Volkswagen, Mercedes, Aston Martin, and BMW have all recently slashed their forecasts. The broader economic landscape for Western automobile companies is dire as high interest rates crush demand, EV programs hemorrhage cash, and demand in China wanes. Many Western firms are plagued with de-growth climate change policies that muzzle economic output or make the manufacturing process way too expensive, ultimately giving Chinese firms an unfair advantage in global markets.
Expanding our coverage on automaker Stellantis, a new report from Wall Street Journal journos on Friday reveals a leaked email from Stellantis Chief Financial Officer Natalie Knight, who informed her team of white collar workers about the need to take "drastic measures" to shore up the Jeep and Ram parent's finances.
Knight told her team, "The Doghouse is back!" As she explained, this belt-tightening initiative involves heavily scrutinizing requests for purchases from outside vendors to ensure maximum cost savings.
She said the doghouse "is the name for much stricter attention and control around purchase requisitions," adding, "If we apply more discipline, we can ensure big savings for the company."
On Monday, Stellantis reduced its margin forecast for the entire year, indicating that production will be reduced and that more promotional incentives will be available to customers in an increasingly competitive auto market.
The Western trans-Atlantic auto manufacturer wrote in a statement that the adjusted operating income margin will slide to 5.5% to 7% this year, down from a previous forecast for a double-digit percentage. It now projects an industrial free cash flow range of negative 5 billion euros ($5.6 billion) to negative 10 billion euros, versus prior guidance of positive cash generation.
In markets, shares of Stellantis in the US were down about 17%, the largest weekly decline since late February 2022.
Also on Monday, Stellantis' head of investor relations told Wall Street analysts that despite "significantly negative" industrial cash flow in 2024, cash on hand will be plentiful at the end of the year. The automaker's business downturn this year is a significant reversal from last year.
Knight also told her team they must preserve cash. She told staff that spending deemed non-essential must be cut, adding "That calls for drastic measures to ensure we deliver the best financial results for 2024, 2025 and beyond."
She also referenced the term "Darwinian times," which Stellantis Chief Executive Carlos Tavares previously used. He used the term when referring to the taxing transition to EVs, pressuring the entire auto industry.
"Stellantis's cash drain stems not only from lower profits, but also from its efforts to reduce a glut of unsold vehicles on dealer lots in the United States," WSJ noted. The automaker also revealed that vehicle shipments in North America would have to be slashed by 200,000. This comes after third-quarter sales in the US crashed 20%.
Bernstein analyst Daniel Roeska told clients Thursday that Stellantis faces a short-term cash headwind of about $4.4 billion.
Taking a look at broader auto markets, the MSCI World Automobiles Index, comprised of major automakers, such as Tesla, Toyota, Ferrari, GM, Benz, Honda, Ford, Stellantis, BMW, and VW, has chopped sideways for two years, below the late 2021 peak.
