In late 2015, Sergio Marchionne led the successful IPO and spinoff of Fiat Chrysler’s(FCAU) Ferrari(RACE) division. Now various speculations suggest that he may spin off Maserati, Jeep, or the Parts division. Marchionne, who is set to retire in 2019, has tried to lure a buyer, publicly courting General Motors(GM), even, but has not found a partner. Alternatively, some believe he will continue to streamline the company by spinning off or selling valuable assets. Recent allegations of cheating on emissions testing, similar to the allegations that cost Volkswagen $20 billion, add increased urgency to a transaction.
In a note published this week, Morgan Stanley analyst Adam Jonas suggests the remaining parts could be worth more than the Milan and New York-traded company’s current €15.4 billion valuation. His model suggests Chrysler’s iconic Jeep brand is worth €20.3 billion, or 135% of the company’s current market cap, and the Ram line of trucks and pickups is worth about €10 billion.
Under the right circumstances, those businesses might be large enough to be out on their own. Even if not, a U.S. or foreign buyer would likely be much more attracted to buying one or both of those popular U.S. brands than they would be in acquiring Fiat Chrysler as a whole.
Other assets with standalone value include Italian luxury vehicle maker Maserati, which Jonas values at €3.2 billion, and a similarly valued collection of parts and components manufacturers.
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Marchionne has hinted at the potential for a spinoff of the parts business but said in Detroit this week that a separation of Maserati is not in the works.
Radical change is afoot in the automobile industry. The century-long reign of the internal combustion engine may soon end. The dawn of the age of autonomous vehicles is breaking. New models of vehicle ownership seem inevitable. Such a world creates challenges and opportunities for an automaker like Fiat Chrysler. Historically, very few incumbents have successfully navigated such upheaval. On the other hand. the company owns brands with significant value and its manufacturing and distribution capabilities may be of interest to new entrants to the auto industry. One thing is for certain- this company will look radically different in a decade- if it exists at all.
Disclosure: The author holds no position in any stock mentioned
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