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Stellantis ( STLA ) CEO Carlos Tavares starts a 3 day visit in the

US to

address lagging profit in North America

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Tavares' visit during his summer break is intended to

reassure

employees and investors

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North America is group's profit powerhouse

By Giulio Piovaccari, Gilles Guillaume and Nora Eckert

DETROIT, Aug 21 (Reuters) - Stellantis ( STLA ) CEO

Carlos Tavares has started a three-day visit in Detroit, where

he will seek to develop a strategy to fix the European

automaker's struggling North American operations and reassure

employees and investors, two people familiar with the plans

said.

The strategy is likely to be developed by the end of this week,

said one of the sources, who asked not to be identified.

While Tavares typically visits the North American operations

every four to six weeks, the CEO's visit this week during his

summer break is meant to send a clear signal, the two sources

said.

"He wanted to make clear he was handling it personally," one of

the sources said. "North American operations are basically

funding the rest of the group."

Tavares, who described Stellantis' ( STLA ) first-half results as

"humbling," has said the French-Italian automaker's North

American business suffered from a mix of high vehicle

inventories, manufacturing issues and a lack of "sophistication"

in how it addressed the local market. Stellantis ( STLA ) shares have

tumbled almost 50% from March highs as a result.

A spokesperson for Stellantis ( STLA ) declined to comment.

During the visit this week to the U.S. offices in Auburn Hills,

Michigan, Tavares will initially meet with top-line managers

before formulating a strategy by week's end to fix things, one

of the sources said.

The second source said the main focus of those "immersive"

days with the local team was to draw a broad picture of the

situation. Tavares will visit dealers and a plant in the Detroit

area, and discuss issues including reducing inventories and

adjusting vehicle production, the source added.

Stellantis' ( STLA ) first-half operating income fell 40%, mainly

due to poor business performance in North America, its profit

powerhouse. Vehicle sales in the region for Stellantis' ( STLA ) top

brands, Ram and Jeep, have both declined at least 33% from the

first half of 2019 to the same period this year, according to

research firm Cox Automotive.

'WE WERE ARROGANT'

Tavares blamed himself for not being quick enough to act

while problems at the group's North American operations were

piling up and, when presenting first-half results, said he would

spend part of his summer holidays there to fix them.

"We were arrogant," he said earlier this year at Stellantis' ( STLA )

investor day in Michigan. "I'm talking about myself, nobody

else."

Those results came just after Tavares enjoyed a compensation

package on Stellantis' ( STLA ) 2023 results of up to 36.5 million euros

($40.6 million), a 56% increase from a year earlier.

Stellantis' ( STLA ) main mistake in North America was to keep

increasing prices in a bid to boost margins even as the market

was signalling customers were not ready to pay, making some

Stellantis ( STLA ) models too expensive, Jefferies analyst Philippe

Houchois said.

"They have lacked pragmatism to address straight away the

inventories building, they should have made more tactical prices

to avoid that," Houchois said.

Massimo Baggiani, founder at Niche Asset Management in

London, said Tavares remains "the best executive in the

industry."

"It's key now for him to keep financial discipline. He needs

to show that he can increase car sales without compressing

margins, losing money and burning cash," Baggiani said of

Tavares.

Stellantis ( STLA ) already has moved to cut costs by reducing its

U.S. workforce.

It said this month it would lay off up to 2,450 factory workers

from its Warren Truck assembly plant outside of Detroit as the

automaker ends production of the Ram 1500 Classic truck. In late

July, the company said it would also offer a round of voluntary

buyouts to U.S. salaried employees.

Tavares also has said there are particular inefficiencies at

two U.S. plants, but has declined to specify which ones. In

July, he told reporters the run rate at its Sterling Heights

Assembly Plant in Michigan was poor.

Tavares' visit comes amid increasing uneasiness among some

investors and union workers over the North American struggles.

United Auto Workers President Shawn Fain has threatened that the

U.S. union representing U.S. plant workers may strike if the

automaker fails to keep the investment commitments outlined in

last autumn's labor deal. Relationships between the union and

automaker have been tense as Stellantis ( STLA ) has laid off hourly

workers at plants this year.

Meanwhile, a group of shareholders last week sued Stellantis ( STLA ),

saying it defrauded them by concealing rising inventories and

other weaknesses before posting disappointing earnings that

caused its stock price to fall.

The company has said the lawsuit was "without merit" and

told the UAW it had not violated terms of their bargaining

agreement and the union could not legally strike.

($1 = 0.9 euro)