Why Stellantis is betting on America again

On October 14, Stellantis announced that it would invest $13 billion in the United States to ensure the group's new momentum and secure its profitability both in the region and on a global perspective. Between 2020 and 2024, the group rested on its laurels and showed a lack of foresight in North America. From a product perspective, the relative absence of new models, the more premium repositioning of Jeep (with the failure of the Wagoneer sub-brand, which will now revert to the Jeep badge), and the discontinuation of flagship vehicles such as the Jeep Cherokee and engines such as the V8 Hemi have hampered sales.

Politically, Stellantis remained very Europe-centric, with power heavily concentrated in France. This was the intention of former CEO Carlos Tavares, as he explains in his book “Un pilote dans la tempête” (A Driver in the Storm), published on October 23rd. There is no doubt that this was a necessary move to appease certain French shareholders in the company. This bias is now coming at a high price. The company is restoring North America's strategic and financial importance by investing in the United States. This is going against the previous policy, which tended to create an imbalance in favor of Mexico. While the US government's policy certainly influences the company's decisions, it is above all a move to revive the manufacturer that is motivating the investments.

Revival of the range and activities
The range was neglected by Stellantis' previous management. The natural imbalance in favor of North America was an excuse to emphasize on other regions. Unfortunately, the stagnation met by the group did hurt its results and caused a slowdown in sales. In Stellantis' geographic distribution, North America represents its largest market. This is particularly important as Europe is plunging inexorably with little to no hope of recovery.

The product line was suffering. The Jeep Cherokee was discontinued without replacement. The two Wagoneers did not meet with the expected success, nor did the electric Charger. Decisions were made to optimize margins, which led to the postponement or cancellation of model launches, sometimes even being pushed from one brand to another, with each one passing the buck. Chrysler rejected certain new models (such as the Airflow concept) to present only the Pacifica minivan. Short-term management methods had undesirable effects on decisions or the lack of sensible decisions. This is also evident in the discontinuation of the V8 Hemi, which was extremely profitable and popular with customers.

The return of the V8 Hemi makes perfect sense from an industrial, competitive, and economic standpoint. The decision to bring it back was made even before the White House mentioned the potential freezing of emissions and fuel consumption standards. In a political environment where sanctions and standards would have been tightened, the negative impact of this engine on CAFE calculations would have been limited due to its relatively low sales volume. It is less performant, less powerful, and less fuel-efficient than the Hurricane 6-cylinder, but it checks important boxes for American customers. The benefits in terms of image and attractiveness are significant; it is part of the DNA of Ram and Dodge. This is proof that the philosophy is changing. Antonio Filosa says it himself: “We decided to put our customer at the center of everything we do.” 

The various projects to launch new programs will primarily benefit the Great Lakes region. Stellantis' $13 billion investment will focus on four states where Stellantis has factories. To support the Hemi, a new 4-cylinder engine is announced for production at the Kokomo plant in Indiana. The new Jeep Cherokee and Compass will be assembled at the Belvidere plant in Illinois. The decision was made at the expense of the Brampton plant in Ontario (Canada), which was initially supposed to receive production of the Compass. However, customs tariffs and the loss of federal subsidies that Belvidere was to receive for producing electric models prompted the manufacturer to rethink its production plans. Finally, Michigan and Ohio will welcome the assembly of the new Dodge Durango crossover and the new mid-size Ram pickup (a competitor to the Ford Ranger), respectively.

These decisions take into account a geographical rebalancing in a political context where uncertainty is the primary driver of decisions. The White House's policy requires the company to be managed with great caution while securing its presence in the United States to limit risks. The move to Mexico initiated by the former management rightly took advantage of the recent USMCA agreements, but it ignored the consequences of possible political changes such as those currently experienced. Positions in Mexico are not yet reconsidered, and we will have to wait for future USMCA renegotiations. In the run-up to future negotiations, the United States is putting pressure on Mexico to obtain guarantees from the government of Claudia Sheinbaum regarding the implementation of protectionist measures against Chinese imports and investments. In this context, the decisions taken by Stellantis are mostly at the expense of Canada. The Canadian union Unifor has pointed out the commitment to retooling the Brampton plant where the Jeep Compass was planned to be assembled.

Normalizing relations
The biggest change between the former and current management is the consideration of other aspects of management beyond financial indicators and dashboard-based asset management. The much-vaunted efficiency was mainly financial. It was therefore short-term and bound to face headwinds at the slightest market change. Under the leadership of Antonio Filosa, the company is regaining respect for its ecosystem. As I mentioned earlier in this column, the Stellantis boss has decided to put the customer back at the center of decision-making. This approach encourages consideration of regulations, but also of the product, quality, and, above all, the offering. In this sense, the return of the Jeep Cherokee, whose pre-production models are already visible in the Detroit area, is good news. It also tends to prove that many projects were ready, but launch decisions were slow in coming.
Relations with dealers should become more fluid. Indeed, a renewed offering means customers will return to showrooms. It also avoids the need for discounts to clear dealers’ lots. From this point of view, aging product lines and large inventories had strained relations with the company's management in 2024.

There is also talk of improving relations with tier suppliers. To help with costs savings, Stellantis had put pressure on long-standing equipment manufacturers and had approached newcomers or smaller groups, even if it meant taking risks in terms of quality. Pressure tactics are normal in the automotive industry. However, Stellantis had set unsustainable financial conditions in terms of prices, deadlines, and payment terms, which many suppliers decided to no longer accept. The manufacturer was therefore exposing itself to restricted access to technological innovations developed by the leaders in automotive equipment. Ultimately, this could become more costly, due to more frequent recall campaigns and module integrations that require the manufacturer to mobilize more resources.
The company must normalize relations between employees and top management. In his book, Carlos Tavares explains with great clarity, honesty, and logic why he did not want to develop a culture within the company. Unfortunately, in the absence of a directed culture, an induced one infused. The boss' isolation and his involvement in all decisions challenged trust in management and led to a lack of accountability. Removing decision-makers at the slightest mistake fueled fear that cascaded down through all levels of the hierarchy. Ultimately, a culture of fear and immobility took hold by default. In its efforts to relaunch programs and create a new dynamic, Stellantis has called back many engineers and managers. The $13 billion invested in the United States by Stellantis requires the hiring of nearly 5,000 people to restart production. It is therefore necessary to rebuild trust with employees. I like to recall the dialogue between Monty Roberts and Clive Warrilow, which suggests that you get more out of employees by winning them over than by giving them orders.

Ultimately, the relationship with shareholders would also be normalized. In a company like Stellantis, the CEO does not stand alongside the chairman and shareholders. He is their employee. Antonio Filosa must therefore design his project in line with the measures and directions taken by John Elkann during his interim CEO period. This does not prevent the new CEO from making major strategic decisions and establishing his team. Recent changes show differences with the interim team formed last December by John Elkann, as evidenced by the departures of Doug Osterman and Arnaud Deboeuf, as well as the change in position of Jean-Philippe Imparato.

Demonstrating foresight
Antonio Filosa does not have an easy task. He needs to generate new momentum without undermining his predecessor's efforts in terms of efficiency. It's a balancing act. He needs to know how to allocate and adjust spending to revive the product line, sales, and restore financial performance in a complex economic and political context. Antonio Filosa must do what it takes to regain the confidence of the financial markets. The value of STLA shares plummeted starting in May 2024 and seems to have been recovering since the beginning of September this year. The CEO must show consideration for all the players in his ecosystem while remaining vigilant. He must adapt to market conditions, technological developments, and the expectations of customers, employees, and shareholders. This requires dealing with suppliers and dealers.

Finally, the top management must rebuild and consolidate the foundations of a group that has suffered from a lack of a more consolidated approach, strategy, empathy, and foresight since its creation in 2021. The outlines of the group's strategy are slowly taking shape, but we will clearly have to wait until early next year for it to be fully unveiled.