Dodge-maker Stellantis drops profit warning

Stocks of European carmakers hemorrhaged on Monday as Stellantis and British luxury brand Aston Martin issued profit warnings, citing broader industry challenges and difficulties in the world’s largest auto market, China.

Stellantis on Monday trimmed its 2024 annual guidance on the back of deteriorating “global industry dynamics” and bolstered competition from China, sending Milan-listed shares lower on open.

The French-Italian conglomerate, known for brands such as Chrysler, Dodge, Jeep and Maserati, warned of lower-than-expected sales “across most regions” in the second half of the year. It now pencils in an adjusted operating income (AOI) margin between 5.5% to 7.0% for the full-year 2024 period, down from a “double digit” outlook.

“Deterioration in the global industry backdrop reflects a lower 2024 market forecast than at the beginning of the period, while competitive dynamics have intensified due to both rising industry supply, as well as increased Chinese competition,” the automaker said.

It also lowered projections for its industrial free cash flow to a range between minus 5 billion euros ($5.58 billion) to minus 10 billion euros, from a “positive” guidance previously, as a result of a lower anticipated AOI margin and temporarily higher working capital over the second half of this year.

The automaker further attributed the revisions to its guidance to “decisions to significantly enlarge remediation actions on North American performance issues,” but supplied no additional details. Earlier this year, Stellantis was sued by shareholders in the U.S. who claimed the automaker defrauded them by concealing rising inventories and other items, Reuters reported.

This month, Stellantis’ U.S. dealer network criticized CEO Carlos Tavares for the company’s recent sales decreases, factory production cuts, among other decisions that they assessed as detrimental to the automaker’s business.

European shares of the carmaker closed 14.7% lower on Monday. Shares on the New York Stock Exchange hit a new 52-week low Monday, closing down 12.5% to $14.05.

British luxury carmaker Aston Martin, whose iconic models gained notoriety via appearances in the James Bond movie franchise, also flagged cuts in its profit margin and production target for the year.

It announced a roughly 1,000-unit reduction in response to “disruption in its supply chain and continued macroeconomic weakness in China,” anticipating that its earnings before interest, taxes, depreciation and amortization (EBITDA) for 2024 will now come in below the previous year’s performance.

The company said it no longer expects to achieve positive free cash flow in the second half of this year, and noted that its full-year gross margin is anticipated to come in below 40%, compared with a previous target of around that threshold.

Aston Martin said it is…