On December 3, the Agnelli family member and Chairman of Stellantis, the world's fourth largest automaker, John Elkann, was busy calling senior officials in Italy and France last Sunday, to inform them that the group's CEO, known as "performance schizophrenic" Carlos Tavares, was about to resign.

Subsequently, the group issued a statement announcing this matter. More revelations emerged on Monday, revealing the multi-level conflicts between the two sides.

Sudden deterioration in performance - CEO becomes "impatient"

Carlos Tavares' stepping down was not entirely unexpected. After announcing in September a significant cut in profit guidance, Stellantis had already begun the search for a successor CEO, with the initial plan for Tavares to resign after his contract expires in 2026. The company's management restructuring in October also seemed to quell speculation of an early CEO departure.

However, insiders revealed that due to the sudden deterioration in the company's performance, Carlos Tavares was shocked by its impact on his reputation. The drawn-out battle with government institutions, suppliers, and dealers continued to escalate. While the CEO tried to improve the financial situation and restore his reputation, his tense relationship with the board of directors quickly escalated, leading to a parting of ways in the end.

Before this year, the 66-year-old Portuguese man had a brilliant record - not only saving the once bankrupt iconic Citroën (PSA) group, but also successfully completing the massive merger of 14 automobile brands into the Stellantis umbrella. In the 2023 fiscal year, the newly formed Stellantis group achieved record profits through 'ruthless cost-cutting measures', surpassing numerous European counterparts.

However, the good times did not last long, as this year saw a significant decline in Stellantis' sales in the European and USA markets. As of Monday's close, Stellantis's US stock fell over 6%, with a annual drop exceeding 40%.

Just as Tangs Wei tries to quickly salvage his reputation, the friction continues to escalate.

Informed sources revealed that Tang Wei Shi attempted to improve Stellantis' cash flow by 'squeezing suppliers' in order to achieve the revised financial targets for the 2024 fiscal year, but the board of directors deemed this short-term measure unsustainable.

In an October interview with the media this year, Tang Wei Shi once said: 'There is a saying...Cost reduction has its limits, can you say this to consumers? I think today, if you can't satisfy consumers...the company will disappear.'

As Tang Wei Shi resigns, some of his 'cost-cutting measures' have also been exposed to the public eye.

Sources revealed that he had significantly cut IT expenses, resulting in the company's system losing track of the locations of thousands of cars in France; some suppliers were informed that they could not receive payments because the person processing the payments was on maternity leave, and Stellantis did not hire a replacement; guests visiting the Ellesmere Port factory in the United Kingdom had to use a coffee machine sent from the Luton factory 100 miles away, as the Ellesmere Port factory was not allowed to purchase such a machine.

From a broader perspective, Italian officials are uneasy with Tang Weishi's approach of "either increase subsidies or close the Italian factories." In the most profitable USA market of the group, he raised prices for a series of brands, burdening dealers with inventory and causing strain on the supply chain.

In addition to some of his actions, Tang Weishi and the board of directors also have significant disagreements on the electrification transformation strategy. Tang Weishi insists on pushing for an aggressive transformation strategy, while the board of directors tends to adopt a more flexible approach to sustain factory operations and profit margins.

Difficult restructuring will continue.

On Monday, Stellantis announced the formation of a 9-member interim executive committee, chaired by Elkann, to manage the company until the next CEO is found.

Insiders indicated that there are 'excellent candidates' within Stellantis who can replace Tang Weishi, but the board of directors will also consider external options. The group also stated on Monday that the process of appointing a new CEO will be completed in the first half of 2025.

Regarding the management changes at Stellantis, Italy's Prime Minister Meloni's ally and the newly appointed EU and Regional Relations Minister of the country, Tomas Forti, stated on Monday: 'It is time for Tang Weishi to leave, but the transition of the management needs responsibility, protecting employment and capabilities.'

The Italian government hopes to receive assurances from Stellantis for continued operations locally and the prospects of worker employment. However, union leaders in Italy and France are also concerned that Tang Weishi's successor may increase the number of layoffs.

At the end of the day, the case of Stellantis is also a microcosm of the European automotive industry. Enzo Peruffo, a professor of business strategy at the University of Rome Luigi, said that Stellantis is an example of the lack of vision in the European automotive industry, with insufficient implementation of industrial strategy.

Editor/Lambor