Strength and stability – top management ‘must haves’

The news yesterday that Stellantis and Carlos Tavares were parting company came as a surprise – at least to me – given that it was already planned that he would retire at the start of 2026.  The recent problems at Stellantis with high inventories in North America and low sales in some European markets have been well-publicised, so it was clear that the pressure was on, but losing your CEO so that there is then a vacuum at a time when you need clear direction is high risk.  I won’t comment on the situation at Stellantis specifically, but it does highlight how important leadership is – not just the individual at the very top, but the leadership group as a whole.

Stellantis, like the VW Group before it or British Leyland for followers of automotive history, has gone through a quite rapid consolidation process to create the company as we know it today.  To achieve synergies from the expanded business, tough decisions need to be made across the board affecting products, processes, systems and trading partners.  Whilst that rationalisation process is still ongoing and for a time afterwards until the new model is established as business as usual, there is always a risk of sliding backwards.  When Ferdinand Piech was driving through the creation of the VW Group as we know it today, and got rid of anyone who stood in his way, I always wondered whether the model would survive him.  What we saw was that enough time passed under relatively stable management for there to be a collective buy-in to the new ways of working based around the brand and platform strategy and a balance between group and brand decision-making and functions.  The direction of the business was no longer dependent on one strong individual imposing his will, but an extended top team whose thinking was aligned.

I recall a paper in Harvard Business Review at some point in the 1990s contrasting the relative performance over the previous decade of Ford and General Motors in Europe.  At the time, GM Europe was consistently profitable whereas Ford had a much patchier record, saved only by the massive contribution made by the LCV business.  (No change there then!).  The HBR paper – with typical academic thoroughness – sought to prove that one of the reasons for the difference was that Ford consistently changed the executives holding the Chairman and President roles in Ford of Europe every three years, whereas GME had a much more stable top management.  Stability brought consistency, but not complacency – this was the period when Lou Hughes attacked direct materials cost including the appointment of Ignacio Lopez to head that up.

In aviation, accident investigators often find that crashes are the result of what they call ‘controlled flight into terrain’ – in other words, that the aircraft was in stable flight but the pilot flew it into the ground because he or she had not planned the course properly, or had deviated from the plan, hitting an obstacle.  Stability in management is therefore also not sufficient in itself, the course needs to be planned correctly, and monitored in the light of changing circumstances – weather or a defect in the aircraft in aviation terms, economic climate, competition and business performance in the case of a car manufacturer.  We see this with brands like BMW and Mercedes, both of which enjoy stable management, mainly developed from within the organisation and have pursued consistent strategies over the last decade as well in terms of product and the transition to agency.  However, when it became evident that the pace of electrification differed from what had been anticipated they adjusted their product strategy.  We can see other brands who have had a kneejerk reaction to slow BEV sales, cancelling investment, and in my aviation analogy, setting course for a completely different country, to the dismay of all the passengers on board.

Those ‘passengers’ include a diverse range of interests in the case of a car manufacturer – investors, employees, suppliers, distribution and retail partners, national and local governments and not least, customers.  At VW, the employees and certain shareholders seem to have hijacked the plane, making it almost impossible for management to steer the plane as they fight over the controls.  Stellantis has struggled with the French and Italian governments trying to protect employment in their respective countries.  From the furore in the press it seems that Jaguar has an issue with the reaction of their traditional customers to the rebranding (see last week’s blog here), but those customers have been enjoying the first class cabin at economy prices.

What all those stakeholders need in the midst of the unprecedented period of change we are in, is strong and stable management.  That is not to say that you need simply a strong CEO, but you do need someone who can attract, grow and retain the best talent.  The vision might come from the CEO, but the plan and execution come from the top team down.  I do not envy John Elkann and the Stellantis Board in now having to make that happen in the coming months, but with Stellantis being the fourth largest car manufacturer globally by sales, we should all wish them well in that challenge.