Cost reduction, attention on China

Tavares and other executives are expected to address competition with China, capital discipline, upcoming products, software efforts and the possibility of further cost-cutting as the company aims to hit ambitious financial targets by 2030.

When Tavares’ PSA Group merged with Fiat Chrysler in January 2021, the newly combined company targeted cutting spending by 5 billion euros ($5.4 billion) annually, a target it said it would reach in 2024, a year ahead of schedule.

More recently, Tavares said the parent company of brands like Ram and Jeep needs to cut costs by 40% to profitably produce and sell EVs to mass-market consumers, noting the need for affordable models despite the rising costs of manufacturing vehicles.

“We’re not in a race to EVs, we’re in a race to bring down the cost of EVs,” Tavares said at a Bernstein investor conference in late May.

The cuts are part of Stellantis’ strategic plan to increase profits and double sales to 300 billion euros by 2030. The plan also includes targets such as achieving adjusted operating profit of more than 12 percent and industrial free cash flow of more than 20 billion euros.

Cost-cutting measures also include restructuring the company’s supply chain and operations, as well as reducing workforce.

Several Stellantis executives told CNBC the job cuts were difficult but effective. Other executives, who spoke on the condition of anonymity because of potential repercussions, said the cuts were brutally draconian.

Since the merger was agreed in December 2019, Stellantis has cut its workforce by 15.5%, or about 47,500 jobs, through 2023, according to disclosure filings. Further cuts this year to thousands of factory workers in the United States and Italy have angered unions in those countries.

Meanwhile, billions of dollars in related operational cost savings helped the automaker’s adjusted operating profit grow 31% from 2021 to last year. Adjusted profit margins also rose, increasing 0.4 percentage points to 12.8% over the same period.

Stellantis Chief Technology Officer Ned Curic said the company is operating much more efficiently than before, including “proper systems engineering” to optimize the design and functionality of new cars.

Curic, who joined the company from Amazon in 2021, said the job cuts, which include laying off about 400 U.S. engineers in March, come after the company has completed much of its systems for the next decade.

“We’re cutting jobs, but we don’t actually need that many,” he said in an interview last month, adding that the company still has about 50,000 engineers. “We’ve already done the system design for the 10-year roadmap.”

“Let’s wait and see,” Mr. Tavares said last month when asked whether further cuts were needed in the U.S. He said officials “still have work to do” to make electric vehicles as profitable as traditional internal combustion engine vehicles.

“There’s no silver bullet. The American middle class and the European middle class are going to have to buy an EV at the price of an internal combustion engine, so they’re going to have to pay an extra 40 percent,” he said at a media roundtable in May. “This isn’t surprising. You look at my comments over the last five years. I’ve been saying the same thing for five years.”

Future cost-cutting efforts could be part of the company’s capital markets day on Thursday.

Stellantis Chief Financial Officer Natalie Knight said executives are scheduled to brief Stellantis on Thursday on progress across its regions and businesses, including on capital and operating discipline.

“I want you to understand more about how we see the industry evolving, how we are leveraging our exceptional technology, industry-leading operating discipline and other competitive advantages that further differentiate us,” she told investors in April. “And I want to share how we are building strong, productive capital discipline to preserve and maximize sustainable returns.”

Stellantis declined to provide details about the event, which will be held at its North American headquarters in Auburn Hills, Michigan.

Wall Street will be looking for executives who can handle the company’s growing U.S. vehicle inventory, upcoming product launches and plans for China.

In early May, Cox Automotive reported that Stellantis’ Jeep and Ram brand vehicles had days of inventory more than double the industry average of 76 days.

Meanwhile, the threat of cheaper Chinese-made EVs looms in the background.

Tavares called Chinese automakers his “biggest rivals” and said the company was pursuing an “asset light” strategy, including plans to rapidly expand car exports from China through a joint venture with China’s Leap Motor, which is controlled by Stellantis.

“The stock price reaction [capital markets day] “The stock price will depend on how the company addresses near-term concerns. We do not expect new financial targets to be announced,” UBS analyst Patrick Hamel wrote in a note to investors on Thursday.

Hamel and other analysts have noted that Stellantis’ stock price has diverged from that of General Motors Co. and Ford Motor Co.

Stellantis’ U.S.-listed shares have fallen more than 6% this year and are down about 30% from an all-time high of more than $29.50 a share in March. By contrast, GM shares are up more than 30% this year, while Ford shares are essentially flat.

RBC Capital Markets analyst Tom Narayan writes that Stellantis, which has a market capitalization of about $68 billion, should return 7.7 billion euros to shareholders in 2024, including 4.7 billion euros in dividends and 3 billion euros in share buybacks.

Generally muted expectations increase the likelihood that Stellantis will outperform expectations, Redburn Atlantis analyst Adrian Janosik said in a note last week.

— CNBC Michael Bloom contributed to this report.