Stellantis has set turning free cash flow positive as a must-achieve target for 2027.
Financial results released on October 28 show that in the third quarter, the company's net revenue was 37.611 billion euros, up 1% year on year, while its net loss attributable to shareholders narrowed to 470 million euros. Yet industrial free cash flow was still a net outflow of 4.009 billion euros in the same period, with a cumulative net outflow of 4.93 billion euros over the first three quarters. After increasing revenue and reducing losses, this automotive group, which owns brands such as Jeep, Peugeot and Citroen, needs to speed up cash recovery.
At the subsequent earnings call, CEO Antonio Filosa stressed that turning cash flow positive in 2027 is a goal that must be completed. Stabilizing prices, controlling inventory and accelerating cost cuts became the main measures given by management.
The cash pressure in the third quarter mainly came from working capital occupation. Chief Financial Officer Joao Laranjo disclosed that changes in working capital caused a net cash outflow of 2.772 billion euros in the quarter. Planned summer shutdowns reduced production and shipment volumes compared with the second quarter, and changes among inventory, receivables and supplier settlements dragged on cash flow. The company expects that higher shipments in the fourth quarter and lower year-end manufacturer inventory will bring cash back.
There is already a clear target for reducing U.S. dealer inventory: from about 368,000 vehicles at the end of September to 320,000 to 350,000 by year-end. Previous production adjustments have already reduced local dealer inventory by 6% quarter on quarter, but inventory is still 23% higher than a year earlier.
Destocking and defending prices need to advance at the same time. Reducing shipments to channels will affect short-term revenue; excessive inventory buildup can also easily force dealers to expand discounts and weaken per-vehicle profit. Filosa said improved net pricing in North America in the third quarter brought a positive contribution of 425 million euros, and the company will continue to arrange production according to market demand, balancing sales volume and profitability.
The task in Europe is heavier. In the third quarter, Stellantis's net revenue in the enlarged Europe region rose 3%, but adjusted operating profit swung from a profit of 157 million euros in the same period last year to a loss of 311 million euros. Although North America returned to profit in the same period, its adjusted operating margin was only 0.4%. How much profit the two major markets can retain directly affects the speed at which the group recovers cash.
The cost-cutting plan is accelerating. Stellantis had previously set a target of reaching an annualized cost savings level of 6 billion euros by 2028. At this earnings call, management said it is confident of exceeding this target and expects the amount saved in the fourth quarter to increase significantly.
This plan has already been refined down to components. Filosa said engineering and procurement teams, through teardown and benchmarking, are re-examining wiring harness layouts, connectors and material usage; a French plant is using predictive maintenance tools to reduce equipment failures, and the related practices are being rolled out to more factories. The money saved comes from one design and production adjustment after another.
Investment in new cars still needs to continue. The company expects capital expenditure and research and development investment for the full year to together account for about 6.5% of revenue; cash payments related to charges accrued in the second half of last year are still expected to be about 1.6 billion euros this year. The fourth quarter will also face pressure from higher memory chip and recall costs.
Year-end production arrangements, the inventory in dealers' hands, and the profit ultimately left by each vehicle will together affect Stellantis's cash balance. If Filosa is to deliver on his 2027 promise, these operational adjustments must generate cash returns as soon as possible.
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