According to informed investors and bankers on Monday, the soon-to-be departing CEO of Stellantis (STLA.US), Carlos Tavares, plans to quickly turn around the struggling usa business by cutting costs instead of focusing on a long-term strategy, which has caused a conflict with the board of directors of Stellantis.

Shares of the global fourth-largest auto manufacturer, known for Jeep, Fiat, and Peugeot, plunged 10% to their lowest level since July 2022, due to investor concerns that the top position would be vacant following Tavares's resignation on Sunday.

Stellantis is struggling to escape from excess capacity and bloated inventories in its key north american market, with global demand still sluggish and competition from chinese rivals intensifying, particularly in the electric vehicle sector.

In addition to the difficulties faced in the usa, the company is also focused on raising prices for mainstream models, which has driven away customers in europe, another crucial market affected by inflation.

Shortly after Stellantis issued a shocking profit warning in September, it announced that Tavares would retire when his current term ends in early 2026. The procedure for selecting a new CEO was originally scheduled to be completed in the last quarter of next year.

Tavares has long been one of the most respected executives in the auto industry. Interviews with six shareholders, bankers, and analysts indicate that since then, the differences between Tavares and the board of directors regarding how to resolve the crisis have rapidly deepened.

An informed senior investment banker stated on Monday that the board of directors is increasingly concerned about Tavares's strategy to turn things around. The banker mentioned that in recent months, with just over a year left on his contract, the CEO has focused most of his energy on cost-cutting measures. The board is worried this will lead to quality issues and also limit the company's ability to develop and design new models.

The banker noted that customers and dealers are angry with Tavares's strategy. The launch of several key models is facing delays, including the new version of the popular Peugeot 3008 midsize SUV and the budget-friendly Citroen C3 city car along with its electric variant e-C3.

A source told foreign media last Sunday that the board believes Tavares is focused on seeking short-term solutions to save his reputation rather than considering the best interests of the company, which has led to tensions between both parties. Stellantis declined to comment.

Stalemate.

Analysts say that Tavares's cost-cutting has particularly harmed his relationships with US dealers and the United Auto Workers (UAW). In a letter to Tavares dated September 10, Kevin Farish, chairman of the Stellantis National Dealer Council, complained that the pursuit of short-term profits has led to "rapid depreciation" of the Jeep, Dodge, Ram, and Chrysler brands, attributing the issue to Tavares.

The United Auto Workers threatened Stellantis with a strike over delayed investments, while Stellantis filed a lawsuit against the UAW for breach of contract.

Stellantis shareholder and founder of Niche Asset Management, Massimo Baggiani, indicated that another tricky issue for investors is Tavares's tough stance on the EU's upcoming stricter emissions targets amid a slowdown in electric vehicle sales. He stated that this has "scared" investors and major shareholders.

CEO Tavares has repeatedly confirmed Stellantis's commitment to meeting EU targets, stating that the proposed last-minute changes or delays to regulations by the European Automobile Manufacturers Association (ACEA) would be unfair.

Starting from January 1 next year, the new regulations known as Corporate Average Fuel Economy (CAFE) will require the company to have approximately 21% of its total sales come from electric vehicles by 2025. If the target is not met, the company will have to pay to other companies with lower emissions to concentrate emissions and reduce the average carbon dioxide emissions; otherwise, it will face fines. It is reported that Stellantis currently has an electric vehicle sales ratio of about 12% in europe.

Jean-Philippe Imparato, the director of european affairs, warned in an interview with the Italian newspaper Milan Finanza last month that if the company does not comply with the regulations, it may face fines of up to 3 billion euros (approximately 3.1 billion USD).

Bernstein analyst Stephen Reitman stated that despite Tavares' determination to turn the situation around before 2026, he has exited early, indicating how serious the group's issues are. He said, "This reflects our long-held view that the problems are very serious and currently difficult to resolve."