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Behind the Jeep/Ram spinoff chatter

by David Zatz on

Analysis. During the quarterly results teleconference, one analyst asked whether FCA could spin off Jeep and Ram.

Sergio Marchionne said, “Yes.”

Thus began a firestorm of people insisting that because FCA’s leader said it can be done, that it would be done.

Spinning off Jeep and Ram is an interesting idea. Outside of China, Jeep’s plants only make Jeeps; and Ram’s core business is done entirely within two American factories (there are also rebadged Fiats and Mitsubishis). Dodge and Chrysler could continue to sell alongside Alfa Romeo and the ghost of Fiat. Yes, it could be done.

Is it likely? Not really, since Jeep is the company’s ambassador to worldwide markets — stated as one of the truly global brands of FCA’s future — and Ram is both highly profitable and in the midst of an expansion. Jeep and Ram are getting closer, with the future Wagoneer being Ram-based and the Ram 1500/2500 suspension being Jeep-influenced. Chrysler Corporation itself paired the two as Jeep/Truck Engineering (JTE), sharing a building on Plymouth Road.

FCA would have to be quite desperate to eject Jeep and Ram, and much of its future along with them. There are definite synergies between Jeep, Maserati, and Alfa Romeo; and between Ram and Fiat Professional.

FCA had a chance to spin off Alfa Romeo, a less valuable property than Jeep or Ram, and they passed — at a time when they had lower profits and more debt.  It seems unlikely they would sell Jeep and Ram today.

When all is said and done, just remember one thing: an analyst asked the question, not Sergio Marchionne. The CEO of FCA answered with a single word — and moved on.

Discussion in progress

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