S&P lifts DaimlerChrysler

Standard & Poor's said it raised its long-term corporate credit rating on DaimlerChrysler AG and related entities to BBB+ from BBB upon completion of the sale of a majority stake of Chrysler LLC to private equity firm Cerberus Capital Management, LP. The A-2 short-term rating was affirmed.

The corporate credit rating was removed from CreditWatch, where it was placed with positive implications on May 14. The outlook is stable.

The agency said the upgrade reflects the positive effect of the transaction on the credit profile of DaimlerChrysler, which is expected to be renamed Daimler AG. While the transaction has resulted in a net cash outflow of €0.5 billion for DaimlerChrysler and is expected to reduce the group's 2007 net profit by €3 billion to €4 billion, S&P considers these as one-time effects and, furthermore, DaimlerChrysler will largely be relieved from Chrysler-related pension and health-care liabilities.

The stable outlook reflects S&P's expectation that DaimlerChrysler will continue to improve performance in its Mercedes car group operations and be able to handle the downturn in the North American truck industry without significant impact on the overall profitability, due to the improved flexibility in cost structures and the offsetting effect of strong European truck markets.

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