Stellantis warns on profit, citing global markets, Chinese competition

PARIS (Reuters) -Stellantis NV ( STLA , STLAM.MI ) on Monday slashed its annual forecasts and said it would burn through more cash than expected, citing worsening trends in the industry, higher costs to overhaul its U.S. business and Chinese competition on electric vehicles.

In warning about lower than expected profits, Stellantis joins rivals BMW ( BMW.DE , BMWYY ), Mercedes ( MBG.DE ) and Volkswagen ( VOW3.DE , VWAGY ), which only days ago cut its annual outlook for the second time in three months.

Stellantis shares fell around 13% in early trading on Monday.

British luxury carmaker Aston Martin ( AML.L ) also issued a full-year profit warning on Monday citing supply chain disruptions and weakness in China.

The earnings forecast downgrades come as the European Union finalises plans on possible tariffs on Chinese electric vehicles.

Stellantis said it was dropping expectations for positive free cash flow, and now expected to burn through 5 billion and 10 billion euros ($5.58-$11.17 billion) in cash this year, after lowering its operating profit margin guidance.

Stellantis said it sees adjusted operating profit margin at 5.5% - 7.0% this year, mostly due to its decision to speed up the normalisation of inventory levels in the United States.

The owner of the Chrysler, Dodge, Jeep, Fiat, Citroen and Peugeot brands brought forward to end-2024 its target of no more than 330,000 units of dealer inventory.

To this end, it will cut shipments to North America in the second half by more than 200,000 units year-on-year, double the previous guidance. It will offer higher incentives on 2024 and older model vehicles and will invest to improve productivity.

The operating profit margin will also be dented by lower than expected sales in the second half of 2024 across most regions, the French-Italian carmaker said.

"Competitive dynamics have intensified due to both rising industry supply, as well as increased Chinese competition," Stellantis said in its guidance.

Earlier this year, Stellantis shareholders in the U.S. sued the automaker, saying the company had defrauded them by hiding rising inventories and other weaknesses before reporting disappointing earnings that caused its stock price to fall.

The carmaker also announced in August that it was laying off as many as 2,450 factory workers from its assembly plant outside Detroit as it ends production of its Ram 1500 Classic truck.