Stellantis NV put its vast network of suppliers on notice that the maker of Jeep SUVs is looking for better deals on components in an effort to protect its margins.
(Bloomberg) — Stellantis NV put its vast network of suppliers on notice that the maker of Jeep SUVs is looking for better deals on components in an effort to protect its margins.
Chief Executive Officer Carlos Tavares, who has already shaved costs at factories, said suppliers must take similar steps as an influx of less expensive Chinese cars ratchets up the pressure to make electric vehicles more affordable.
Component makers should review “what we have done in our own plants to progress on their side,” Tavares said on a media call Wednesday after Stellantis reported better-than-expected first-half results.
The comments point to Tavares taking aggressive steps to reshape Stellantis’s supply chain amid stiff competition from rivals like BYD Co. and Tesla Inc., which has slashed prices in the face of weaker demand. With no plan to lower prices on his vehicles, Tavares is squeezing production costs.
In Italy, Stellantis is cutting jobs and was recently accused of skimping on janitorial work. In the US, it’s been offering buyouts to scores of staff and has idled a Jeep factory.
Meanwhile, Stellantis, which is plowing €30 billion into EVs and software, has been inking deals with companies including Infineon Technologies, NXP Semiconductors and Qualcomm to help avoid potential shortages of semiconductors. It’s also taking equity stakes in mining companies and signed deals to directly access raw materials, such as manganese and nickel.
Earlier this year, Chief Technology Officer Ned Curic touted Valeo SA as an example of a supplier that has worked extensively to keep a lid on costs while keeping its products flowing amid persistent supply-chain disruptions in recent years. Not all suppliers had been as reliable, he cautioned, adding that some might not survive the tough times.
Read more: Stellantis Sees Risk of New Chip Shortage on Demand Surge
Tavares has said Stellantis may need to further adapt its industrial footprint in Europe and the US, its biggest profit pool, as a consequence of the expensive shift to EVs. Stellantis is under pressure from the French and Italian governments to produce cheaper cars locally to maintain jobs in those markets.
On Wednesday, Stellantis gave an upbeat outlook for the rest of the year even as concerns mount over a cost of living crisis that is denting demand for higher-priced EVs in Europe.
Cost cuts already implemented helped the company reach an adjusted operating income margin for the first half of 14.4%, beating the 12.2% predicted by analysts.
Tavares also flagged that logistics problems in Europe are mostly resolved after thousands of cars stranded were stuck in parking lots.
“We still have a couple of things that we are going to solve during the month of August, namely getting rid of our backlog in some of our yards where our customers are still waiting” for some cars, Tavares said on a media call.
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