'Stellantis, 'radical' targets led to Tavares resignation - sources'

 Targets deemed unrealistic or destructive by some board members triggered the sudden fall of Stellantis (STLA) CEO Carlos Tavares just a month after he received their full backing, two people with knowledge of the matter told Reuters.

Unhappy with his aggressive targets for sales and cost cuts and his contentious dealings with the giant automaker's suppliers, dealers and unions, the board unanimously wanted Tavares to go, the sources said.

"Something broke in November," one of the sources said.

Tavares resigned on Sunday, leading to a selloff of shares in the world's fourth-biggest automaker, which owns brands including Jeep, Ram, Fiat, and Peugeot.

Details of the clashes leading to his ouster have not been previously reported.

Tavares did not respond to requests for comment.

Stellantis declined to comment further. On Sunday, Senior Independent Director Henri de Castries said in a statement that differing views emerged in recent weeks among the CEO, major shareholders and the board.

The outspoken chief executive, who earlier this year was paid 36.5 million euros in compensation based on Stellantis' 2023 results, had annoyed some board members in October, at the Paris car show, by publicly blaming the automaker's U.S. management for falling sales and rising inventories in that market, one of the sources said. But the board continued to back him.

In November, however, Tavares' brash style led to a "totally untenable" relationship with the board, whose members represent major shareholders Exor, the Peugeot family and the French government, the other source said.

When board members started asking more specific questions about the executive's strategies, the person said, "Tavares' reaction was: 'You do not interfere with my job - that is not your business.'"

Board members, irritated, continued pressing Tavares, the source said. They were unsettled by what they viewed as the CEO's relentless but narrow focus on cost-cutting, which had caused supply disruptions and angered dealers. Those problems had been overlooked in previous years, when Stellantis was hitting double-digit profit margins.

Now those and other issues were causing angst across the sprawling company, as Tavares tangled with dealers, unions, suppliers and governments - and now board members.

"You cannot make enemies with everybody," the person said.

The clashes led the board to oust Tavares with no one to replace him. It was a stunning reversal from its plan for a smooth succession when he retired in 2026 as scheduled.

Chairman John Elkann had declared on Oct. 10 that the board was "unanimous in its support of Carlos Tavares" even as the company jettisoned its CFO and its North American chief the same day.

Stellantis is now searching for a new chief executive with a daunting to-do list: stabilise a global company with 14 brands, bloated U.S. inventories and falling U.S. and European market share - all while facing surging Chinese EV rivals, tough new European emissions standards and disruptive electric vehicle and trade policies championed by U.S. president-elect Donald Trump.

Stellantis issued a major profit warning at the end of September that had undermined Tavares' reputation as an industry leader in maximising profit margins and payouts for investors.

Dealers, industry experts, and customers say the company has priced itself out of the market in both the United States and Europe.

Stellantis shares are down 43% so far this year.

Tavares was well known throughout his tenure at both Peugeot maker PSA and then Stellantis - formed in 2021 when Peugeot merged with Fiat Chrysler - for his top-down leadership style, leaving no one in doubt as to who was in charge.

But in November, board members felt compelled to confront Tavares, one of the sources said.

"Something had to be done," the person said.

One source said the first sign of tensions between Tavares and the board came over in recent weeks on how to handle European Union rules that will levy hefty fines unless electric vehicles account for at least 21% of Stellantis' 2025 sales - a big jump from the automaker's 12% EV share so far this year.

Tavares refused to back an auto industry lobbying push now underway to renegotiate the rules, saying instead that Stellantis would simply work to avoid fines.

The board feared the company would have to "massively decrease" combustion-engine car sales to hit the regulatory target, one of the sources said. Company staffers were "totally lost" over the "irrationality" of the view that Stellantis could achieve such a large EV share increase without fines, the person said, which prompted the board to question Tavares.

Both sources used the term "radical" to describe Tavares' sales targets.

Tavares also outlined other controversial plans at board meetings in November, saying he wanted to drastically cut costs in Europe that had already been "cut to the bone", one source said. Tavares, the source said, also proposed a cash-management policy focused on 2024 at the expense of 2025 cash flow. This might have exposed Stellantis to a new profit warning in the future, the second source said.

Board members also bristled at Tavares' often-contentious dealings with key players across what one source described as the "ecosystem" surrounding Stellantis, including tensions with "suppliers, dealers, consumers," the governments of Italy and France, and U.S. labour unions.

Tavares, the source said, sometimes viewed suppliers as expendable in his cost-cutting drive, while board members worried that replacing trusted parts makers was not quick and caused disruptions.

"You cannot just say 'you're out'" to longtime suppliers, the source said. "That puts at risk your very capacity to produce cars."

https://finance.yahoo.com/news/exclusive-radical-targets-toppled-tavares-122209892.html