Carlos Tavares, once hailed as a transformative leader, has been forced to step down as Stellantis CEO amidst mounting criticism over his handling of the company’s faltering U.S. operations. The move, effective immediately, comes a year and a half before the end of his term, leaving Stellantis without a permanent leader during one of its most challenging periods.
The breaking point: U.S. operations in freefall
The tipping point for Tavares’ exit was the sharp decline in Stellantis’ North American market, which accounts for the automaker’s most profitable region. Plagued by a lack of new models, high vehicle prices, and drastic cost-cutting measures, the U.S. arm saw a 17% drop in sales and a staggering 27% decline in revenue during the third quarter of 2024. Showrooms across the country were flooded with unsold inventory, signaling a deeper crisis.
Tavares’ aggressive focus on short-term profits, which earned him a €36 million bonus in 2023, drew sharp criticism from all corners: dealerships, suppliers, unions, and even Stellantis’ powerful board members, including the Agnelli family, the Peugeot family, and the French government.
The fallout: tensions with the board
The Stellantis board reportedly clashed with Tavares over his single-minded pursuit of cost-cutting, which many insiders felt ignored long-term strategic needs. Sources close to the situation told Reuters that Tavares’ focus on immediate fixes to salvage his reputation ultimately alienated key stakeholders.
“His credibility was shattered by the collapse in North American profitability,” analysts from Bernstein noted, pointing out that Stellantis had to slash its profit forecasts for 2024, with operational margins dropping from double digits to just 5.5%-7%. The company’s free cash flow also fell into the red, with projections of a negative €5-10 billion.
A legacy of turmoil in North America
Tavares’ tenure in the U.S. was marked by growing dissatisfaction. Dealers accused him of undermining Stellantis’ iconic American brands—Dodge, Ram, Jeep, and Chrysler—while unions like the United Auto Workers (UAW) criticized his harsh cost-cutting measures and failure to deliver on promises. UAW President Shawn Fain bluntly stated, “Tavares leaves a legacy of painful layoffs and overpriced vehicles.”
Kevin Farrish, president of Stellantis’ U.S. dealership network, lambasted Tavares in September for prioritizing short-term gains to boost his bonus. “The rapid degradation of the company’s brands and decisions made purely for profit were unsustainable,” Farrish said.
Even suppliers found themselves at odds with the hard-charging CEO, with one industry insider telling Bloomberg, “No one in North America will miss him.”
Stock crash and investor concerns
The leadership shakeup sent Stellantis shares plummeting. By Monday, the company’s stock dropped over 6%, hitting a two-year low of €11.7. Analysts voiced concerns about the decision to leave Stellantis without a CEO until mid-2025, with Bernstein’s Daniel Roeska remarking, “The market will question why the board believed no CEO was better than keeping the current one. It’s hard to see this as a positive development.”
From star to scapegoat: the rise and fall of Tavares
Tavares joined PSA in 2014 and played a pivotal role in orchestrating the 2021 merger of Fiat Chrysler and PSA Group, creating Stellantis. His reputation as a relentless cost-cutter initially delivered results, but his approach began to falter as North American stakeholders grew increasingly disillusioned with dated product lines, bloated inventories, and falling market share.
David Bailey, a professor at Birmingham Business School, told the BBC that the North American decline sealed Tavares’ fate. “With outdated products, shrinking market share, and growing dissatisfaction among suppliers, dealers, workers, and investors, his position became untenable.”
What’s next for Stellantis?
Stellantis faces an uphill battle as it searches for a new CEO while trying to stabilize its operations. The interim leadership team, led by John Elkann, will need to rebuild trust with stakeholders and address deep-seated challenges in the U.S. market.
For Tavares, his departure marks a stunning fall from grace, as his once-lauded leadership style proved unable to navigate Stellantis through the complexities of its largest and most profitable market. As the dust settles, the company—and the industry—will be watching closely to see if Stellantis can turn its fortunes around or if Tavares’ exit is merely the beginning of deeper troubles.
