Stellantis CEO Says He Was ‘Arrogant’ About How Bad Company Is Doing In America

In looking at the news of the day a theme emerged: Bosses. Specifically, a lot of people are asking if certain CEO/Chairmen should have their jobs. This is, of course, after record profits for most automakers.

Leaders are judged by the present in the present, and yet the real measure of success is how they perform in the future as judged by someone looking at the past. This can create competing incentives, especially with a publicly traded company whose value is being recalculated every millisecond.

We’ll start today with Stellantis CEO Carlos Tavares (pictured above), who admits that his North American operations have been less than ideal. He’s taking the blame, which is something a good leader does. But is his concern about the past consistent with the reality of the present? I’m not so sure.

And what of VW + Porsche CEO Oliver Blume? Porsche is enormously valuable and I think Blume has done a good job of dealing with his various constituencies, but one observer makes the point that perhaps doing both at the same time isn’t working. And what of Akio Toyoda? Given all the tsuris, two big proxy groups are saying dump him.

Finally, Tesla CEO Elon Musk is going to get the greatest paycheck in human history and it’s interesting to see who ended up pushing him over the line.

Does Carlos Tavares Understand The Problem

Michael Lewis, through his books and movies like The Big Short and Moneyball, frequently suggests that maybe collective wisdom isn’t all that wise. That maybe it’s easier to persuade ourselves and others that if we’re making money and winning games we’re doing the right thing, which works right up to the point that it comically and tragically fails.

It is an extremely white-nerd-online-point-of-view to quote Moneyball, but to thine own self be true, I guess.

I will say that I believe Stellantis CEO Carlos Tavares when he says that his company is failing in North America and part of the cause is his “arrogance.” That quote was from an investor presentation yesterday, and here’s some context from The Detroit News (Stellantis hasn’t posted the transcript yet):

Stellantis NV CEO Carlos Tavares said Thursday his company was “arrogant” when it failed to quickly react to a convergence of several problems in the United States over recent months, including manufacturing issues and ballooning inventories.

“When I say we were arrogant, I’m talking about myself. Nobody else. I’m talking about the fact that I should have acted immediately,” Tavares said at an investor gathering Thursday at the automaker’s North American headquarters in Auburn Hills.

He said he should’ve formed a task force to tackle the problems, which have included manufacturing hiccups at a couple of unnamed U.S. plants that “are not operating as they should.”

The making of cars has, indeed, been a problem for Stellantis. The company has been hugely profitable, but it’s been profitable because it’s been selling old cars on old platforms. Many new cars are on the horizon, including the Charger Daytona and Ram Ramcharger, and those need to work to justify the investment.

Granting Tavares credit for his humility in this situation, and while I’m sure he’s trying to solve the problem of Stellantis in North America, I’m not sure he’s looking at the right problem, and I say that because of what’s said later on in this article:

“(There will be) questions about where we are in terms of cost-cutting, and are we on the limits or not? It is the same thing as asking, do we have limits to our imagination?” Tavares said of finding areas in the company for savings.

Beyond reducing headcount, Stellantis executives on Thursday also discussed their efforts to save money by moving more of its engineering departments to so-called “best cost” countries, such as Morocco, India and Brazil.

Platform reduction and cost reduction through shared platforms is the way every modern automaker is trying to operate and it’s likely sensible for a company with so many regional operations to pursue that strategy. The laying off of engineers in America and the search for cheaper engineering elsewhere feels wrong to me, though.

The part of Stellantis that used to be Dodge wasn’t successful because of accounting, it was successful because it built products people found desirable. Offshoring all the engineering in order to accomplish those goals doesn’t strike me as an ideal solution to the company’s current biggest problem, which is that it doesn’t make competitive cars in the United States.

Should Oliver Blume Run Both VW And Porsche?

Volkswagen and Porsche have a wild history that goes all the way back to the time that Porsche thought it would be able to buy Volkswagen and then, surprise, it went so sideways that the opposite happened and now Volkswagen owns Porsche.

This arrangement was beneficial for both, as Porsche has managed to become a much better company that still produces world-class cars and does so profitably and at way higher volumes than it did when it was more on its own.

So what’s the problem? Financial reporter and opiner Chris Bryant makes the point in a column this week that maybe having Oliver Blume head both VW and Porsche ain’t working. Here’s the crux of his argument:

VW’s preference shares have declined around 20% since Blume’s appointment, further compressing VW’s market capitalization to a derisory €59 billion, less than smaller rival Stellantis NV.

After deducting VW’s majority ownership of Porsche and truck maker Traton SE, this implies the rest of VW’s sprawling automotive empire is effectively worth nothing. My hope that listing Porsche would help reveal hidden value at VW has proven much too optimistic. VW investors still have a cornucopia of concerns, ranging from the company’s fading relevance in China and software delays, to a lack of competitive electric vehicles and the Audi division’s subpar performance.

It’s a fair point, even though I don’t agree.

When Blume took over from Herbert Diess, Volkswagen was not in great shape, still reeling from Dieselgate and the rather listless term of Matthias Müller. I don’t think the current vision of the company is perfect and China is a legitimate concern, but the high amount of experimentation with brands like Cupra and the ongoing desirability of Porsche globally makes me think the dual-role isn’t that big of a deal.

It’s a crap job running VW and somehow this guy runs both companies for about $10.8 million a year, which is way less than most car execs. I think getting to run Porsche is the fun perk and it’s bad management to take away work people find enjoyable if they’re good at it.

Dump Akio?

We had a column implying that maybe Blume should relinquish his CEO job at Porsche so he can focus on being the boss of VW, so here’s a column arguing that Toyota Chairman Akio Toyoda should keep his job.

Why, after helping shepherd the automaker to its position as the most profitable public company in Japanese history, would people want to dump him? All the major screwups around faked crash tests and fudged powerplant numbers have led to major activist investor groups to call for Toyoda’s head.

Hans Griemel, in his column, gives a bunch of arguments for why Toyoda should keep his job, but I like this one best:

Back in the day, Toyotas were durable and reliable. But they were also ho-hum.

From his first day in office, Toyoda set out to change that, and he worked miracles. Under his drumbeat of “ever better cars,” Toyota has delivered better-looking, better-driving vehicles.

Toyoda rearranged the portfolio around successful vehicle families, such as the Crown, Corolla and Yaris series. He also rebalanced the regional sales mix.

Maybe Bob Lutz was right about this one?

Tesla CEO Elon Musk Gets The Vanguard Vote

According to Reuters, it was big investor Vanguard (which owns the second biggest stake in the company at 7%) that helped push Musk over the line in order to get the biggest payday in history. This is entertaining because Vanguard actually voted against the pay package when it was initially proposed in 2018.

What changed Vanguard’s mind?

In its note, Vanguard said while Musk’s pay was “a substantial outlier” among CEOs, Tesla’s shareholder return was in the 98th percentile of all Russell 3000 companies from 2018 through 2023. “There are few companies that have created as much absolute market value appreciation as Tesla,” Vanguard said.

The man said he could eat 50 eggs and he ate 50 eggs, so pay up.

What I’m Listening To Today While Writing TMD

Whether you’re a No Limit Soldier or a Cash Money Millionaire you gotta appreciate Juvenile’s surprise crossover hit “Back Dat Azz Up,” which came out 25 years ago this week?!? Man, I’m older than I thought I was. NOLA celebrated by making Tuesday “Back Dat Azz Up Day.” The best part of this video is that they clearly shot it as “BACK DAT THING UP” which is the cleaner version and then just dubbed over him saying “AZZ.”

The Big Question

Rank them:
Blume
Tavares
Musk
Toyoda