Stellantis is struggling, with its own difficulties compounded by a sluggish market

Alarm bells have been ringing for two years now, and manufacturers are moving from verbal warnings to decisions that foreshadow the carnage already seen in equipment manufacturers' plants for assembly sites. This overall picture is already dire when viewed at the European level. It becomes frightening when analyzing the situation by country and/or focusing on the most fragile manufacturers. From this second perspective, current events seem to indicate that Stellantis has become the sick man of Europe.

The deterioration of the industrial and social situation in Europe has been well underway for several months now, and the end of the third quarter marks a milestone in this regard. Indeed, while a very tense “strategic sector dialogue” is underway in Brussels, the malaise that has so far mainly affected equipment manufacturers is now spreading to carmakers and threatening assembly plants. From this point of view, the short-time working measures taken by Stellantis for six of its European sites and the fact that Volkswagen has also announced similar measures for two of its German sites are a warning sign that disaster is imminent.

The Volkswagen spokesperson said that the company “will halt vehicle production at its Zwickau and Dresden sites” in Saxony in the east of the country “during the first week of the autumn holidays”, which begin on October 6. “We are thus adapting our production program to the market situation,” he added, indicating that demand is lower than expected for the electric cars assembled at the two plants.

The situation is quite clear and the problem has been pointed out repeatedly for more than two years: the process of catching up on the volumes lost during the health crisis that we saw in 2021, 2022, and the first half of 2023 has since come to a halt.

In 2024 and 2025, both production and registrations are, at best, stagnant. Thus, when comparing 2024 to 2019, there is a shortfall in passenger car production of 21% of volumes, or 3.3 million vehicles.

Considering that an average assembly plant has a capacity of around 250,000 units, we can conclude that there are 13 surplus factories: if manufacturers were to sacrifice these facilities, provided that they or others had not built new factories in the meantime, they would return to the average capacity utilization level they had in 2019! Obviously, this reasoning only applies if the decline in demand is sustained and the hope of seeing orders pick up again is dashed.

This was not the assumption that manufacturers had made until now, and they had contented themselves with partial measures to “compact” sites or switch from three to two shifts, or even from two to one... The shutdown of sites announced by the two groups sounds like a warning shot: in Europe, manufacturers are seriously considering reorganizing their production facilities, which they will deem necessary if production in the region is to stabilize at current levels in the coming months rather than return to pre-COVID levels.

This reasoning based on averages makes sense and accurately describes the nature and scale of the problem facing the European automotive industry. However, it must be applied to the different national contexts in order to gauge the seriousness of the situations in which the various industries find themselves. To understand the contrasts that emerge, it should be noted that the decline in passenger car production in Europe, which is 21% over the period 2019-2024, is 40% in the United Kingdom, 43% in Italy, and 45% in France, but only 13% in Germany and 15% in Spain. Among the new Member States, Poland and Slovenia are the most affected, with declines of 50% and 69% respectively. Conversely, Hungary and Slovakia are faring well, with declines of 12% and 10%. The Czech Republic and Romania are even seeing their production grow by 2% and 14% respectively. Turkey lost only 8% of its production, while Morocco gained 42% during the period.

The mapping of overcapacity is therefore quite clear: all other things being equal, the sites that appear to be the most underutilized and therefore the easiest to eliminate without affecting production are French, Italian, British, Polish, and Slovenian, rather than Spanish, German, Czech, Slovak, Romanian, Turkish, or Moroccan. Given that, with a few exceptions, model allocations favor the sites that are already the busiest and stand out as the most efficient, there is very little chance that the sites neglected in the decisions made over the past five years will miraculously return to the race in 2026 or 2027.

As a result, the French site, which had managed to recover somewhat between 2014 and 2019, has once again fallen into a cycle of marginalization. Toyota and the hopes that can still be placed on Douai (R5) and Maubeuge (R4-E-Tech) could paint a more nuanced picture, but the volume lost over five years has been 750,000 cars, and the hope of recovering this is very slim. So if manufacturers consider that they have long-term overcapacity in Europe and intend to resolve the problem once and for all, everything indicates that they will do so at the expense of countries towards which they have already shown their disaffection for years and whose marginalization in their industrial plans they have accelerated since the Covid crisis.

L'Argus ran the headline in March “More than one in two French car factories is operating at less than 50% of its capacity.” The imminence of the danger could hardly be more clearly emphasized.

These national contrasts are compounded and intersect with those concerning automotive groups and their brands. From this point of view, while several of VW's sites in Germany are in a fragile position, as was the case with Novo Mesto at Renault before the decision was taken to assign the Twingo there, it is clearly Stellantis, as we learned this week, that is the manufacturer most affected by the issue of overcapacity. Indeed, as soon as the merger was finalized, Carlos Tavares had to proclaim loudly that there would be no plant closures, as it was obvious that the new group's production capacity was oversized. That was in 2021, and the lasting damage caused by Covid to production and sales volumes in Europe was obviously unforeseeable. Nevertheless, the production apparatus inherited from Fiat, Opel, and PSA, whose combined market share in 2021 was no longer what it had been in the years when the factories were developed, made observers skeptical about the new entity's management's ability to keep this commitment.

Since then, Stellantis has suffered from the situation already described, as have all European manufacturers. Added to this were factors specific to Stellantis. First, the obsession with “pricing power” and the associated confusion between the very particular characteristics of the Covid period and the success of a strategy favoring margins over volumes led to a decline in the market share of Stellantis brands in 2023 and 2024. The problem of volumes and overcapacity is therefore even more acute for Stellantis than for its competitors. Furthermore, for reasons that are partly unrelated to Tavares' management, the group is facing quality issues across its ranges that continue to affect its brands commercially and industrially, thus significantly hampering the group's ability to achieve the two objectives announced by Filosa: to restore volumes and regain the profitability lost in H1 2025.

The partial layoffs at six plants come shortly after the new boss explained the change of direction he was going to take, stating: “We are now clearly setting ourselves the goal of improving several indicators. Revenue is the first of these.”

Employees, suppliers, and networks were beginning to regain hope, telling themselves that the absolute necessity of halting the decline in market share was now on the agenda. Everything indicates that the difficulties encountered in achieving this are much greater than expected. The market is not buoyant, and winning or regaining market share is complicated in any case and offers little margin in a market where sluggish volumes are exacerbating competition and pushing everyone to “make big commercial efforts.” Add to this the fact that your brands' customers are coming to you asking to take back vehicles that have become almost impossible to resell, which compounds the problems of the very optimistic residual values adopted in recent years to make the proposed lease payments acceptable, and you can imagine that Filosa and his teams are facing a wall.

The European market stagnated at the end of August, while Stellantis saw its sales fall by 7.4%: today, every point of market share to be regained by the group created in 2021 can only be achieved by selling at a loss.

At the beginning of September 2025, Stellantis presented itself to us as a company that needed to quickly close a parenthesis and get back on track in terms of volumes. Since the decline in market share was recent, the networks were still in place and the catalogs remained well stocked. It seemed reasonable to assume that by redefining its pricing policy and no longer depriving itself of any distribution channels, it should be possible to achieve this.

The Stellantis of late September seems to be throwing in the towel, preferring not to produce and asking governments to work with the company to cover the salaries of employees who have been furloughed. This Stellantis looks more like GM or Chrysler during the 2009 crisis: market share had dwindled and regaining it seemed clearly out of reach. In this context, the American method that Marchionne had so appreciated at the time consisted of closing factories and brands to deal with the consequences of the losses in market share.

This could be the most tempting path for Stellantis in Europe. Indeed, unless shareholders agree to forego their dividends for a fairly long period of time and contribute to a recapitalization or accept dilution because others have accepted it in their place, it is difficult to see how the volumes and market share of yesteryear could be regained, given how degraded the positions of Stellantis' brands appear to be.