Chrysler's focus is to raise new financing: CEO

Chrysler CEO Sergio Marchionne looks through the Jeep presentation during the press days for the North American International Auto show in Detroit, Michigan, January 10, 2011.

DETROIT (Reuters) - Chrysler Group is focused on raising new financing to pay back almost $7 billion to the U.S. and Canadian governments before an initial public offering of shares, Chief Executive Sergio Marchionne said on Wednesday.

"Our priority is to put in place a structure where Chrysler would become answerable to the capital markets only," Marchionne told a meeting with financial analysts organized by Deutsche Bank.

"The most likely of the options under consideration is a financing package that would facilitate payment of all government debt prior to an IPO," he said. For his remarks, click on link.reuters.com/seb85r

Chrysler, which was put under the management control of Fiat SpA in a 2009 bankruptcy brokered by the Obama administration, owed $5.7 billion to the U.S. Treasury and $1.2 billion to Canada as of the end of September.

Marchionne said the cost of financing that debt had kept the No. 3 U.S. automaker from posting a profit for 2010. Instead, it broke even, Marchionne said. Chrysler is due to report full fourth-quarter results on January 31.

In his prepared remarks, Marchionne said Chrysler's global sales in 2010 amounted to 1.6 million vehicles.

Sales figures listed in the company's press releases and provided by Chrysler showed the company sold 1,515,999 cars and trucks worldwide in 2010.

This includes 1,085,211 vehicles sold in the United States, 204,955 sold in Canada, 78,574 in Mexico and 147,259 sold outside North America.

Chrysler has been in discussions with Goldman Sachs and other banks but has not made a decision on which will lead its IPO and refinancing, Marchionne said.

In its first full year under Fiat, Chrysler made more progress in reducing costs, he said.

A Fiat system for manufacturing that was rolled out in Chrysler plants -- starting with the Detroit plant that makes the new Jeep Grand Cherokee -- produced savings of more than $200 million, he said.

The cost savings mean that the new Chrysler could break even if the U.S. industry sees annual sales as low as 10.5 million vehicles, even below the 2009 crisis levels that prompted its bankruptcy, Marchionne said.

Chrysler expects to break even on a net basis in 2011, Marchionne said.

He told reporters on Monday during the Detroit auto show that Chrysler would like to report a net profit for "a couple quarters" before an IPO.

IPO IN THIRD QUARTER?

Chrysler's U.S. market share was 9.2 percent in 2010 up from 7 percent in 2009, even though the only new product it had was the Jeep that arrived late in the year.

Marchionne, who spoke briefly to reporters after his presentation to analysts on Wednesday, said the IPO could come as early as the third quarter of 2011. He said a final decision on timing would depend on the strength of financial markets and the judgment of Chrysler's board.

Chrysler's restructuring differed from the bailout for General Motors Co in that the U.S. Treasury converted less of its financial assistance to equity at Chrysler and kept more debt on its balance sheet.

GM launched its IPO in November, raising $20 billion and reducing the U.S. government's stake in the company to about 33 percent.

"Had we been treated like another car company in town, which received most of its assistance in the form of equity, we would have been able to report a net profit for 2010," Marchionne said.

Fiat holds 25 percent of Chrysler as of this week after meeting a promise to the U.S. government to produce a more fuel-efficient, Fiat-designed engine at a U.S. plant for Chrysler.

On a diluted basis, the U.S. Treasury holds 8 percent of Chrysler stock, the Canadian government holds 2 percent and 55 percent is held by a trust fund for retiree healthcare affiliated with the United Auto Workers.

Fiat can increase its ownership in Chrysler to 35 percent, in two 5 percent stakes, by reaching certain sales targets outside North America and by developing a vehicle on the Fiat platform that gets at least 40 miles per gallon.

Marchionne said on Wednesday that Dodge was developing a compact car on a Fiat platform that will reach 40 miles per gallon.

(Reporting by Deepa Seetharaman, writing by Kevin Krolicki, editing by Maureen Bavdek, Matthew Lewis, Phil Berlowitz)