Sources claim that Stellantis CEO Carlos Tavares lost control of the automaker due to 'arrogant' mistakes.

• Several former or current leaders and U.S. employees of Stellantis, the former CEO of which was Carlos Tavares, claimed that Tavares' focus on near-term costs and profits was detrimental to the business and its products, according to CNBC.
• The fourth-largest automaker in the world, Stellantis, was accused of mismanaging its U.S. operations, according to sources.
• The person who replaces Tavares will have to mend relationships with suppliers, U.S. employees (hourly and salaried), dealers, and politicians.

In June, former CEO Carlos Tavares described the mistakes that led to the automaker's troubles in the U.S. as "arrogant." This is also how executives who worked with him described him to CNBC over the past year.

Numerous former or current leaders, along with other U.S. employees of the trans-Atlantic automaker, stated that Tavares' unwavering focus on cost-cutting, his ambition to achieve double-digit profit margins under his "Dare Forward 2030" business plan, and his reluctance, if not unwillingness, to heed U.S. executives' advice about the American market led to the company's current predicament and, ultimately, Tavares' departure last week.

Interviews with sources were conducted throughout 2024, including several last week, on the condition of anonymity to avoid repercussions.

The Portuguese-born executive was solely focused on short-term cost reductions and profits, which negatively impacted the business, its products, employees, relationships with suppliers, unions, and dealers.

New products and sales lacked support, supplier costs were squeezed, and North American plants and products were mismanaged, according to sources.

"According to a source who spoke to CNBC, the feeling of being pressured to reduce expenses was like having a gun pointed at your head."

The source claimed that Tavares often shifted responsibility onto U.S. executives while disregarding his own errors: "If you lack knowledge of the market, you cannot comprehend customer needs, and thus, make incorrect choices," the source stated.

In 2024, the chief executive of Stellantis faced criticism from investors, resulting in a 43% decline in U.S.-traded shares. This was in contrast to a 55% increase in shares of and a 9% decline in shares of during the same time period.

Tavares resigned from his position at Stellantis due to differing views with the company's board. Les Echos reported that his departure was a negotiated resignation that followed the board's decision to terminate the executive.

The board's actions caught many off guard, including those within and outside Stellantis, which Tavares had led since January 2021 when he spearheaded a merger between his French automaker, PSA Groupe, and Fiat Chrysler. Stellantis, the fourth-largest automaker in the world, owns brands such as Jeep, Dodge, Fiat, Chrysler, and Peugeot.

Tavares' departure occurred less than two months after the board decided to keep him on board until the end of his contract in early 2026, with the expectation that he would help with the selection and transition of his successor.

Stellantis expects to name a successor as CEO during the first half of next year. In the meantime, the company has appointed an interim executive committee led by Chairman John Elkann, a member of the Italian automaker Fiat's family.

PSA Groupe and Opel European operations underwent drastic turnarounds, thanks to Tavares, who was known for his business acumen and ability to ruffle a few feathers.

Carlos Ghosn, a former Nissan executive, was known for his cost-cutting, mergers, and synergies. These traits made him a popular choice for running an automaker, but ultimately led to his downfall.

""Auto company CEO exits are celebrated like Formula 1 drivers when things go right, but a single misstep can lead to a spectacular spinout," Bernstein analysts wrote in a Friday investor note. "Transformational leadership requires not only vision but also consensus-building among the team, a robust understanding of what the organization is capable of, and careful timing," they added."

Wrong turns

Tavares, a passionate racer who spent up to one week a month at his ranch in Portugal, encountered several mistakes.

Tavares, who resides in Europe and received nearly $40 million in compensation last year, publicly announced that he would spend a few days in North America to address issues during his summer break. This move was perceived as arrogant by some U.S. hourly and salaried employees, who don't typically get a monthlong vacation.

U.S. leaders had to hold regular hourslong meetings in the middle of the night before working their full U.S. day, while Tavares exuded a smug sense of intellectual supremacy and dismissed opinions, particularly regarding product planning, according to sources.

A former Stellantis executive stated that when Tavares began, he believed the company's center was in the Atlantic, but it became evident that it was actually in France.

Tavares rejected executives' attempts to prioritize gas-powered models over electric vehicles to maintain sales, despite several sources stating that executives made multiple attempts to do so.

According to sources, Tavares' cost-cutting measures included simplifying vehicles such as the Jeep Grand Cherokee while increasing its pricing above market norms; outsourcing critical engineering work to lower-cost countries and consultants such as France-based; and micromanaging budgets and decisions to a point where U.S. leaders felt they had their hands tied behind their backs. One of the most notable measures was killing the automaker's popular V-8 Hemi engines.

One source stated that everyone wanted to retain [Hemi], but the response was, "You must be more environmentally friendly," and there was little they could do to alter the decision.

Even as executives claimed they were addressing previously reported delays in new products, cutting low-margin vehicles such as the gas-powered Jeep Cherokee and Dodge Charger and Challenger without any replacements ready, and engaging in cost battles with suppliers, dealers, and the United Auto Workers union, among other "arrogant" mistakes in the U.S.

"Stellantis Chief Financial Officer Doug Ostermann stated during a UBS conference on Wednesday that he believes it is necessary to rebuild trust in certain areas. He emphasized that the management team is committed to working on this issue and acknowledged that it will take time to achieve."

Tavares left Stellantis due to disagreements on priorities and issues with key stakeholders, according to Ostermann.

The company, Stellantis, is currently facing legal action from the UAW and several suppliers over pricing and cost disputes, which led to strike actions against the company.

In Europe, as in the U.S., budget cuts were excessive. For instance, the Financial Times reported that guests invited to a factory in the UK this year were served drinks from a coffee machine that had been transported over 100 miles from another plant because staff were not permitted to purchase one.

Mismanagement of U.S. operations

U.S. operations mismanagement resulted in Stellantis having excess new vehicle inventories, cutting plant production, reducing workforce, and pricing out traditional consumers for its essential Ram, Jeep, and Dodge brands.

During a June investor event, Tavares admitted to being arrogant and not having any excuses for the problems with some U.S. plants and his failure to adjust business plans in response to changing market conditions.

According to three executives or top-line managers, Tavares consistently rejected any feedback that did not align with his "Dare Forward 2030" plan, which aimed to double net revenues and maintain double-digit adjusted operating income margins through the next decade, primarily through the growth of electric vehicles (EVs).

Stellantis' Ostermann stated that the company's board and Tavares did not necessarily disagree on long-term plans, but he declined to confirm the company's plans for double-digit AOI. "Whether or not the environment going forward, if double digit is the right number or not, we'll have to see," Ostermann said Wednesday.

Fiat Chrysler's Marchionne had previously given brand CEOs more freedom and trust to do their jobs, but Tavares put more bureaucracy and budgeting in place, sources told CNBC.

An exodus of executives, including Tim Kuniskis, Christian Meunier, Jim Morrison, Mamatha Chamarthi, and Natalie Knight, left Jeep. Meanwhile, Mark Stewart, the head of Stellantis North America, left the company to become CEO of Goodyear Tire and Rubber Co.

Tavares' cost cuts were difficult but effective, as stated by other executives, including Chief Technology Officer Ned Curic, who remains with the automaker and was named last week to its interim executive committee.

The cuts around that time were described as grueling and excessive by others in the company, leading to problems in the U.S.

In July, Tavares stated that the cuts were not the cause of the company's U.S. issues.

"Tavares stated in July that the narrative about the budget cuts is incorrect. He explained that what is being requested from the local team is profit, share, and customer satisfaction. Tavares added that when a project fails for any reason, it's easy to blame the budget cut as a scapegoat. However, he emphasized that it's not accurate."

Stellantis' actions were deliberately differentiated from those of its competitors, whether intentionally or unintentionally.

Mark Reuss, GM President, stated in October that companies cannot cut to growth.

"Time and again, it's been said that you can't achieve growth through cutting. No way," he stated during GM's investor day in October. "To succeed, you must create products that people desire and need. We are doing both and are positioned for long-term success."

Damage control

The person who replaces Tavares must maintain relationships with suppliers, hourly and salaried U.S. employees, dealers, and politicians.

Stellantis has cut its employee count by 14%, or about 40,600 workers, from 2020 to the end of 2023, including a 15% reduction in the Europe North America region, according to public filings. However, this does not include additional headcount reductions and layoffs that are planned for 2024.

Shawn Fain, UAW President, cheered Tavares' departure, stating it as a significant move towards rectifying the company's mismanagement and resolving the long-standing mistreatment of its workforce.

Dealers in the U.S. were becoming more optimistic about recent changes, even before Tavares left.

Antonio Filosa, Stellantis' newly appointed North American Chief Operating Officer, was praised by Kevin Farrish, head of Stellantis' U.S. dealer council, for the company's recent support of dealers.

The Stellantis U.S. dealership council met with Filosa and Elkann, Stellantis' chair, on Monday.

"Farrish, who slammed Tavares in September, told CNBC on Friday that Antonio is hitting the ground running. "We have a great deal of confidence in Antonio, and we look forward to working with him. ... It's very optimistic to see this much action happening.""

Efforts to manage the fallout from Tavares' departure were prompt and effective, particularly in the US and Italy, where the company has significant operations and was previously headquartered by Chrysler and Fiat automakers.

Elkann informed Italian Prime Minister Giorgia Meloni about Tavares' resignation before it was announced, following Stellantis' significant reductions in headcount and production in the country.

Last week, Elkann participated in a global tour of Stellantis' facilities in the U.S., Italy, and France. During a leadership meeting at the automaker's North American headquarters in suburban Detroit, Elkann emphasized the importance of finishing 2024 and expressed optimism that 2025 would be a better year for the company.

Stellantis did not respond to requests for comment on the visits, including whether the company plans to review Tavares' past decisions, such as shutting down and selling the company's Arizona Proving Grounds.

According to a source who attended the U.S. town hall, Elkann did not indicate any plans to revisit any decisions. However, the company has ended an internal surgical cost-cutting program called "Darwin," which is a reference to Tavares' statement that the auto industry is in a Darwinian period, where only the strongest survive.

According to the source, Elkann stated that Darwin's death was a result of our intention to survive.