DBRS Places DaimlerChrysler AG’s Long-Term Rating Under Review with Positive Implications

DBRS has today placed the long-term rating of DaimlerChrysler AG (DaimlerChrysler or the Company) and its related companies Under Review with Positive Implications. Concurrently, DBRS is confirming the Commercial Paper rating of the companies at R-1 (low) with a Stable trend. The rating action reflects the Company’s much stronger business-risk profile and the good progress achieved in the Mercedes Car Group.

With the completion of the divestiture of a majority stake in Chrysler on August 3, 2007, the Company has removed a significant risk to its business profile. In addition, the sale had a less than expected negative impact on the Company’s financial position, another positive development. The sharp deterioration at Chrysler and the uncertainties associated with its turnaround have been a major negative factor weighing on the Company. Going forward, the Company’s exposure to Chrysler is limited to its equity investment of 19.9% and some outstanding guarantees of less than €2.5 billion.

DBRS notes that the Company has made good progress in improving product quality and efficiency at the Mercedes Car Group. Benefits from the “CORE” program are reflected in a sharp increase in profit margin, which has exceeded the Company’s initial target. The restructuring at the smart brand is also on track. DBRS believes that smart is no longer a drain on the Company’s resources.

The Company continues to have a very strong balance sheet and, at the end of June 30, 2007, the industrial business had a net liquidity position (cash and marketable securities net of debt) of €13.9 billion. On August 29, 2007, the Company announced that it plans to buy back up to €7.5 billion of its own shares within the next twelve months. DBRS expects the Company to continue to generate strong free cash flow and should have no problems in funding its operating needs and the share buyback from internal resources.

DBRS expects to complete the review shortly and to make a rating decision in the coming week.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

Ratings

Back to top