Stellantis revenues rise even as shipments slide from chip shortage

Breana Noble
The Detroit News

Detroit — The maker of Jeep SUVs and Ram pickup trucks on Thursday said its revenues increased 12% year-over-year in the first three months of 2022 even as shipments dropped by the same percentage from lost production resulting from parts shortages.

Stellantis NV's combined shipments fell to 1.42 million vehicles in the first quarter, mostly due to a global scarcity of semiconductors that's hit the industry for more than a year and that doesn't appear to be clearing up this year, according to the automaker's leaders. The resulting decrease in inventory even as demand remains strong, especially for a slate of new, larger Jeeps, helped boost revenues at the transatlantic automaker to $44 billion (41.5 billion euro) for the quarter.

The industry, however, is facing increasing challenges. The pandemic, inflation and war in Europe have resulted in increasing costs for raw materials like steel. That looks like an up to 50% increase right now, Chief Financial Officer Richard Palmer said. Customers have seen their bills go up, and the Federal Reserve this week made its largest hike in interest rates in more than two decades.

"The type of (rate) increases we're seeing aren't creating any significant impact on the consumer demand," Palmer said during a conference call, "but it's fair to say obviously, they've got to take off, and given the high level of finance sales, there would be an impact."

Still, Stellantis confirmed its guidance for 2022. It expects to report another year of double-digit margin results and positive cash flow to drive it forward in the transformation strategy it outlined in March to become a sustainable tech mobility company with more than 50% of its U.S. sales all-electric by 2030. Sales globally of the automaker's battery-electric vehicles, none of which are sold in the United States at this point, totaled 60,000, up 55% year-over-year.

"The increase in revenues of 12% to 41.5 billion (euro) for the quarter shows the strength of our business to weather the recent headwinds caused by volatile macroeconomic conditions as well as the continued negative impact of unfilled semiconductor orders, which continue to constrain our volumes," Palmer said. "We continue to take prompt commercial actions in all segments to protect our revenues and profitability."

Increased interest rates, however, weighed on the stock market on Thursday. Stellantis shares were falling 5.1% in the afternoon, more than major market indexes and bringing its stock price down 31% year-to-date. Its shares closed down less than 1% in both Milan and Paris.

The auto market, however, already is dealing with an enormous amounts of pressures right now resulting from parts shortages crimping production, low vehicle inventories and inflation on raw material prices.

"It's just another headwind," said Stephanie Brinley, principal autos analyst for the Americas at financial firm S&P Global Inc. "In the immediate term, the sales market is going to be affected more by the lack of production availability than interest rates."

She added that although higher prices and rates do change the way people spend, the labor market remains strong, offering buyers some financial confidence.

Stellantis' revenues for the quarter surpassed its crosstown rivals. Ford Motor Co. reported a $3.1 billion net loss on revenue of $34.5 billion in the first quarter. General Motors Co. posted $2.9 billion in net income on $36 billion for the first quarter.

Unlike its Detroit rivals, the merger between Fiat Chrysler Automobiles NV and French rival Groupe PSA that celebrated its one-year anniversary in January reports earnings only for the first and second halves of the year. Stellantis will share its full first-half financial results in July.

New products such as the Jeep Grand Cherokee L, Wagoneer and Grand Wagoneer SUVs as well as the refreshed Jeep Compass crossover contributed to a 6% increase in shipments to 480,000 vehicles in North America even as downtime at Stellantis' plant in Belvidere, Illinois, dragged down Jeep Cherokee production and the company reported a 14% drop in U.S. sales in the January-to-March quarter. Stellantis on Thursday said Belvidere will idle next week because of the chip shortage.

Strong pricing and favorable mix, though, boosted net revenue by 30% to $21.9 billion (20.7 billion euro).

"Stellantis," spokeswoman Ann Marie Fortunate said in a statement, "continues to work closely with our suppliers to mitigate the manufacturing impacts caused by the various supply chain issues facing our industry."

Last month, Stellantis unveiled the longer Wagoneer and Grand Wagoneer L models that will go into production in Warren later this year. Palmer said higher trims of the standard wheel-based models that can go as high as almost $120,000 have secured strong demand, though not all of the lower trim levels have launched.

The carmaker began deliveries of the fifth-generation Jeep Grand Cherokee in Detroit late last year, with the 4xe plug-in hybrid version that starts at $57,700 set to go on sale in three weeks around when Detroit's Jefferson North Assembly Plant will return resume production after an eight-week, $900 million upgrade for the new generation.

"It's something," Mark Stewart, chief operating officer of North America, said of the 4xe Grand Cherokee during a grand opening event at supplier Dakkota Integrated Solutions in Detroit, "we're very proud as we're investing $35 billion to convert our platforms to an electrified future to help with the climate, to help with the environment and to do that while keeping our customers who love our brands engaged with our brands and to make them affordable.

"EVs today are not affordable. It is important we also work together to make sure as we are doing the things for the planet that we also are doing things for our customers so everyone can afford to buy one, too."

Shipments were hit worse in Europe where they fell by 24% year-over-year in the first quarter, decreasing revenues by 9% to $15.5 billion (14.6 billion euro). Shipments in other regions fell except in China, where combined shipments increased 2%. Still, revenues rose 40% in South America, 7% in the Middle East and Africa and 8% in Asia.

For the Maserati luxury brand, which unveiled the forthcoming Grecale SUV in March, revenues were down 5% as shipments fell 20%. Despite deliveries of the MC20 sports car having begun late last year, the brand's results were hit by reduced Ghibli volumes, particularly in China, according to the company.

The company indicated it hasn't seen a worsening in its inventory as parts shortages continue. Its inventory was at 807,000 vehicles at the end of March, broadly in line with levels in December, it said.

Although higher prices from lower inventories help with cash flow, Palmer emphasized Stellantis has more than that to leverage. The automaker projects $5.7 billion in cost savings annually from its merger, much of which will come from purchasing parts in scale as brands combine platforms. That will begin to come to fruition in about a year, Palmer said.

"The level we're doing there's clearly a disparity between our performance and the share price," he said. "I think what's important is that we continue to execute, and people are going to realize that this is a sustainable level of profitability."

Despite the market's current obstacles, the company moves forward with its transformation plans. In January, it announced a software partnership with Inc. and a new vision for the Chrysler brand that includes a broader customer base, SUVs and an all-electric portfolio by 2028. It's also moved forward on plans for battery manufacturing in Italy and announced a $4.1 billion gigafactory with LG Energy Solution in Windsor, Ontario.

Also in Ontario, Stellantis on Monday shared a $2.8 billion investment to build hybrid and electric vehicles at its two plants there as well as open its first battery lab in North America in Windsor. The company has said it expects to announce a second battery plant with Samsung SDI in the United States in the coming weeks.

Twitter: @BreanaCNoble