Chrysler to Refinance Debt in Second Half of 2011, Fiat's Marchionne Says

Chrysler Group LLC, the U.S. automaker operated by Fiat SpA, should have a “firm idea” about refinancing its debt by the end of the first half of next year as the company seeks to improve profitability.

“We’ll probably execute in the second half of 2011,” said Sergio Marchionne, who is chief executive officer of both automakers. “We need to find a solution to all of this by the time we hit the IPO market.”

Fiat, based in Turin, Italy, gained control of Chrysler during the U.S. automaker’s 2009 bankruptcy and may conduct a share sale in the second half of 2011, the company has said. While Chrysler last month reported its best quarterly earnings since emerging from court protection, interest payments on $7.4 billion of U.S. and Canadian government loans will prevent the company making a profit this year, according to Marchionne.

The effective interest rate on money borrowed from the U.S. government is as high as 14 percent and as much as 20 percent on the Canadian loans, the company said.

Chrysler has held discussions with several financial institutions that are “willing to help,” Marchionne said yesterday in Los Angeles.

Auburn Hills, Michigan-based Chrysler lost $84 million in the three months through Sept. 30.

Ferrari

Marchionne said last week Fiat may sell its auto-parts division Magneti Marelli SpA and a stake in Ferrari SpA before consolidating Chrysler, analysts told Bloomberg News.

Separately, Fiat said yesterday it may consider transactions involving Ferrari, Magneti Marelli and Alfa Romeo SpA after it spins off its industrial businesses.

“These represent just some of the strategic options available” after the demerger “that could be evaluated internally at the company’s full discretion,” Fiat said yesterday in a statement made at the request of the Italian stock market regulator Consob.

Fiat, Italy’s biggest manufacturer, isn’t currently trying to sell Ferrari to potential buyers, Marchionne said. The company might someday consider selling a part of Ferrari to prove its worth, he said.

“At some point in time, we may think of that,” Marchionne said. “I have no plans to do it, but it’s a possibility.”

Marchionne spoke to reporters yesterday at a new company- owned dealership. The Motor Village, slated to open during the first quarter, will serve as a testbed for Chrysler’s brands, the company said.

To contact the reporter on this story: Tim Higgins in Los Angeles at thiggins21@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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