Stellantis cut its 2024 profit forecast on Monday and warned it would burn through more cash than expected as Europe’s No.2 carmaker vowed to cut production and offer deep discounts to revive its U.S. business , wiping billions off its market value.
The world’s fourth-biggest carmaker by sales said it faces weakening global demand and stiff competition from China, echoing similar comments from rivals including Volkswagen ( ETR:VOWG_p ) which cut its full-year profit outlook on Friday.
“Competitive dynamics have intensified due to both growing industry supply and increased Chinese competition,” Stellantis (NYSE:STLA) said in its guidance.
Instead of positive cash flow, it now expects negative cash flow of between 5 and 10 billion euros ($5.58-11.17 billion).
Italian brokers Equita and Akros said it put the carmaker’s dividend and share buyback programs at risk. Stellandis said he would have no further comment beyond his guidance on Monday.
The company also said it now expects an adjusted operating profit margin of between 5.5% and 7% this year, lower than the double-digit forecast investors expect from the automaker because of its profitable U.S. operations.
“This warning confirms how difficult the situation is at the company,” Bernstein analysts wrote in a client note. “The scale of the hit to margins far exceeds our already lowered expectations.”
Its shares fell as much as 14 percent by 1052 GMT, wiping about 6 billion euros ($6.7 billion) off the company’s market value and hitting their lowest level since October 2022.
They have fallen around 40% this year, the worst performance among European carmakers.
BMW (ETR:BMWG) and Mercedes have also warned of lower-than-expected earnings.
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Stellanti’s current problems are centered in the United States, where selling expensive jeeps and trucks has until now been the company’s profit engine.
But as demand has fallen, it has been stuck with high inventories, forcing it to cut prices. This reduced its operating profit by 40% in the first half of the year.
The owner of the Chrysler, Dodge, Jeep, Fiat, Citroen and Peugeot (OTC:PUGOY) brands said Monday it will increase consumer discounts in the United States to accelerate dealer inventory reductions and cut production more than what was announced.
Stellantis CEO Carlos Tavares visited Detroit last month to develop a strategy to fix its struggling North American operations.
Monday’s warning revealing the extent of the problems at US businesses is expected to increase pressure on Tavares.
The company announced in August that it is laying off up to 2,450 factory workers from an assembly plant outside Detroit as it ends production of the Ram 1500 Classic truck.
The United Auto Workers union accused Stellanti of breaking contract promises and called on US workers to authorize a strike.
($1 = 0.8955 euros)
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Reference;
Reuters (2024) Stellantis cuts 2024 profit outlook as US sales crisis deepens By Reuters, Investing.com. Investing.com. Available at: https://www.investing.com/news/stock-market-news/stellantis-revises-guidance-downward-citing-performance-issues-industry-dynamics-3638146 (Accessed: 30 September 2024).
