S&P raises Chrysler outlook from stable to positive

Article by Christian Andrei, on May 2, 2013

Standard and Poor's Ratings Services raised Chrysler Group LLC's outlook to "positive" from "stable and expressed confidence that the automaker may receive an upgrade in its credit rating in the next 12 months. S&P revised its outlook even after Chrysler reported a 65% decrease in its profit in the first quarter.

S&P added that Chrysler's corporate credit rating of B+ was unchanged and it may increase if its stand-alone performance still improves and if the credit rating of Fiat SpA (its majority owner) stays at BB-. S&P explained that the change in its outlook is a representation of its prediction that despite weak results in the first quarter, Chrysler will continue to grow revenue and improve profitability.

S&P also pointed out that this works on the assumption that the North American light vehicle industry will continue to recover. It’s believed that product launches had hurt its results for the first quarter. For the first quarter of 2013, Chrysler Group posted a net profit of $166 million, a drop from $473 million a year ago. In 2009, Chrysler underwent a government-sponsored bankruptcy in 2009 that included management control by Fiat.

S&P said that Fiat's involvement is a “positive factor” in Chrysler’s business risk assessment. S&P believes that Fiat’s management and product integration with Chrysler made the U.S. firm more credit worthy, Fiat was helped by Chrysler's rising sales in the strengthening North American market to help it avoid financial losses despite the European auto market being very weak in the past several years. Chrysler’s rating of B+ places it four notches below an investment grade credit rating. Fiat's S&P rating of BB- is three levels below investment grade.

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