First year of strong push for Stellantis as cost challenge emerges According to Reuters


© Reuters. FILE PHOTO: The Stellantis logo is seen in this image provided on November 9, 2020. FCA/Handout transmitted via REUTERS


By Giulio Piovaccari and Gilles Guillaume

MILAN (Reuters) – Stellantis has completed its first-year profit target after forming from the merger of Fiat Chrysler and Peugeot (OTC:PSA) maker, fueling hopes the carmaker could be deal with rising raw material costs and semiconductor chip shortages.

Milan-listed shares of the world’s No. 4 carmaker rose 6.5% in Wednesday afternoon trading.

The company, whose brands include Jeep, Ram, Opel and Maserati, reported an adjusted operating profit margin of 11.8% in 2021, about 10% above its target. That’s thanks to strong progress on synergies from the merger, which generated some 3.2 billion euros ($3.6 billion) in net cash benefits.

On a conference call with analysts, CEO Carlos Tavares said the results demonstrate that “we will deliver on our commitments.”

The figures come less than a week before Stellantis presents a strategic plan for the next few years that will, among other things, tackle its struggling business in China.

Tavares said he hopes Chinese authorities will approve Stellantis’ plan to increase its stake in China’s joint venture with Guangzhou Automobile Corporation (GAC).

The automaker also said it expected to post double-digit profits again this year. The pro forma figure for 2020 is 6.9%.

Banca Akros analyst Gabriele Gambarova wrote in a client note that the outlook is “very vague, but it leaves room” for Stellantis to live up to expectations.

Chief Financial Officer Richard Palmer told reporters that the price of raw materials, such as metals, would remain an issue for the industry this year, but the shortage of semiconductors, which cost the group about approx. 20% of planned output in 2021, peaking in the third quarter of last year.

“We think this guidance (Stellantis ‘2022) is justified given the difficulty in assessing volumes, prices or combinations in FY22 and given other constraints such as raw materials,” Morgan Stanley (NYSE:) analysts wrote in a client note.

Margins in North America, where Stellantis sells highly profitable Ram and Jeep pickup models, rose to a record 16.3% in 2021.

Rival General Motors (NYSE:)’ equivalent margin for 2021 in North America is 10.2%.

Palmer said the cash synergies put in place last year put the group ahead of schedule to hit 80% of its €5 billion cost-savings pace target by 2024.

He added that Stellantis has no significant direct contact with Russia, which is facing new international economic sanctions over its actions in Ukraine.

“We have production flexibility,” said Palmer. “We are confident we can manage the crisis in Russia.”

Tavares has so far outlined a €30 billion electrification strategy and formed an alliance with Amazon (NASDAQ:) and iPhone assembler Foxconn to accelerate software and semiconductor development for connected vehicles. connection in the future.

He also outlined plans for five battery factories and slashed deals with unions to further streamline operations in Europe – mitigating potential labor conflicts and increasing profits.

Palmer said the group currently has no plans to create separate entities for combustion and electric cars, as competitors are considering. Renault (PA:) and Ford.

“We just created a new company, and that should be enough to start with, provided we manage complexity and diversity,” he said.

In a separate statement, Stellantis said it paid 1.9 billion euros in employee benefits based on last year’s results, up 70% on 2020.

(1 dollar = 0.8829 euros)

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