TURIN — Stellantis CEO Carlos Tavares mentioned the automaker was in a position to scale back its break-even level to lower than 50 % of its put in manufacturing capability within the last months of final 12 months. It did so to guard Stellantis from “chaos” created by the mix of the chip scarcity, rising uncooked supplies costs and geopolitical dangers.
The auto trade commonplace break-even level is mostly 70 to 80 % of put in capability, as measured by the Harbour index, which is predicated on a plant working two eight-hour shifts for 235 days a 12 months.
Stellantis declined to provide a quantity determine for the corporate’s present break-even level or reveal what that quantity was when the group was created by the merger of PSA Group and Fiat Chrysler Vehicles in January 2021.
Final 12 months, Stellantis shipped 6.14 million items to its distributors and sellers, up 3 % from 5.95 million in 200 on a pro-forma foundation combining the 2 group’s outcomes.
Its adjusted working margin jumped by 95 % to 18 billion euros ($20.4 billion), equal to an 11.8 working margin in contrast with a 6.9 % margin in 2020, additionally on a pro-forma foundation.
Tavares advised reporters Wednesday that the concept to scale back Stellantis’ break-even level come to thoughts throughout his summer season break, including he was proud the corporate reached this aim by the tip of 2021.
“On Sept. 1, I introduced the highest management crew to a particular assembly and we determined that we might look to convey the corporate under 50 % [of capacity] break-even level,” Tavares mentioned.
His mentioned his view was that there are such a lot of uncertainties across the auto trade that Stellantis must assume repeatedly about on learn how to shield itself from this “chaos.”
Tavares has lengthy thought of the break-even level to be a key measure of an automaker’s monetary well being, a degree he reiterated on Wednesday in saying report earnings at Stellantis.
Considered one of his accomplishments after changing into CEO of PSA in 2014 was to chop the then-struggling group’s break-even level to 1.6 million autos in 2017 from 2.6 million in 2013. And after buying Opel from GM in 2017, he set the break-even level to 800,000 autos from an undisclosed quantity (on the time, Opel was dropping tons of of tens of millions a 12 months whereas promoting about 1 million autos yearly).
Tavares mentioned that final 12 months’s tailwinds offset headwinds at Stellantis.
The chip scarcity — which led to an imbalance between provide and demand on account of manufacturing constraints — gave automakers a lot bettter pricing energy. “Which, to make it easy, means much less discounting and better margins,” he mentioned.
However, he mentioned, a rise in uncooked supplies costs offset a lot of that larger profitability.
Tavares cited the European market as a bonus of getting a decrease break-even level. Submit-pandemic quantity is about 15 tens of millions items, virtually 20 % under the pre-COVID degree of 18 million items.
“On condition that Stellantis has a share of about 20 % of the European market, we misplaced about 600,000 annual gross sales, although our market share was unchanged,” he mentioned.
Wanting forward, Tavares mentioned {that a} return to a standard degree of chip provide will enhance his revenue pool, however probably at decrease margins.
“If there’s extra chip provide, there will likely be much less imbalance between provide and demand, and due to this fact much less pricing energy,” he mentioned. Elevated general income will cowl fastened prices, he added, “however the per-unit margins could also be a bit bit decrease, as a result of we nonetheless have uncooked supplies value inflation.”