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Stellantis (STLA), the struggling auto maker that owns brands such as Jeep, Chrysler, Ram, Fiat, and Maserati, has been cutting production and reducing headcount as the company continues to grapple with sluggish demand and bloated inventories across its dealer network. Those efforts to better align supply with demand are showing no signs of slowing with STLA temporarily halting production of the Fiat 500, an all-electric vehicle, at its Turin, Italy plant, according to Bloomberg.

• The facility, which is home to some 13,000 workers, will reportedly be idled from December 2 to January 5 due to uncertain market conditions for EVs in Europe, as well as ongoing softness for luxury cars in China and the U.S. While EVs are accounting for an increasing percentage of total auto sales in Europe, they have been on a downward sales trajectory this year. As of late October, EV volumes were down by nearly 6% on a year-to-date basis in the EU.
• This isn't the first production halt that STLA has recently executed. Just last week, Reuters reported that the company was planning to pause production at two other plants in Italy -- Termoli and Cassino -- with some workers also being furloughed during this time. Back in the U.S., STLA also has cut production of Jeep vehicles at its plant in Toledo, Ohio, while also laying off 1,100 employees there.
• Sluggish demand is only half of the problem for STLA. The company has been slow to adjust to softening market conditions, leaving dealers with too much inventory and a substantial backlog of vehicles. This was evident when STLA reported Q3 results on October 31 that included a 27% plunge in revenue to EUR 33.0 bln as every region, with the exception of South America, showed a double-digit decline. Eroding sales and margins also caused 1H24 EPS to plummet by 63% yr/yr to EUR 2.36.
• There is a silver lining, though. Specifically, the company is making good headway in its inventory reduction efforts. In the Q3 earnings report, STLA disclosed that total inventory decreased by 129,000 units to 1.33 mln as of September 30, 2024. Additionally, the company stated that it's on track to meet its goal of reducing U.S. inventory by 100,000 units by the end of November. This gave STLA the confidence to reaffirm its FY24 operating margin guidance of 5.5-7.0% and its industrial free cash flow forecast of EUR 5.0- EUR 10.0 bln.

Overall, the outlook for STLA and the EV market in general is rather murky, especially as new tariffs and the possible elimination of the $7,500 tax credit are introduced as President-elect Donald Trump takes office in January. The prospect of lower interest rates should help to offset some of the headwinds facing the EV market, but it will likely be tough sledding for STLA in FY25 as rising competition and weaker-than-expected demand for EVs provide roadblocks for earnings growth.