A recent spat between Italian Prime Minister Giorgia Meloni and Stellantis opens a new window for car companies: European national carmakers, once homegrown, have become global players ready to exploit excessive overcapacity in EU car factories to get better government deals.
Stellantis uses the surplus factories in Europe as leverage in the fight against Rome
Stellantis, opens a new tab, created by the combination of the French manufacturer Peugeot PSA, the Italian manufacturer Fiat and the company Chrysler of Detroit, represents practically all the production of automobiles in Italy. Fiat production fell as European sales stagnated and Stellantis moved production to other countries in its sprawling global network, Reuters reports.
Stellantis’ capacity utilization rate at its European factories stood at 56 percent last year, down from 64 percent in 2019 and well below Volkswagen’s 71 percent rate, according to GlobalData data provided by Reuters. Automakers aim for at least 80% capacity utilization.
Stellantis uses its excess production capacity as leverage in negotiating subsidies and political support from Rome and the governments of other countries. In the United States, state and federal officials have offered subsidies to persuade Tavares not to close a Jeep plant in Illinois, which will now be used to build a new midsize pickup that fills a gap in the company’s U.S. model lineup.
The world’s third-largest carmaker has so far allocated more European production of electric vehicles to France, Justin Cox, director of global production at GlobalData, told Reuters. The company’s North American Jeep truck and SUV operations generate most of the group’s profit. Stellantis will report financial results for 2023 on Thursday.
“You can see why the Italians are upset … Italy has a lot to lose”, Cox said. “All their volume production is linked to Stellantis”.
On paper, France and Italy appear to be on a par under the Stellantis production system. In 2023, Stellantis built 735,000 vehicles in France and 750,000 in Italy.
But Stellantis is Italy’s only major automaker, while France can also lean on Renault, breaking new ground and backed by several planned future EV models. Total car production in Italy stood at about 800,000 vehicles last year, compared with 1.5 million units in France, according to AlixPartners.
Italian officials demanded that Tavares rebuild Fiat’s production to 1 million vehicles a year. Meloni criticized Stellantis’s decisions in nationalist terms.
Meloni declared in Parliament that “the supposed“fusion that created Stellantis”actually masked a French takeover”. She added: “It is not a coincidence that the industrial choices of the group take more into account the interests of France than those of Italy”.
Tavares – who has made Stellantis one of the most profitable companies in the industry – countered that the automaker “is not afraid of the 1 million mark … But let’s not forget that it always (depends) on the size of the market.”
Tavares and Stellantis president John Elkann, scion of the Italian Agnelli family, engaged in talks with the Meloni government. The company said Rome must do its part to support production growth – provide incentives for consumers to buy electric vehicles, reduce energy costs and encourage the development of the electric vehicle charging network.
Earlier this month, Italy launched a new incentive for the purchase of cars, worth 950 million euros for this year.
Stellantis transferred the production of cheaper vehicles to low-cost countries, assigning the more expensive models to France or Italy.
Rome’s discontent reflects a growing awareness that it has few tools to influence Stellantis’ decisions, said Marco Santino, a partner at management consulting firm Oliver Wyman.
“Stellantis has no plans to give up Italy or France,” he said. “But it is a global group, not making industrial choices based on national preferences.”
Stellantis and its European rivals now face weakening demand for cars and increased competition, which usually means lower prices and tough choices. Chinese automakers are stepping up deliveries of electric vehicles that they offer at prices that European manufacturers can’t match if they want to turn a profit.