As a leading global automaker, Stellantis stock (STLA:NYE) faces intense competition and challenging market conditions. To sustain its growth and profitability, the company has recently launched a comprehensive cost-cutting drive, aimed at reducing expenses and increasing efficiency across its operations.
Overview of Stellantis:
Stellantis is a multinational automotive manufacturer, formed in 2021 by the merger of PSA Group and Fiat Chrysler Automobiles (FCA). The company operates a portfolio of 14 brands, including Alfa Romeo, Chrysler, Dodge, Jeep, Fiat, Maserati, Opel, Peugeot, and Citroen, among others. Stellantis has a global workforce of around 400,000 employees, and produces over 8 million vehicles annually, with a strong presence in Europe, North America, and South America.
The rationale for Cost-Cutting:
Stellantis has been facing several challenges in recent years, including declining sales, rising costs, and changing consumer preferences. The COVID-19 pandemic has further exacerbated these challenges, leading to a sharp drop in demand and supply chain disruptions. In this context, Stellantis has decided to implement a series of cost-cutting measures to improve its financial performance and competitiveness.
The main objectives of the cost-cutting drive are:
- Reduce fixed costs by €3 billion ($3.6 billion) by 2024
- Increase operating profit margin to 5.5% by 2023 and 7% by 2026
- Focus on high-growth segments, such as electric and autonomous vehicles, and exit non-core businesses
Key initiatives:
Stellantis has outlined several key initiatives to achieve its cost-cutting and profitability goals. These include:
1. Rationalization of Product Portfolio:
Stellantis plans to streamline its product portfolio and focus on its most profitable and strategic brands and models. The company aims to reduce the number of vehicle platforms by 40% by 2025 and to achieve 98% coverage of its sales volume with just four platforms. This would allow Stellantis to optimize its production, reduce complexity, and achieve economies of scale.
2. Optimization of Manufacturing Footprint:
Stellantis plans to optimize its manufacturing footprint and reduce excess capacity. The company aims to close or convert underutilized plants, and to invest in its most efficient and flexible plants. Stellantis also plans to increase the utilization rate of its plants from the current level of 75% to 100% by 2025, and to reduce lead times by 30%.
3. Digitalization and Automation:
Stellantis plans to accelerate its digitalization and automation efforts, to increase efficiency and reduce costs. The company aims to increase its share of digital sales to 20% by 2025 and to reduce its dealer network by 30%. Stellantis also plans to invest in robotics, artificial intelligence, and data analytics, to improve quality, safety, and productivity.
Stellantis Stock Forecast:
Based on the Stellantis stock forecast from 2 analysts, the average analyst target price for Stellantis NV is USD 20.00 over the next 12 months. Stellantis NV’s average analyst rating is Strong Buy.
Stock Target Advisor’s own stock analysis of Stellantis NV is Bullish, which is based on 14 positive signals and 4 negative signals. At the last closing, Stellantis stock price was USD 16.11. Stellantis NV’s stock price has changed by -12.97% over the past week, -6.61% over the past month, and +23.17% over the last year.
Conclusion:
Stellantis’ cost-cutting drive is a bold and necessary step to ensure its long-term viability and success. By optimizing its product portfolio, manufacturing footprint, and digital capabilities, Stellantis can become more agile, resilient, and competitive, and better positioned to capitalize on the opportunities and challenges of the global automotive market.
