Chrysler Rating Raised One Level to BB- by S&P After Fiat Deal

Jan 11, 2014 12:01 am ET

Jan. 11 (Bloomberg) -- Chrysler Group LLC’s credit rating was raised one grade yesterday to BB- by Standard & Poor’s Corp., after majority owner Fiat SpA reached a deal to acquire the rest of the U.S. carmaker.

Fiat said on Jan. 1 that it will acquire the final 41.5 percent of Chrysler from a United Auto Workers health-care trust for $4.35 billion. S&P said it increased Chrysler’s rating from B+ to BB-, three levels below investment grade, because it will be a Fiat subsidiary once the acquisition closes.

Fiat Chief Executive Officer Sergio Marchionne has revived Chrysler, which he also leads, from its bankruptcy in 2009 with 45 straight monthly sales gains on the back of successful new autos, including the Jeep Grand Cherokee, the Jeep Cherokee and the Ram 1500 pickup.

“We now assess Chrysler as a ‘core’ subsidiary of Fiat under our group rating methodology and, therefore, have made equal the ratings on both entities,” S&P said in a statement.

A merger should tighten cooperation between Fiat’s Alfa Romeo and Maserati brands and the Chrysler, Dodge and Jeep nameplates. Fiat plans to invest as much as 9 billion euros ($12.3 billion) to revive underused Italian factories to stem losses in Europe. That plan depends on Fiat’s access to Chrysler’s $12 billion cash.

Chrysler and Fiat together delivered 4 million vehicles worldwide in 2012. That compares with 9.07 million vehicles sold by Wolfsburg, Germany-based Volkswagen AG, 9.3 million by General Motors Co. and 9.75 million by Japanese competitor Toyota Motor Corp., according to Bloomberg Industries data. Marchionne estimated in June that a merged Fiat and Chrysler will rank seventh in global deliveries.

Fiat’s Rating

Fiat already relies on Chrysler to sustain profit amid losses in Europe, where the car market has fallen to a two- decade low. Group net income, including minority holdings, totaled 1.41 billion euros in 2012. Without Chrysler, Fiat would have posted a 1.04 billion-euro loss.

Fiat has said it expects to close its acquisition of the rest of Chrysler on or before Jan. 20. S&P affirmed its rating on Fiat earlier.

--Editors: Niamh Ring, Stephen West