At least one financial analyst has concluded Jeep may actually be worth more than Fiat Chrysler Automobiles as a whole. This week Morgan Stanley analyst Adam Jonas conducted a sum-of-the-parts valuation on FCA, concluding Jeep is actually worth 120 percent of FCA’s market capitalization. As of Friday, FCA’s market capitalization rested at just above $17 billion.
For enthusiasts, the news that the Jeep brand is more valuable than all of FCA comes as little surprise. Jeep has seen significant success in recent years as FCA has thrown more product at the brand. The increased product has perfectly paired with a strong global appetite for crossovers and SUVs, leading Jeep to sell 1.4 million vehicles globally in 2016.
So we have one of the most iconic brands in the world, more product and increased demand for the very type of products said iconic brand is known for. Basically, this sequence of events has yielded Jeep’s valuation as no surprise.
Perhaps more intriguing is the fact that Jeep’s product offensive is only beginning. Later this year the brand will roll out the first all-new Wrangler in nearly 11 years. It will be closely followed with a pickup version of the Wrangler, Wagoneer and Grand Wagoneer to capstone the Jeep portfolio. There’s also talk of unique crossovers for the all-important Chinese market.
Suffice to say, Jeep’s value is on the upswing.
From a purely financial perspective, this valuation begs the question: will FCA spin off Jeep? In terms of value creation for shareholders, spinning off Jeep would be a no-brainer if this analyst’s conclusion is correct. A standalone Jeep could generate more cash for shareholders than the brand is contributing to FCA’s bottomline today, something FCA shareholders are probably pondering themselves.
FCA CEO Sergio Marchionne has acknowledged that spinning off Jeep could make sense, but has asserted the company has taken no such efforts to do so.
Spinning brands off onto their own is not an unknown task to FCA. The company spun off Ferrari into its own company in 2016. Marchionne is slated to become the CEO of Ferrari next year, stepping down from the top spot at CEO.
Perhaps his successor at FCA will be inclined to review the possibility of creating Jeep the company, versus maintaining Jeep the brand?