Stellantis N.V. (STLAM) Earnings Call Transcript & Summary

Good afternoon. Thanks for joining us. We're really glad to have this opportunity for you to get to speak with Carlos Tavares, the CEO of Stellantis. Just a couple of housekeeping notes before we get going. [Operator Instructions] In addition to Carlos Tavares, I'd like to introduce you to Bertrand Blaise, our Global Head of Communication, who can give you a little more insight into Carlos as only he knows. Thank you again.

Thank you, Rick. Thank you very much. Hello to everybody. I will show the face behind the mask. So it's a real pleasure. My name is Bertrand Blaise, I'm in charge of Corporate Communications. But before that, our -- first of all, passionate of course. I handle product communication since almost 30 years now. So I'm writing cars over the weekend. It's also my passion, not only figures, commercial results, financial results, but also current suggests. Just a few words about Carlos Tavares because you will have, I would say, good exchange because he's passionate of course. I don't know if some of you know that he has raced more than 500 races in his life and more to come, of course, is preparing his racing car over the weekend. That's his passion as -- passion for the company, for the family and for racing. It is the pyramid. So I think that you will have an opportunity to discuss between passionate people. So in a minute, we'll have the pleasure to discuss with Carlos Tavares. Just any question related to products, technology, but also a historic question about the brands, you will find in front of you a book of knowledge about his passion for the car industry, he's not the CEO just managing the figures. He's also CEO managing the enthusiasts' citizen brand review. So this is what you will get for this half an hour, I would say, meeting, which will start in a couple of seconds now. So raise your question to Dianna, as indicated by Rick, and so that we have a fruitful meeting all together. So I will hand over now to Carlos Tavares to start the passionate discussion in between car enthusiasts. Thanks to all of you.

Hello. Good afternoon. It's my big pleasure to spend the slot with you and the answer your passionate questions, of course. So let's not waste our time. Let's give it -- back the floor to you for your questions.

[Operator Instructions] Our first question comes from Bob Sorokanich from Road & Track.

My first question is, FCA, in particular, is known for having a lot of enthusiast vehicles with large V8 engines. I'm wondering how FCA plans to continue to offer this type of performance vehicle with the environmental regulations that we're expecting in the near future?

Well, it's a great question, and thank you for raising that. Well, first of all, I think that it's absolutely possible to bring the appropriate thrilling answers to that question in terms of making sure that at the end of the day, we have the dynamics. We have the acceleration feeling, and we have the thrilling perception that we are in control of the machine. So I think we can do it. Of course, electrification will be needed. But as you know well, electrification is all about talk and talk is what we need to create all of those perceptions and feel that we have the power, we have the acceleration capability, we have the dynamics and the agility. And I think that it's absolutely possible. By the way, it's also important to understand that beyond the fact that electrification can bring a lot of talk and create the dynamics that you are stating. It's also true that the way we package the platforms with electrification components and namely the battery is also something that can improve the dynamics by lowering the center gravity, the height of the center of gravity of the product. So if you lower the height of the center of gravity of the product using, I would say, the electrified components of the platform. And if you bring the appropriate power on the electric motors, to generate the talk that is going to deliver the emotion, then I think we can continue to support as much as you would like the dynamics of very agile products, I think it's possible. I think, of course, we need a lot of work. We need also a lot of work with the enthusiasts about what they want to feel, what they want to protect in terms of perception of the dynamics of the product. But it's absolutely possible to generate that kind of feelings with electrified technology. And this is, as you know, one of the big assets that Stellantis is bringing to the table is a very powerful understanding of electrified technology as we have a very strong vertical integration of those components being electric motors, being automatic electrified transmissions, being battery packs or being battery cells. So all of this is now part of the technological assets of Stellantis and it is, of course, used by all of our brands and will be used by all of our brands. So that's my answer to your question. And I can assure you, as being myself, a motorsports addict can assure you that all of those dynamics and all of those feelings can be protected while reducing significantly the CO2 emissions. And if you want an example of this, you can look at some of the products that we have just launched in Europe, like the new Peugeot 508, Peugeot Sport Engineered, which is a 360 HP product with PHEV technology, and I can tell you that in terms of acceleration filling and dynamics, the car is very thrilling. Just one example among many others that I could give you to express the fact that I have a strong confidence that we can continue to meet those expectations with a much lower CO2 emission, which, of course, is aligned with the societies in which we are now operating.

[Operator Instructions] Our next question comes from Sharon Carty from Car and Driver.

Carlos, welcome to the new job. Congratulations. Just curious about Peugeot and PSA and the -- it seems like there are reports that you guys are maybe having a change of heart on bringing Peugeot to the U.S. Can you talk a little bit about that and what's behind your thinking and when you plan on making a decision?

Sure. Thank you for raising that question. As you know, the comeback of PSA to the United States market was announced when we presented a Push to Pass strategic plan back in April 2016. In nowadays terms, that's a long time ago. It was in April 2016, where we said, well, within the next 10 years, PSA will come back to the U.S. market. Well, since then, many things have changed. Since then, we made the acquisition of Opel-Vauxhall, we turned around Opel-Vauxhall. We made the merger with FCA. We are now Stellantis. And of course, we have a very strong position in the U.S. market, north of 12% market share with very strong brands that you know well, American brands, European brands. They are not performing all in the same way. And I think it's fair to recognize that with this strong presence in the U.S. market, we have already many brands to take care of. So most probably, we will make a decision that will be to suspend the fact that we bring Peugeot to the U.S. market, given the fact that it's better to focus on the brands that we already operate in the market and some of them also have the opportunity to rebound in a strong way, and we are now working on those plans to make those brands rebound and project them in the future. So most probably, we will soon be deciding that we will suspend that initiative, which, of course, was announced at the moment where we were far from knowing that we would 1 day merge with FCA to create Stellantis. So that's where we are today. That doesn't mean that, that will not happen 1 day. But for the time being, I don't think this is part of the things we want to prioritize for the next time window, which will be the time window of the Stellantis long-term strategic plan that we are now going to start working on. And that's the focus that we need to have because we already have many, many brands in the U.S. market. I think it's better that we funnel the talent, the capital and the engineering capability of our Stellantis company on the existing brands to improve what needs to be improved and to accelerate where we need to accelerate because we already have a very strong presence in this market. And of course, we want to be focused in everything we do.

Our next question comes from Alisa Priddle from Motor Trend.

You've talked about how you want the brands in the U.S. to rebound. Some of them seem pretty obvious. Jeep is obviously an iconic brand, and you'll expand it globally. Ram is a very North American-centric. I imagine you'll focus in that sense. Dodge and Chrysler, how do you envision keeping those alive and what is the focus? Do they stay as small niche products? Do they get sister products from other architectures? How do you deal with those smaller children?

Well, that's a word I would not use, but it's a very fair question, and thank you for asking it. You see there are 2 things that we could say about the 2 brands you mentioned, Dodge and Chrysler. First of all, I would like to say that if you look back at last century, it is obvious that many brands have survived different legal entities. If you look at the last century, some of the brands were owned by different legal entities, and they were passed from one legal entity to another legal entity, but they survived. They survived because they were driven by the passion and the vision of a few people that were able to express what was the brand promise, what was the direction and what those brands stand for in terms of technology, performance, appeal, you name it. So it's clear that on the 2 names you mentioned, for Chrysler, we are now strategically thinking about what is the next step of this brand because we understand that it needs to rebound. And we do not forget that Chrysler is 1 of the 3 historical pillars of Stellantis. The 3 historical pillars of Stellantis is Chrysler, it's Fiat and it's Peugeot. So those are the 3 historical pillars and that I would feel uncomfortable to think that for 1 of those 3 pillars, we don't have a clear vision destination for the brand. But of course, it's not because I feel that way that it's going to succeed. We need to set the conditions for this to be successful, which is, first, we need to set up a very strong brand team that will build the vision destination, and that will come with a proposal in terms of mid- and long-term business plan to show that it makes sense to invest in this brand. And we do not forget that in the old days, Chrysler was meaning for American automotive best technology. It was all about technology. So if we were to think about those days, we could think about what is going to be the next technologies for the automotive industry and of course, you know this as much as I do. So about autonomous vehicles, zero-emission vehicles, many good things in connectivity, infotainment, you name it. So it would be possible for a talented team to bring a clear vision destination for what would be the American best technology for the future. It's one of the possibilities that we are now thinking about, but it's not unique. We'll see what the brand team will bring to us. But we consider that this brand is 1 of the 3 historical pillars of Stellantis. And of course, we are eager and I am eager to give this brand a future. But it's not because I'm eager to do so that we have the good proposals on the table. So we will also rely on the brand team to come back with something that we would be excited, you and me, about. Dodge is a very different case. Dodge is already a very successful brand in its own segment. And of course, the question is, what about the CO2 of Dodge. And as you heard, I gave already that answer to one of our teammates about can you protect what the Dodge customers love about this brand, which is acceleration filling the dynamics, the torque, everything that makes driving this product really joyful. And the answer is, yes, of course, we can. We have the technology to deliver the torque, deliver the dynamics, deliver the acceleration feeling, and at the same time, reduce dramatically the emissions. Of course, you would raise a very important point, which, of course, I would agree with you, which is what about the noise. What about the sound? What about the sound signature? Which will, of course, will be something that we will have to work on. But I think there are solutions for that. And of course, the new generations also have a different perception of what is a powerful sound, compared to my generation. So again, it's all about people. It's about setting up a team that is now going to bring the brand to the next step, to the next century with a clear vision destination. And I don't think that is completely disruptive against the current attributes of the brand, which are all about enjoying the drive, filling the acceleration, filling the power, filling the agility. And I think we can protect that very easily with the new technologies. And I think even that the new technologies can add in that same direction, and that it will reinforce the appeal that those products can have with a much lower CO2 emissions. So it's different. And of course, we will continue to develop those electrified technologies. You have seen this morning that we have announced a strategic partnership with Archer Aviation for our aerospace mobility devices. One of the reasons why we have done this is because we believe there is a convergence in terms of accelerating the technology development on 3 major differences, 3 major directions that can improve the automobiles and even improve Dodge, which is all about making sure that we have high skills in terms of energy management systems, which is about using the best way that energy that we store in our batteries and deliver the highest efficiency with those energies. It's all about making lightweight batteries, which is, of course, important for cars like the Dodge ones. And it's also about the speed of charge because nobody wants to wait several hours to get the batteries recharge. So by making this strategic investment, we are also somewhere investing in the acceleration of those technology break developments. And that kind of direction is very supportive of the kind of products that our Dodge fans are expecting from us. That's my answer to your question.

Our next question comes from Wes Raynal from Autoweek.

You are the perfect guy for this question. Could you talk about where you guys are headed in terms of motorsports?

Well, motorsports is something that we consider as being a marketing tool. And we are addressing this in a very, I would say, business-oriented way. Motorsports is one of the marketing media that we can use to support our brands. And therefore, motorsports is in competition with other media, can be TV advertisement, can be magazine advertisement can be digital campaigns, can be whatever you want, you want to figure out the specific event, a 360-degree event, for instance. So motorsports is a marketing tool, and we have a specific way to calculate the return on investment of this specific marketing tool. As long as motorsports keeps a good audience from one side and controls the cost on the other side we can protect the overall efficiency and effectiveness of motorsports as a marketing tool. But it's important to say this because if we don't keep the audience and if we don't control costs, then motorsports as a marketing tool, will lose its competitiveness vis-a-vis the other media. And therefore, at one point in time, will be put in trouble. So assuming that motorsports keeps a strong ROI compared to the other media. We have currently a certain number of ongoing motorsports programs. We have the Alfa Romeo brand in Formula 1, as you know well. We have the premium French DS brand that has won 2 world Formula E championships, the DS Techeetah team, 2 world championships in a row. And we have now in preparation the Endurance World champion engagement with the WEC with Peugeot, that is now under preparation, and we intend to come to the tracks in 2022. So that's where we are. That will open to other opportunities, of course, possibly. And again, it opens to other opportunities as long as we protect the return on investment of motorsports as a marketing tool. And I will conclude this answer by telling you that one day I remember, I was shocking some of my teammates who're motorsports addicts like me saying, well, if you are promoting that the budgets of motorsports are increasing. In fact, you are not helping motorsports. Because if we let inflation take all of the motorsports activities, it means that in terms of return on investment, the overall efficiency of motorsports is going to decrease against the other media, against the TV advertisement or a magazine advertisement or a newspaper advertisement. And for motorsports addict like you and me, it is not in our interest to penalize, the motorsports return on investment against the other media, which means if we are really sincere about protecting motorsports, we should look for cost-efficient solutions, frugal solutions that protect the value of sports, protect the intensity of the racing, at the same time, keep the cost under control so that with a high intense racing, highly competitive in terms of sports that creates the right audience and a controlled cost, we have a good return on investment. And therefore, against the other marketing tools, motorsports remains a good investment for the company. that's where our thinking is today.

[Operator Instructions] Our next question comes from Sharon Carty from Car and Driver.

Another question. You -- about cars in the U.S. Peugeot and Citroën have full lineup of cars and crossovers. But FCA doesn't really have anything like that in the U.S. Are you at Stellantis thinking about bringing cars back over here? Or you committed to trucks and SUVs as being the real profit centers in the U.S.?

No, we are committed to make sure that we offer our citizens freedom of mobility, which is safe, clean and affordable. We are committed to that, which means that in the U.S. If today, pickups and SUVs are what the customers expect from us, we are eager and glad to offer those products at the highest level of competitiveness. If tomorrow, that would change, and the expectations of our U.S. customers would change, we would adapt to that. Do we have opportunities to bring platforms and technology from other parts of the world to the U.S. market. Well, if it is the benefit of the U.S. consumer, why not? It's open. It's absolutely open, and it's possible to bring other platforms, other technologies from the rest of the world to the best benefit of the U.S. consumer that we respect above everything else. And that means that, yes, Stellantis see an opportunity for the U.S. consumer because we have a 14-brand portfolio, which is a gorgeous brand portfolio. We have strong technology capability in zero-emission technology, in autonomous technology, in connectivity technology so we can offer that technology at the best level in terms of performance and costs, which brings us back to our purpose is to offer freedom of mobility to our citizens and to our customers, which is safe, clean and affordable. That's why we are here for and that's why we believe we deserve to exist.

Okay. Our next question comes from Natalie Neff from Autoweek.

Carlos, as you know, GM has already announced plans to completely phase out internal combustion engines by 2035. And you had mentioned previously that Stellantis plans to offer 10 new electrified vehicles, I believe, this year and that every new model from here until 2025 will offer an electrified variant. Can you talk specifically to what mix, of say, PHEV and dedicated EVs we'll see over the next few years? And then also what the longer view Stellantis has for EVs beyond 2025?

Sure. I'm glad to do so. First of all, I would say that I understand that the power of the statement when somebody says, well, I'm going to start making internal combustion engines by whatever date the announcement is. I understand the power of the announcement. We have a very different stance, which is to say, well, we will do what makes our customers happy. That for us is our reference point. Our reference point is we are here to serve our customers. And of course, our customers would like to protect their freedom of mobility. And their freedom of mobility can only be expressed if we meet a certain number of guidelines, rules and regulations, which, of course, we do. And I would like to remind you that in Europe, the PSA part of Stellantis is the leading carmaker in terms of CO2 emission reductions. We are #1 by far, I would say. So we perfectly understand that. But instead of making a statement about the precise date where ICs are going to be disappearing, we prefer to say, well, you have this new model, on this new model you can buy electrified version or a non-electrified version, you decide, you are the customer. Of course, you may have differences in the taxes. You may have a different perception of what you are looking for. And your freedom of mobility may depend on the kind of mobility device that you would like to purchase. But you are the customer, you are the person that we respect the most. You decide and we are here to offer the solutions. So if there is a point in time where there is a very limited number of customers who want this against a high number of customers who want that. Of course, we will make the conclusion ourselves that we should stop doing this. That is possibly going to happen. But you see, I also think that we need to be humble vis-a-vis the way the world is moving. It's moving fast. But from time to time, we are surprised by the change in the direction. So we want to be just looking at the customer. We are not looking for big statements that may be the case from time to time, but that's not our primary goal. Our primary goal is to make sure that we serve our customers, and they want to protect their freedom of mobility within a certain frame of regulations that is going to distort the way they can enjoy their freedom of mobility. And we are here to offer the solutions that give them the possibility to protect their freedom of mobility. That's how we see our role. This is how we see our purpose and our -- has on that in this market.

Okay. We have one more question, and this will be our last question. It's from Bob Sorokanich from Road & Track.

Simple question. What is your biggest regulatory challenge in the U.S. market?

I think it's -- I'm not sure it's a challenge, but it's a question mark. It's to anticipate what the next regulations will be. I must say it's not specific to the U.S. I think it's a worldwide question that we are constantly raising to ourselves. We see that in some markets, we are able to have a continuous productive dialogue to be able to anticipate. In some other parts of the world, it's very difficult to anticipate because the regulations are just top down and then you have to adapt or disappear. But I think that the common big question mark for all the carmakers in the world right now is how much time are we going to be given to adapt to new stringent rules. And to which extent are we allowed to contribute to setting those rules. I think that's the biggest challenge for our industry, not only for Stellantis by the way, by far, because at Stellantis we want to anticipate as much as we can. And this is what we want to do is through the planning activities and we have a specific division for that. We want strategically to adapt through anticipation to what we can forecast as being the new rules. And I think that's the most difficult part of our job right now is to understand what is going to be the objectives for 2025, 2030 and beyond, not only about CO2, but any other regulation related to autonomous vehicles or other kinds of things. All of this is still very much in the unknown. And from time to time, we are surprised with some top-down rules that, of course, we have to comply. And then the speed to change and the speed to adapt is very high, which puts a lot of pressure in our teams, sometimes a lot of stress. So we would like to try to anticipate that to have a more, I would say, a reasonable way of working and making sure that we bring the best of our companies to our consumers because let's not forget that our people at Stellantis are also citizens. And they are doing their work in a very dedicated way, very sincere, very honest. They are trying to do their best to serve their communities. And we should not forget when something is brutally imposed on the industry. Well, we have many million people working in our industry who happen to be also citizens, and they are trying to do their job with their best talents, their best dedication to serve all of our consumers. So I think that would be the question mark that we all have. In certain regions, it is a challenge. In other regions, it's not such a challenge. I must say that here in the U.S., the dialogue we have with the Biden administration is very productive, very collaborative. And we are trying to contribute with the best of our knowledge to setting the right thresholds to make sure that we contribute actively to fixing the global warming issue.

On behalf of the Stellantis Communications team, we'd like to thank Mr. Tavares for participating today, and thank you to all of our attendees. Everyone, have a wonderful day.