Stellantis Predicts Negative Cash Flow for Second Half of 2024

Jeep-maker Stellantis is facing increased costs to fix its U.S. business, stiff competition from Chinese manufacturers, and dire trends in the industry overall. As a result, the French-Italian car maker predicts slower sales than previously expected and expenditures that could exceed cash flow.

Stellantis, which owns several car brands including Dodge and Maserati, anticipates an adjusted operating income (AOI) margin around 5.5%-7.0% for 2024. Previous guidance forecasted AOI in the double digits. The car company now says it will likely finish the year in a negative cash flow situation, roughly 5 billion euros to 10 billion euros ($5.6 billion to $11.2 billion) in the red.

Along with the lower annual outlook, Stellantis is cutting inventory in the U.S. The second half of 2024 will see 200,000 fewer vehicles shipped to dealers compared to the same period last year. Incentives to buy 2024 and older vehicles will also be increased.

“Deterioration in the global industry backdrop reflects a lower 2024 market forecast than at the beginning of the period, while competitive dynamics have intensified due to both rising industry supply, as well as increased Chinese competition,” the automaker wrote.

A Bad Year for Stellantis

For the first half of 2024, Stellantis’ net profit fell 48%. The auto maker blamed declining sales, manufacturing problems, and decreasing market share in North America. In the U.S., sales dropped almost 16%.

Stellantis also announced imminent layoffs affecting up to 2,450 workers in Warren, Michigan. With the discontinuation of the older Dodge Ram 1500 model, the plant that manufactures the vehicle will likely wind down some operations as a replacement vehicle has not been announced.

Earlier this month, Stellantis had to recall 1.2 million Ram 1500 trucks due to a software malfunction related to the anti-lock brake system (ABS). According to the company, the software could unexpectedly turn off the Electronic Stability Control (ECS) system. The recall included some 2019 and 2021-2024 vehicles.

In August, shareholders accused Stellantis of artificially inflating its share price by hiding various problems. Allegedly, the company provided a positive spin on inventory assessments, operating margin, and the launch of new products, which falsely sent the stock price higher. Yet, once the company released disappointing earnings, the price fell, which prompted a shareholder lawsuit.