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Highlights
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Stellantis NV has issued a profit warning, revising its 2024 adjusted operating profit margin guidance to between 5.5% and 7%, down from 10%.
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The company anticipates negative free cash flow of €5 billion to €10 billion, reversing previous expectations of positive cash flow.
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This guidance adjustment is driven by performance issues in North America and worsening global market conditions, leading to a significant reduction in production targets.
Stellantis Cuts Production Targets Amidst Global Market Deterioration
Stellantis NV {NYSE:STLA} the European automotive powerhouse behind brands such as Peugeot, Fiat, Chrysler, and Jeep, has announced a profit warning as it revises its production targets for the year. The company cites a significant "deterioration" in the global automobile market as a primary factor in this adjustment.
In its updated guidance, Stellantis has lowered its forecast for the adjusted operating profit margin for 2024 to a range of 5.5% to 7%, a notable decrease from the previous target of 10%. Furthermore, the company now anticipates free cash flow to be negative, projected between €5 billion and €10 billion, reversing earlier predictions of positive cash flow.
This announcement coincides with similar warnings from luxury carmaker Aston Martin Lagonda, which has also faced challenges due to supply chain disruptions. Stellantis attributes its revised financial outlook to a decision to accelerate initiatives aimed at addressing performance challenges in the North American market, alongside an overall decline in global industry dynamics.
To mitigate these issues, Stellantis is intensifying efforts to reduce inventory levels in the US, now targeting a maximum of 330,000 vehicles by the end of 2024, an advancement from the earlier timeline set for the first quarter of 2025. The company expects North American shipments to decline by more than 200,000 vehicles year-on-year in the latter half of 2024, effectively doubling previous forecasts.
In response to competitive pressures, Stellantis plans to implement price cuts and increase incentives on both 2024 models and older inventory. The group also aims to enhance productivity through cost reductions and adjustments in production capacity.
The backdrop of deteriorating global market conditions has prompted Stellantis to acknowledge a lower market forecast for 2024 compared to earlier estimates, compounded by intensifying competition, particularly from rising industry supply and increased competition from Chinese manufacturers.
In reaction to these developments, Stellantis shares have experienced a sharp decline, falling 14% to €12.51, marking the lowest price point in nearly two years. This decline parallels a 24% drop in Aston Martin's stock, reflecting broader market challenges facing the automotive industry.
