As Fiat Chrysler Automobiles N.V. (FCAU) - Get Stellantis N.V. Report prepares to release its second-quarter financial report on Thursday, July 27, investors will be focused on the sales drop at Jeep.
Jeep, arguably FCA's strongest and most reliable brand as well as its biggest moneymaker, has suffered a 13.2% decline in sales in the U.S. through the first half of the year. Jeep's slide is significantly worse than the 2.2% slide for the overall U.S. vehicle market over the same period.
FCA explains that Jeep's numbers aren't bad and more or less track what the automaker planned when it juggled production, switching models built at a couple of its assembly plants in Toledo, Ohio,and Belvidere, Ill. The automaker replaced its Compass and Patriot SUVs with an all-new Compass. And like its rivals at Ford Motor Co. (F) - Get Ford Motor Company Report and General Motors Co. (GM) - Get General Motors Company Report , Fiat Chrysler deliberately reduced lower-profit sales to daily-rental fleets.
A new Jeep Cherokee went into production last month at Belvidere and a new Renegade is due in 2018. Jeep plans to display a new Wrangler later this year and also has plans for a Jeep pickup truck, a new Grand Cherokee and the reintroduction of the iconic Wagoneer.
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Based on three analysts' forecasts, the consensus earnings-per-share forecast for FCA's second quarter is 59 cents. Fiat Chrysler earned 51 cents a share a year earlier.
The automaker, despite a debt-heavy balance sheet, has shown remarkable progress toward long-term sustainability since the 2009 bankruptcy of Chrysler and subsequent merger with Fiat. Much of the credit must be attributed to CEO Sergio Marchionne and the team around him which recognized the potential of Jeep, Ram pickup trucks and, to a lesser extent, Chrysler's minivans.
Marchionne hasn't been afraid of bold moves, such as the spinoff of Ferrari and the discontinuation of the relatively new Dodge Dart and Chrysler 200 car models when they proved uncompetitive.
Still, Wall Street views FCA with some skepticism as 2017 looks more and more like the first year in seven that the U.S. vehicle market declines and automakers will have to cut prices to maintain sales. The industry's hope is that growth could return in 2018, which would be great news for Marchionne, who plans to retire in early 2019. His earlier forays to merge or ally with larger, stronger automakers haven't panned out.
Adam Jonas, equity analyst for Morgan Stanley, earlier this month issued a research report in which he stated that Jeep would be more valuable to shareholders if it, too, were spun off. The opinion is a left-handed compliment for FCA, which has more than quadrupled Jeep sales since 2009 and has plans to increase sales even more on a global basis.
So far, Marchionne hasn't indicated any solid plan to spin off Jeep. But when asked on an April earnings call whether he would consider the move, he answered, "Yes."
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Doron Levin is the host of "In the Driver Seat," broadcast on SiriusXM Insight 121, Saturday at noon, encore Sunday at 9 a.m.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.