Why Trump Tariffs Are a Bigger Threat to Jeep Maker Stellantis

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(Bloomberg) — Stellantis NV Chairman John Elkann recently told investors that 2025 would be a period of stabilization. For the beleaguered automaker, it’s turning out to be anything but. 

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After US President Donald Trump imposed a 25% import tariff on goods from Canada and Mexico last week, Elkann and the leaders of Ford Motor Co. and General Motors Co. pled for Trump’s assistance. Stellantis executives even reached out to the United Auto Workers union for help.

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While the tariffs were delayed until April 2, Trump on Tuesday threatened to increase steel and aluminum tariffs on Canada to 50%, rattling US stocks, before the president backtracked. Such changes come at a particularly vulnerable moment for the maker of Jeep Wranglers and Dodge muscle cars, which has seen shares drop by more than half over the last year. 

The carmaker’s former chief executive, Carlos Tavares, raised prices while aggressively cutting costs, leading to a 70% drop in net profit in 2024 even as Ford slightly beat estimates and GM posted record earnings. The company, which is still searching for a new CEO, expects only lackluster profitability this year, not including further tariff costs.

“The entire car industry will get serious headwinds from the tariffs, but for Stellantis, the stakes are much higher,” said Pierre-Olivier Essig, a London-based equities analyst at AIR Capital. 

Formed by the 2021 merger of Fiat Chrysler and France’s PSA Group, Stellantis was intended to be a global juggernaut big enough to weather the rocky transition to electric vehicles. But under Tavares, the company spent years shifting production and jobs to lower-cost countries, as part of a play to fund EV development. Elkann, the scion of Fiat’s founding Agnelli family, is now leading a costly process to reverse many of those decisions, even as Trump makes new demands for US investments.

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Ahead of Trump’s inauguration, Elkann met with the president and subsequently announced billions of dollars of new US investments, including reopening an Illinois plant that had been shuttered under Tavares. The automaker also plans to hire around 1,000 people in the US this year.

Some 45% of Stellantis’s US sales are imported, giving it considerable tariff exposure although relatively less than others including Volkswagen AG. Last week, S&P Global Ratings downgraded Stellantis debt from BBB+ to BBB, two steps above junk, warning that price cuts and tariff risks could limit the manufacturer’s ability to expand sales and profit margins this year.

“We do not assume that Stellantis will have to absorb the full cost of tariffs because we think the company, like other carmakers, will use pricing to pass through the impact, and possibly consider shifting assembly to the U.S.,” S&P said. 

In S&P’s base case, a 25% tariff on Canadian and Mexican imports would force Stellantis to raise car prices 6% to 8%, causing US sales to shrink some 5% to 7%.

US Production Battles

Trump’s tariff delay, which was extended beyond cars, came with a condition: automakers should develop plans to move more manufacturing back to the US, according to people familiar with the discussions, who weren’t authorized to speak publicly about private talks.

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Stellantis has already made billions in new US manufacturing commitments this year, and the company declined to comment on any further investment plans. Its chief financial officer said in December that Stellantis has more capacity in the US that “will allow us to adjust if and when” tariffs come into place.

The Illinois facility closed in early 2023, and became a point of contention in a subsequent UAW strike that year. Then-CEO Tavares agreed to reopen the facility, helping to resolve the strike, but he later delayed the investment.

Stellantis now plans to manufacture a new mid-size pickup there starting in 2027, bringing 1,500 people back to work.

Stellantis has also pledged to build its new Dodge Durango SUV at a Detroit assembly plant, and invest in facilities in Toledo, Ohio and Kokomo, Indiana.

Relations between Stellantis and the UAW were particularly strained under Tavares’ leadership of the automaker, though Elkann and Antonio Filosa, Stellantis’s chief operating officer, Americas, have sought to turn the relationship around. The White House has been consulting the UAW as it shapes tariff policy, and the union has applauded the president’s tariff moves. 

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“Michigan, Toledo, Kokomo, Belvidere, they all have room for expansion in capacity. A lot are running at either a third or half capacity,” said Kevin Gotinsky, the UAW’s Stellantis department director, referring to the company’s US assembly plants. “We have interest in trade policies that benefit us and bring work back here.”

At the top of Gotinsky’s list is a truck plant in Warren, Michigan, where Tavares cut 1,100 jobs last fall. He also shifted some production of Stellantis’s Ram 1500 pickup to a plant in Saltillo, Mexico, where the company also makes heavy-duty versions of the lucrative pickup. 

The union rebuffed Stellantis’s request to help it persuade Trump on tariffs last week because of its concerns about laid off workers and underutilized plants in the US, according to people familiar with the matter, who declined to be named because they weren’t authorized to speak publicly about the private talks.

Stellantis is counting on lower prices and aggressive marketing to improve sales this year. It’s also launching a slew of new products, including the stylish new Fiat Grande Panda in Europe and the Ram Charger, an electric truck with an on-board gas generator to ease drivers’ range anxiety. Stellantis could also benefit from lessened regulatory pressures in Europe, where the European Commission has proposed easing emissions rules that were supposed to get stricter this year.

But Stellantis’s efforts so far haven’t boosted its market share, according to Jefferies analyst Philippe Houchois.

“Against now relatively lean inventories, retail data points have so far shown more share loss in the US and Europe,” Houchois wrote in a March 2 note to clients. 

—With assistance from Keith Naughton.

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