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Chrysler Reports First Quarterly Profit Since Emerging From Bankruptcy - Update


Auburn Hills, Michigan-based automaker Chrysler Group LLC Monday reported a profit for the first quarter of 2011, its first since it emerged from bankruptcy protection in 2009. The turnaround from a year-ago's loss reflected higher vehicle sales, which in turn generated 35 percent revenue growth.

The company also announced plans to commence new financing transactions consisting of senior secured credit facilities and notes offering, and said it will use the net proceeds to repay its loans from the U.S. and Canadian governments.

Chrysler, which was once part of German automotive company Daimler AG, emerged from Chapter 11 reorganization in June 2009 and was bought by Italian automaker Fiat S.p.A. (FIATY.PK) in a U.S. government-brokered deal.

Fiat currently holds a 30 percent stake in Chrysler, with an option to increase its stake to 35 percent, and up to 51 percent if it meets financial and developmental goals for the company.

On April 21, Fiat had announced its commitment to exercise its call option to increase its ownership interest in Chrysler by 16 percent, if Chrysler fully repays its loans from the U.S. and Canadian governments during the second quarter. The new financing transactions announced today are in connection with this.

The senior secured credit facility will include an expected $3.5 billion six-year term loan and a $1.5 billion five-year revolving credit facility. The notes offering of $2.5 billion is expected to have eight- and ten-year maturities.

The company will also use the $1.3 billion in proceeds received from Fiat on its acquisition of incremental 16 percent ownership interest in Chrysler to repay the loans.

The completion of the notes offering, the credit facilities and the equity investment by Fiat are expected to occur concurrently.

Chrysler's first-quarter net income was $116 million, compared with a loss of $197 million in the prior-year quarter.

Excluding certain items, the company's modified operating profit climbed to $477 million from $143 million a year ago. Improved operating performance was primarily attributable to higher volumes and positive pricing and mix, partially offset by increased advertising investments and industrial costs.

Chrysler's quarterly revenue jumped 35 percent to $13.1 billion from last year's $9.7 billion as 16 new or significantly refreshed products in the marketplace supported volume growth and positive pricing and mix.

Commenting on the results, the company's Chief Executive Officer Sergio Marchionne said, "Chrysler Group's improved sales and financial performance in the first quarter show that our rejuvenated product lineup is gaining momentum in the marketplace and resonating with customers."

Chrysler, which makes Chrysler 300 and Dodge Challenger cars, Jeep Wrangler, and Ram 1500 trucks, said worldwide vehicle sales reached 394 thousands in the first quarter, an 18 percent growth from the previous year. This increase reflected refreshed product launches and an improving U.S. automotive industry.

The vehicle sales growth also led to a rise in the company's U.S. market share to 9.2 percent, compared with 9.1 percent in same quarter of 2010. Canadian market share increased one full percentage point from last year to 14.7 percent.

In addition, Chrysler's worldwide vehicle shipments were 485 thousands, up 28 percent from the year-ago first quarter, with U.S. vehicle shipments climbing over 33 percent.

Going forward, the company expects fiscal 2011 net income in a range of $0.2 billion - $0.5 billion and modified operating profit of over $2 billion. Full-year net revenue is projected to be above $55 billion.

FIATY.PK closed Friday's trading at $10.73, near the low end of its 52-week trading range of $8.03 - $22.80.

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