Stellantis is facing challenges. Here's the reason.

The new ownership of American car brands Jeep, Ram, Dodge, and Chrysler is causing them difficulties.

The European-American giant is the world's fifth-largest automaker by volume, according to S&P Global Mobility. The 2021 merger of the French maker Groupe PSA and the American-Italian Fiat Chrysler aims to generate billions of dollars in synergies and new opportunities for brands across two continents to collaborate on developing costly new technologies such as electric vehicles and software.

Some of those promises came to fruition.

Daniel Roeska, managing director at Bernstein, stated that initially, the market was uncertain about Stellantis' ability to achieve the $5 billion in synergies between the two companies as they had announced.

But Stellantis did better than that.

""They successfully executed $8 billion, but then they ceased counting," he stated."

2023 was a standout year: remarkable revenue, impressive earnings, exceptional cash flow.

Behind those results, all kinds of problems lurked.

The company faced criticism from customers over high prices, as their products became stale and competitors updated their offerings. Customers also expressed dissatisfaction with the quality of the products, particularly with the new Jeep models that cost over $100,000, which was a departure from the brand's traditional pricing.

The company reported that sales in the first half of 2024 decreased by 14%, resulting in a near-halving of profits. Additionally, the company's stock shares have fallen from their all-time high of $29.51 in March to around $13 in early October.

Stellantis' profits are estimated to be around 50% due to high inventories in North America, where the Jeep and Ram truck brands are based.

Stellantis vehicles have some of the highest inventories of vehicles on dealer lots in the U.S., indicating that they are not selling well, according to Cox Automotive.

""North America operations were highly profitable and viewed as a cash cow, but it was believed that they could run themselves with minimal influence. However, they still required support," said Stephanie Brinley, director of the AutoIntelligence unit at S&P Global Mobility."

The council of dealers in North America has sent an open letter to Stellantis' top management, including CEO Carlos Taveres, accusing them of ignoring warnings and making mistakes that have led to the company's struggles.

The United Auto Workers union is threatening to strike again due to disputes with suppliers that have ended up in the courts.

"Roeska stated that the discussion on Stellantis has essentially fallen apart, and the focus is solely on the cost of removing U.S. inventory from the company. The topics of free cash flows, long-term EV strategy, market position, and the China Leapmotor joint venture are no longer being discussed."

Stellantis is expected to launch several new products in the near future, and its highly adaptable platform allows for the integration of various powertrains, including EVs, hybrids, and traditional gas-powered vehicles. This flexibility may aid the company in navigating the unstable auto industry during a time when the demand for EVs is uncertain and unpredictable.

But the next six to 12 months could also be quite rocky.