Is Stellantis CEO Carlos Tavares Talking Trash About Tesla?

The week has barely started and already the drama is starting, with Stellantis CEO Carlos Tavares talking dirt on someone’s name. But whose name is it? This is important.

Also important and not at all surprising is Ford’s announcement that it’s cutting back on Ford F-150 Lightning production to favor exactly the kind of vehicles you’d guess. Infiniti dealers would kill for something, anything, to fill their dealerships.

And, finally, a look at the employment market because this idea of a “soft” landing to this recession is predicated on a labor market that doesn’t collapse, which is itself important to the car market.

Who Is Carlos Tavares Talking About?

There’s that Internet truism that anytime you see a headline with a question the answer is always “yes.” I’m not sure it’s so true here. I think I know who Stellantis CEO Carlos Tavares is talking about, but it seems a little bold.

Let’s start with the quote. Tavares had an event in Milan wherein he introduced the new STLA Large EV platform that will underpin the Jeep Wagoneer S and all sorts of other vehicles as part of a cost-saving approach to EVs that Stellantis is making.

Here’s how Reuters described the meeting and quotes Tavares talking about a mystery company below:

Tavares said Stellantis, which is among the most profitable companies in the industry, was comparatively protected from a downtrend in prices that could put some rivals “in trouble”, with persistent losses and at risk of becoming takeover targets.

“If you go and cut pricing disregarding the reality of your costs, you will have a bloodbath. I am trying to avoid a race to the bottom,” he said.

“I know a company that has brutally cut pricing and their profitability has brutally collapsed,” he said, without elaborating.

It’s easy to look at the huge inventories at Stellantis and think this is a company that’s doomed and this is big talk, though that’s hard to square with a Stellantis that took home $18 billion in profits in 2022. Carlos Tavares is, in many ways, an acolyte of his old boss Carlos Ghosn, who was called “Le Costcutter” (though those cuts never seemed to apply to Ghosn’s remuneration). There may be fewer, older products and no Stellantis EVs in America yet, but there are also relatively fewer giant cost centers (Stellantis has been slow to make new battery plants). We’ll see how 2023 went, but it’s probably good news for the automaker.

So, um, who is the company?

Theory #1: It’s Tesla. No one has cut prices more than Tesla and the company’s price cuts have impacted its margins. Reuters even uses the next paragraph to point out that Tesla again cut prices, which is a hint that maybe it’s what the reporter thinks.

That seems insane for Stellantis to boast about because its profit margin of 14.4% in the first half of 2023 is much lower than Tesla’s 18.8%. Also, Tesla is not a takeover target because Tesla is worth more than any other car company from a market cap perspective.

Theory #2: It’s Lucid. Lucid has been cutting costs, for sure, and could be a takeover target if the Saudi Arabian government decided to cut its losses on the company. But Lucid isn’t profitable, at all. In fact, it’s losing hundreds of thousands of dollars per vehicle sold. Gotta have profits to lose profits, amirite?

Theory #3: It’s a Chinese company. Chinese automakers have also engaged in price-cutting and numerous Chinese companies are on the edge of disappearing (including, potentially, HiPhi). This makes sense from the “takeover” perspective.

It’s possible that the “takeover risk” thing is not connected to the overall point, which would make Tesla (or Ford) a possibility and Tavares just means that he needs to keep profitability up so Stellantis doesn’t go the way of basically every other prior Chrysler/AMC regime.

Ford Cuts F-150 Lightning Production

I think we all saw this coming. The Ford F-150 Lightning was Ford’s attempt at beating most EV trucks to the market but, it seems, there’s only so much current appetite for them [Ed Note: Current. hehe. -DT].

Here’s how Ford leads a press release on the topic:

Ford Motor Company announced plans to create nearly 900 new jobs as part of a new third crew at Michigan Assembly Plant in Wayne to meet demand for the popular Bronco and Bronco Raptor and the all-new Ranger and Ranger Raptor.

More Broncos and Rangers makes sense, but, uh, what about the F-150 Lightning?

“We are taking advantage of our manufacturing flexibility to offer customers choices while balancing our growth and profitability. Customers love the F-150 Lightning, America’s best-selling EV pickup,” said Ford President and CEO Jim Farley. “We see a bright future for electric vehicles for specific consumers, especially with our upcoming digitally advanced EVs and access to Tesla’s charging network beginning this quarter.”

Approximately 1,400 employees will be impacted as the Rouge Electric Vehicle Center transitions to one shift effective April 1. Roughly 700 will transfer to Michigan Assembly Plant and the others will be placed in roles at the Rouge Complex or other facilities in Southeast Michigan, or take advantage of the Special Retirement Incentive Program agreed to in the 2023 Ford-UAW contract.

This is part of Ford’s slowdown in EV development and shift towards more hybrids in the short term.

It Sucks To Be An Infiniti Dealer Right Now

Infiniti sales were up 39% last year to 64,699 total sales, compared to just 46,619 sales in 2022. Those numbers are not great. Infiniti managed to sell more than 100,000 vehicles a year from 2014 to 2019.

The problem? It’s the cars. Infiniti has long lacked a competitive mix, instead resting on selling old platforms like the Infiniti QX60, which is just a rework of the old J-Series platform.

I like this Automotive News interview with a big Infiniti dealer who talks about the issues:

“Product is king,” Steve Lapin, Infiniti National Dealer Advisory Board chairman, told Automotive News. “Infiniti doesn’t have the right products right now to compete in the marketplace.”

Absolutely. Infiniti, for its part, says new product is coming (see the new QX above). Here’s something else I thought was interesting:

At last year’s annual retailer meeting, Infiniti said it plans to boost sales to 100,000 vehicles by mid-decade. Is that realistic?

The mid-decade target is ambitious. But if [Infiniti] produces the products they have committed to and adds more to that over the next three to five years, 100,000 units [in annual sales] is in the bag.

We need Infiniti to expand into more affordable product segments, especially entry-level crossovers.

Infiniti missed the mark by not bringing hybrid vehicles to the U.S. The technology is a good compromise. It delivers electric drive performance without range anxiety. Some hybrid vehicles can go 150 miles on battery power only.

Ok, that last part isn’t true, is it? I can’t think of a single PHEV that can go that long.

Either way, it’s a good interview, you should read it.

Is The Job Market Softening?

This idea that cars will be more affordable, we’ve avoided a recession, and inflation will bring down rates is all well and good for your 401k, but is it true? I’m lightly skeptical and I do not believe the Fed is going to actually bring down rates five times this year unless something goes super wrong with the economy, which contradicts the “soft landing” narrative.

A key early indicator for how the economy is doing is the labor market, which isn’t as weird as the major financial markets.

Here’s how Marketwatch summarizes the Fed’s look at the current labor market:

There were signs that the labor market was cooling in nearly all regions of the country, according to a Federal Reserve survey released Wednesday.

The survey, known as the Beige Book, is a collection of anecdotes from business contacts collected before Jan. 8.

The contacts spoke of larger applicant pools, lower turnover rates, more selective hiring by firms and easing wage pressures.

It’s in times like these that it’s smart to look not just at the official unemployment rate (the U3), which is at 50-year lows and currently sits at 3.5%, but also the U1 (long-term unemployment) and the U-2 (people who just lost jobs/temp jobs). These can tell you if something that might indicate a future recession is happening, i.e. if people are holding onto jobs.

I put the chart in at the top of the piece, but right now there aren’t any huge swings or indicators that this might be happening. If anything, the Fed is probably happier if the labor market cools a bit as a control for inflation.

Still, it’s something to keep your eyeballs on this quarter.

What I’m Listening To As I Write TMD

Good old Ted Leo and the Pharmacists and their mid-career quasi hit record “Hearts of Oak.” I always thought that Ted Leo always sounded like he should have been in a Fugazi spinoff instead of an alt-rock band.

The Big Question

Who, exactly, is Carlos Tavares talking about? Am I being dense? Is this mild corporate trash-talking or is he giving someone the business?