Stellantis Faces 10% Profit Slump Amid North America Labor Strikes

Feb 15, 2024 03:28 AM EST

A WHITE CHRYSLER 300 — (Photo : PEXELS/Esmihel Muhammad)

Stellantis targets double-digit profit margins in 2024, despite facing higher labor costs in North America. A 10% fall in operating profit during the latter half of 2023, mainly due to strikes at its key profit-generating North American facilities, challenges its outlook. Meanwhile, Stellantis revealed potential job cuts at its Warren Truck Assembly Facility, adding to the firm's strategic adjustments amid industry upheavals.
Stellantis anticipates achieving double-digit profit margins in 2024, despite confronting escalated labor expenses in North America. On Thursday, Stellantis reported a 10% decrease in its operating profit during the latter half of the previous year, attributed to six-week strikes at the 'Detroit Three' automakers, resulting in significant disruptions to the group's operations in North America, its primary profit contributor.

Prior to this, Stellantis warned of more job cuts in its Warren Truck Assembly Facility.

Stellantis Operating Profit Slips to 10 percent

Automotive News reported that Stellantis anticipates a challenging year following a 10 percent decline in its operating profit during the latter half of 2023. This downturn was attributed to prolonged shutdowns at its North American facilities, primarily due to strikes at the Detroit Three automakers, which are key to its profit margins.

The coordinated strikes by unions in the U.S. and Canada concluded with the Detroit Three automakers conceding to unprecedented wage hikes for their employees.

Moreover, the strikes have contributed to a complex scenario for the automotive industry, characterized by cautious global demand for electric vehicles, rising competition from China, persistent high costs, and repercussions from global geopolitical conflicts.

Reuters report revealed that the adjusted Stellantis operating profit (EBIT) by revenue dropped to 10.2 billion euros ($10.96 trillion) from July-December. This was beyond the expectations of analysts. They projected a profit of 9.54 billion euros, based on a Reuters survey.

The company announced plans to suggest a dividend of 1.55 euros per share, marking an increase of approximately 16% from the previous year, along with initiating a share buyback program valued at 3 billion euros throughout 2024.

Stellantis has maintained its expectation for the current year to achieve double-digit margins in adjusted operating profit and to generate positive industrial free cash flow, despite encountering rising labor costs in North America. This outlook has remained consistent over the past two years.

The coordinated strikes by unions in the United States and Canada concluded with deals that secured unprecedented wage hikes for employees at the Detroit Three automakers.

Stellantis Threatens More Job Cuts at Warren Truck

As per World Socialist Website, following Stellantis' dismissal of 171 temporary employees at its Warren Truck Assembly Plant in the suburbs of Detroit, United Auto Workers Local 140 has reported that the management is currently evaluating the facility for potential downsizing.

In a correspondence from February 8, Randall Pearson, the President of Local 140, indicated that the plant's output would decrease from "300,000 units annually to 89,000 units annually" due to the anticipated cessation of Dodge Ram pickup truck production later this year. Following this, the only models to be manufactured at the facility will be the Jeep Wagoneer and Grand Wagoneer, both of which have significantly lower sales figures.

Local 140 recently rolled out a new rule for reporting work absences or lateness, requiring employees to give a heads-up at least an hour before their shift starts. Also, staff now need to use their vacation and personal time before they can tap into the FMLA leave, which allows for 12 weeks off for health reasons. This change hasn't sat well with many in the workforce, stirring up quite a bit of frustration.