Stellantis cuts 2024 forecast on costs for U.S., Chinese competition

Stellantis cut its profit margin forecast for the year, citing higher costs to revive its struggling Jeep and Dodge businesses in the U.S., Chinese competition and a global slowdown in the auto industry.

Adjusted profit margin is now expected to be between 5.5 percent and 7.0 percent for the year, down from the "double digit" level previously forecast, Stellantis said in a statement.

The automaker also said it would burn through more cash than expected. Industrial free cash flow is now expected to be between $5.6 billion and $11.2 billion, down from a prior "positive" projection.

The profit margin will also be dented by lower-than-expected sales in the second half across most regions, Stellantis said.

"Competitive dynamics have intensified due to both rising industry supply, as well as increased Chinese competition," Stellantis said in a statement on Sept. 30.

Stellantis plans more aggressive action to bring vehicle supply back in line, targeting no more than 330,000 units of dealer inventory by year-end, rather than by the first quarter of 2025.

The company aims to pull that off by building 200,000 fewer vehicles in the second half — double its previously planned reduction — and increasing incentive spending. It will offer higher incentives on 2024 and older model vehicles and will invest to improve productivity.

Stellantis's announcement adds to a litany of guidance cuts from European automakers, which have been hurt by sluggish sales and mounting competition from Chinese rivals. Aston Martin on Sept. 30 joined Stellantis, Volkswagen, BMW, Mercedes-Benz and Volvo Cars in lowering its profit outlook within the past month.

Automakers are struggling with slowing demand as they shift to electric vehicles, forcing them to resort to measures including job cuts and factory closures. They are also contending with intensifying trade tensions and the possibility of billions of euros in European Union fines tied to stricter CO2 rules next year.

Stellantis CEO Carlos Tavares has come under particularly intense pressure of late. Investors, dealers and unions alike have taken the CEO to task over sliding sales, a dated U.S.vehicle lineup and bloated inventory.

Earlier this year, Stellantis shareholders in the U.S. sued the automaker who said the company had defrauded them by hiding rising inventories and other weaknesses before posting disappointing earnings that caused its stock price to fall.

The company also said in August that it was laying off as many as 2,450 factory workers from its assembly plant outside Detroit as it ends production of its Ram 1500 Classic truck.

Reuters and Bloomberg contributed to this report.