Net loss narrows by 90% and North American operations turn profitable, but Stellantis (STLA.US) still struggles to relieve cash flow pressure

According to Jinse Finance APP, Stellantis (STLA.US) released its third-quarter results on October 28: Net revenue was €37.611 billion, a year-on-year increase of 1%, higher than the market expectation of around €36.4 billion; net loss was €453 million, narrowing by 90% compared to the €4.532 billion loss in the same period last year; adjusted operating profit was €256 million ($285 million), slightly above consensus estimates, up 184% year-on-year, with a profit margin of 0.7%. The company maintained its full-year guidance and reiterated its target for positive industrial free cash flow by 2027.

This troubled automaker is striving to cut costs, improve quality, and launch new models to respond to increasingly fierce competition, especially in Europe. Previously, the company's share price had plunged over 60% year-to-date, with both equity and bonds hitting all-time lows, making this performance a battle for CEO Antonio Filosa’s credibility. CEO Antonio Filosa stated that the ramp-up in cost-saving efforts and the plan for a refreshed product lineup are progressing steadily.

By region, revenue in Greater Europe and South America both grew by 3%; North America declined by 3% due to planned production halts; the Middle East & Africa and Asia-Pacific dropped by 19% and 7%, respectively.

At the operational level, North America’s market share increased to 7.5%, and Ram brand sales rose 30% year-on-year. Driven by Leapmotor, EU30 pure electric passenger car sales surged by 93%, with Leapmotor sales nearly quadrupling year-on-year.

European operations remain an urgent challenge for Filosa. Mainstream brands such as Peugeot and Opel are facing intense competition from rivals like BYD, Volkswagen, and Renault. The region recorded an adjusted operating loss of €311 million, mainly due to price declines and buyers shifting towards lower-margin electric vehicles.

North American business returned to profitability at €64 million, thanks to the launch of new models such as the Jeep Cherokee hybrid and Ram 1500 Hemi. However, shipments for the quarter were still impacted by planned production stoppages.

The company maintained its forecast for positive cash flow next year and reiterated its guidance for a low single-digit full-year adjusted operating profit margin. However, quarterly industrial free cash flow was negative €4.009 billion, an improvement of about €300 million year-on-year but worse than the market expectation of a €3.4 billion deficit, highlighting the gap between profit recovery and cash collection in the turnaround process.

The company indicated that its value creation plan is on track to achieve at least 40% of the €6 billion run-rate efficiency goal by year-end, with cost-reduction effectiveness in the fourth quarter to be about double that of the third quarter. However, it also warned of new pressures from memory chip and recall costs. As of the end of the quarter, industrial available liquidity was €42.7 billion, still within the target range.

Before Wednesday’s earnings release, HSBC analysts including Michael Tyndall noted that high unsold inventories at US dealers remained a concern.

Earlier this year, the company announced record asset write-downs and adjusted its electric vehicle strategy, while also planning to tackle persistent quality issues. Filosa combined these moves with an approximately €60 billion investment in dozens of new models by 2030, prioritizing the Jeep, Ram, Peugeot, and Fiat brands. The company is also betting on partnerships with Zhejiang Leapmotor Technology and Dongfeng Motor to help fill underutilized plant capacity in Europe.

This five-year strategic plan has struggled to gain market acceptance, with the stock already down more than 60% this year, making it the worst-performing constituent of the STOXX Europe 600 Index.

This month, Stellantis suspended operations at four out of its five French automotive assembly plants to manage dealer inventory and address shortages of long-range EV batteries. Several other European plants were also halted this month, as the group faces shortages of auto parts and weaker-than-expected demand for models such as the hybrid Fiat 500.

Stellantis stated it will announce new plans for its luxury brand Maserati in Modena, Italy on December 10.