**Stellantis Faces Business Struggles Amid Labor Strike Threats**

Stellantis' North American operations are grappling with significant challenges, including rising inventories, expanding price cuts, and discontent among dealers over perceived mismanagement. Compounding these issues is the looming possibility of labor strikes led by the United Auto Workers (UAW). The union accuses Stellantis of reneging on agreements to restart operations at the closed Belvidere, Illinois, assembly plant.

The difficulties plaguing Stellantis are reflective of broader issues in the global automotive industry. Volkswagen (VWAGY), another major player, plans to implement layoffs in Germany due to excess capacity and declining sales. In response to these cutbacks, Volkswagen workers are preparing to strike. Similarly, Japanese automaker Nissan is reducing production of its Rogue SUV and Frontier pickup because of rising inventories and a notable 5% drop in global sales in August. Nissan’s lack of hybrid options in the U.S. market is also adversely affecting its sales.

Adding to the automotive sector's woes, Morgan Stanley's autos and mobility team, led by analyst Adam Jonas, recently downgraded the entire U.S. auto sector. The downgrade was prompted by increasing inventories, vehicle affordability issues, rising credit losses, and concerns about China’s slowed economic growth. Jonas and his team noted that these factors might not be fully recognized by investors, driving their decision to downgrade the sector.

Despite the industry-wide downgrade, Morgan Stanley maintains an optimistic outlook on Tesla (TSLA). The firm continues to rate Tesla as "Overweight," highlighting the company's advancements in AI and self-driving technology. Tesla's eagerly awaited robotaxi event is set for October 10, generating considerable anticipation.

As the automotive industry navigates these turbulent times, stakeholders will be closely watching how companies like Stellantis, Volkswagen, and Nissan address their operational and strategic challenges.