Can Stellantis' commercial reorganisation in France learn from the fiasco of its vehicle logistics?

Since 2014, with undeniable success, the management of Stellantis, under the leadership of Carlos Tavares, has taken over almost all the files and is obsessively seeking to improve the economic performance of the group. Exhilarated by their success, the teams do not seem to see any limits to the application of the recipes which, for the moment, have worked wonderfully. However, recently, the reorganisation of logistics has put a damper on things. The doubt thus created on the infallibility of the rationalisation methods applied upstream would undoubtedly deserve to remain in the minds of those concerned with distribution. The reorganisations of the trade announced last week indicate that this is not the case.

On Wednesday, Autoactu described to us the major changes that Stellantis intends to implement in its commercial organisation in France.
The following day, we learned that, at the same time as these changes, which are worrying the networks, were taking place, a previous reorganisation concerning vehicle logistics "turned into a fiasco".

These two developments are taking place in a context where the management of Stellantis has largely confirmed, by resigning its network and offering it agent contracts, what observers have been sensing for several months or years: distribution is, after the organisation of design, factories and purchasing, the new field on which the "performance psychopaths" that Carlos Tavares asks his top managers to be must exercise their talents.

This means that there is, at Stellantis, a kind of "extension of the field of struggle" for profits and that the "to the euro" calculations that have been made since C. Tavares' arrival in January 2014 to control manufacturing costs and rationalise catalogues, platform management, purchasing and factories must now concern downstream logistics, trade and distribution.

There is a certain novelty here in the industry's traditions because, historically, without ever neglecting their distribution, manufacturers have, by delegating it to independent investors, given up exercising such a fastidious control over it as they did over their factories. A. Sloan, the boss of GM from 1923 to 1956, explained this in his memoirs My Years at General Motors published in 1963, indicating that the fact that in order to sell a new car, one had to take over a used car made the operation too complex to be controlled centrally. He wrote on this subject (1):
"When the used car trade-in became part of our landscape in the 1920s, the car business ceased to be an ordinary act of selling and became a matter of negotiation. The task of organising and overseeing the thousands of complex transactions required for this type of product marketing would have been difficult for the manufacturer. Selling as a negotiation is an art that does not fit easily into the usual framework of managerial organisations. (2)

In fact, by delegating their distribution, for more than 100 years, manufacturers have accepted a two-tier system or a "double standard" management system in which managerial rigour appears to be less important when it comes to selling cars than when it comes to designing and producing them. A. Sloan assumes that there is much to lose by trying to fit distribution "into the usual framework of managerial type organisations".

Today, Stellantis seems to consider that this way of seeing things is very "20th century" and deserves to be revised. It is easy to imagine that the top managers with an engineering culture that C. Tavares intends them to behave like performance psychopaths are very happy to be able to finally attack this impregnable fortress which has resisted the Taylorian empire until now. Delegating, trusting, letting the local representatives of the brands translate their positioning in their territories as well as possible, setting obligations of results and leaving a certain latitude in the definition of the means ...: all these traditions in terms of network management would have been lost; the sums lost by leaving these freedoms to the distributors would deserve to be recovered and redistributed to the consumers and - above all - the shareholders. Digital technology would make the unbearable lack of control by central government over this very important issue obsolete.

Without going back over the problem of the transfer of power on the management of the logistics file between the historical partner, Gefco, formerly a subsidiary of PSA, and CAT, traditionally at the service of Renault, the idea that the recipes applicable upstream when dealing with the purchase of components and improving performance by activating the virtues of competition can be applied to the management of the downstream file is the working hypothesis which prevails in the reorganisation of the trade.

Since we manage to make vehicles for the Peugeot, DS, Citroën, Opel, Jeep, Fiat or Alfa brands which are clones of each other and which we manage to convince customers that they are part of distinct "brand universes", we can deduce that, provided that the brands are distributed by the same investors in each plate, There is no more reason to have as many "zone managers" responsible for the sales of new and used cars as there are brands and we then invent multi-brand "business coach" positions which, because they will move from Opel to Peugeot or Fiat, can be fewer in number (80 fewer in France according to F. Lagarde). Lagarde).

If this logic is extended, 150 posts will be dispensed with and, provided that the working hypothesis is verified which consists of considering that the network management must, according to G. Couzy, "concentrate on its real added value which is the management of performance" and that it can be made more efficient in 2022 "in a world which is evolving towards a more accentuated multi-branding within the framework of the new distribution strategy", the gain in performance could be very significant.

The problem is obviously to know if we can make the hypothesis indicated and consider that a lighter animation and less dedicated to the brands can be implemented without damage to sales when the manufacturer carries the stock and when it expands the teams at the head office to address the customers "with the creation of a hot line for all the brands".

It is the whole intellectual - and now operational - edifice of the new Stellantis distribution system imagined during the Covid and semi-conductor crises that will be put to the test in the months to come, as will the conviction that loyalty to a logistics provider with whom things were going well is an economic error that performance psychopaths cannot make.

Basically, the idea that the choices made earlier may have been made after a trial-and-error process that eventually produced fairly good reasons for organising in this way and for not treating commercial and production issues in the same way does not seem to have any place in the Stellantis managerial universe.

However, even if the lowering of break-even points is a constant obsession, there is good reason to believe that the relative indifference to volumes sold in which Stellantis and the industry have been living for the last 30 months will not remain so clear when it becomes possible again for some to develop volume strategies whose past virtues, forgotten for two and a half years, will surely be rediscovered.

When this is the case, since the manufacturer will have given up having its distributors carry the stocks, it will probably need even more than in the past to nag its networks to do the necessary work in the field and for each brand. Similarly, when the same platforms, the same engines and the same suppliers are used to make the same car 6 or 7 times, it is necessary to accept that the dashboards, the interior trim, the bodywork colours and all the superficial elements are different so that the brands remain. Stellantis knows this and has so far been able to make these trade-offs quite well.

One might think that, like the interior of the vehicles, the network animations need to be more differentiated than the current reorganisation envisages. Of course, the business coaches will probably have contacts in the distribution groups on each 'plate' but the work of the site managers and their sales managers will continue to be done brand by brand and the promotion will then be very distant.

10/10/2022

(1) The quote is reported by the American historian Tedlow in: R.S. Telow, L'audace et le marché - L'invention du marketing aux Etats-Unis, Odile Jacob, 1997.
(2) Underlined by us.