heights – is not good; and that is something that we need to fix with our plant management team.”

Mr Tavares told US media that there are several challenges facing Stellantis as it reported a 48 per cent decline in first-half net income. He attributed much of the weaker performance to North America, where revenue fell 16 per cent.

US Stellantis dealers have complained recently about rising inventory levels and have appealed to Mr Tavares directly for assistance. In response, Mr Tavares said the company needs to do a better job of presenting incentive offers, believing customers are deterred by vehicle list pricing and unaware of available discounts.

Additionally, Mr Tavares admitted Stellantis has not been building the right number and kinds of vehicles to meet market demand.

“We have not always been able, in production planning, to make a production mix that aligns with the sales mix,” he stated.

“If we don’t do that … your inventory is distorted against what the real demand is. If it is distorted, some of the models and versions and trims, they stick in the dealer yard, and then you have an inventory problem.”

Mr Tavares said Stellantis has lost a lot of profitability in the North American market and says the industry is doing it tough.

“People that think that we are making our money easily, they are wrong,” he said.

“This is a very tough industry (that is going through) a very tough period, and everybody has to fight for performance because, as we used to say, only performance protects.”

He said improved performance could come in a number of forms including quality improvement, cost reduction, appealing products and being collaborative with dealers and defending against inflation.

In the US particularly, Mr Tavares said that fixing Stellantis’ sales and marketing strategies is a top objective, and that the way the groups manages its purchase funnel is “suboptimal”.

“In some cases, our sticker price happens to be higher than the competition, but, of course, the sweeteners are here to make that car acceptable for the consumer,” he reiterated.

“We are having an abnormal number of prospects that are opting out of the purchase funnel at the beginning of the journey because we are not bringing the sweetener strong enough and soon enough in the process to keep them engaged.

“That is an obvious flaw,” he concluded.