GAC summons CEO of Stellantis amid failure of China’s Jeep project

Following the news that global automaker Stellantis is ending its Jeep production joint venture with Guangzhou Automobile Group (GAC), the Chinese automaker applauded. More specifically, the GAC singled out Stellantis CEO Carlos Tavares for his recent comments about the failed joint venture, and the supposed “crippled trust” between the two partners.

Stellantis ($STLA) is a global top-ten automaker and is the current version of Fiat Chrysler Automobiles (FCA), following the merger with Peugeot SA completed in early 2021. Prior to this merger, FCA signed a joint venture with the Chinese manufacturer GAC Group to produce its own vehicles for its home markets abroad, including jeeps.

Although the GAC Group is China’s top five automaker, its joint venture with Stellantis has struggled in recent years, a fact that neither side denies. This “lack of progress” was the initial reason why Stellantis announced last month that it was ending its joint venture with GAC Group in favor of imports, thus halting production of Chinese Jeeps:

With no progress in Stellantis’ previously announced plan to acquire a majority stake in the GAC-Stellantis joint venture, Stellantis NV today announced its plan to focus on distributing the Jeep brand’s imported vehicles in China to capitalize on the brand’s potential and its premium products through a light asset approach.

In January, Stellantis attempted to increase its stake in the joint venture from 50% to 75%, but was held back by GAC. At the time of announcing the termination of Stellantis, we reported that the GAC was surprised by comments from Stellantis, reprimanded the public statement, with the response that no formal agreement had been signed, and criticized Stellantis for saying otherwise.

The punches over Chinese manufacturing of Jeeps have continued, but the GAC Group is the latest to publicly condemn its lame-duck business partner, targeting Stellantis CEO Carlos Tavares.

The finger continues to be pointed at the failure of Chinese jeep production, according to the latest chapter reported by Europe Car News. The report noted that Carlos Tavares, CEO of Stellantis, noted the increased risk of politicians meddling in China’s auto business during last week’s earnings presentation.

While Tavares has acknowledged Jeep’s low sales volume in the Chinese market as a reason to quit Stellantis JV, he expanded on by saying that the decision was also rooted in “broken trust” with the GAC Group, while at the same time blaming Chinese policy favoring local auto brands.

Moreover, the CEO said that Stellantis signed a deal to increase its stake in the GAC joint venture, but that the GAC Group “did not do what it was supposed to.” The GAC publicly responded to Tavares’ comments, calling them “unreasonable.”

According to a statement from the GAC Group, many of the vehicles in the Stellantis project “failed to achieve success, which is the result of a lack of respect for customers in the Chinese auto market.”

In addition, the GAC said that its joint venture with Stellantis “was not able to establish a mutually trustworthy operating mechanism adapted to the highly competitive environment in China in order to turn around the opposite situation of continuous losses in recent years.”

Regarding the failed takeover by Stellantis earlier this year, the GAC stated that it refrained from submitting any formal papers because “there was no consensus on the relevant agreements”. Instead, the GAC Group said that Stellantis was the party that had not fulfilled its obligations. Mark, you are on it.

No matter what goes wrong, this joint venture does not appear to be salvageable, and Chinese-made jeeps will be discontinued. Going forward, Stellantis plans to import electrified versions of Jeep models for sale in China. We’ll see if they can find any success in this on their own.

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