Stellantis CEO Targets Quality Issues at Key Assembly Plant

Stellantis CEO Carlos Tavares recently addressed ongoing quality control issues at the Sterling Heights Assembly Plant (SHAP) in Michigan, emphasizing the need for immediate improvements. SHAP, responsible for producing the company’s best-selling Ram 1500, has been under scrutiny for vehicles requiring repairs before being shipped to dealers, which Tavares identified as a significant challenge.

Tavares pointed out that the problems at SHAP have negatively impacted Stellantis’ “direct run rate,” which measures the number of vehicles that pass quality certification at the end of the production line without needing rework. “The direct run rate of some of our plants, starting with SHAP—Sterling Heights—is not good. We need to fix that with our plant management team,” Tavares stated. He emphasized that rectifying issues in newly assembled vehicles increases production costs and can slow down shipments to the market.

The CEO also expressed concerns about potential new quality issues arising from repairs made outside the main production line. “When you are making a repair outside of the main line, you can always fix what you have to fix but create another problem,” he noted. This inefficiency not only impacts production costs but also affects the timely delivery of vehicles to dealers.

Stellantis has faced several challenges this year, reporting a 48% decline in first-half net income, with North America seeing a 16% drop in revenue. Tavares described the results as “disappointing and humbling,” attributing much of the weaker performance to quality issues and supply chain disruptions.

U.S. Stellantis dealers have raised concerns about rising inventory levels and have sought assistance from Tavares. The CEO acknowledged that the company has struggled to build the right number and kinds of vehicles to meet market demand. Using the Ram 1500 as an example, he explained that “some of the highest trim levels were not available at the right time,” leading to mismatches between production and sales.

“We have not always been able in the production planning to make a production mix that aligns with the sales mix,” Tavares said. This misalignment has resulted in distorted inventories and excess models and trims remaining unsold on dealer lots, exacerbating the inventory problem.

Tavares also highlighted the need to present incentive offers more effectively to attract consumers. He believes that current vehicle pricing and a lack of awareness about available discounts are deterring potential buyers. “We are having an abnormal number of prospects that are opting out of the purchase funnel at the beginning of the journey because we are not bringing the sweetener strong enough and soon enough in the process to keep them engaged,” Tavares explained.

Stellantis is working to improve its production planning, quality control, and sales strategies in response to these issues. Tavares emphasized the importance of reducing production costs while maintaining quality to protect profit margins. “Protecting the margins means reducing the costs when the customers are asking for more affordability,” he said.

The company is also focusing on enhancing its go-to-market initiatives in the U.S. as part of its efforts to address the current inventory glut and improve market performance. Tavares remains committed to improving collaboration with dealers and delivering appealing products to meet consumer demand.

As Stellantis works through these challenges, Tavares plans to visit the U.S. again in August to further address dealer concerns and drive performance improvements. “This is a very tough industry, a very tough period, and everybody has to fight for performance,” he said, underscoring the company’s determination to overcome these obstacles and achieve its goals.

Source: Automotive News