April 30 Chrysler Group LLC may get an upgrade
in its credit rating in the next 12 months, said Standard and
Poor's on Tuesday, which raised Chrysler's outlook to "positive"
S&P changed its outlook to positive despite Monday's
reporting by Chrysler of a 65 percent fall in first quarter
Chrysler's corporate credit rating of B+ was unchanged and
it could rise if its stand-alone performance continues to
improve, S&P said, and if the credit rating of its majority
owner, Fiat SpA remains at BB-.
"The outlook revision reflects our expectation that Chrysler
will continue to grow revenue and improve profitability, in
spite of weaker first-quarter results, which were hurt by
product launches, and assuming a continuation in the North
American light vehicle industry recovery," S&P said.
On Monday, Chrysler Group reported first quarter net profit
of $166 million, down from $473 million a year ago.
Chrysler went through a government-sponsored bankruptcy in
2009 that included management control by Fiat.
"Fiat's involvement is a positive factor in our business
risk assessment for Chrysler," S&P said.
While S&P credits Fiat for its management and product
integration with Chrysler as making the American company more
credit worthy, it has been Chrysler's improving sales in the
strengthening North American market that has helped Fiat avoid
financial losses despite an extremely weak European auto market
in the past several years.
At B+, Chrysler remains four notches below an investment
grade credit rating. Fiat's S&P rating of BB- is three levels
below investment grade.
Fiat owns 58.5 percent of Chrysler, with the rest owned by a
United Auto Workers' retiree healthcare trust, which is a
voluntary employees beneficiary association, or VEBA.
Fiat is attempting to buy VEBA's portion of Chrysler. If it
is successful acquiring all of Chrysler, there would be downward
pressure on Fiat's credit rating, S&P said.