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Rating Action:

Moody's upgrades FCA's rating to Ba3; stable outlook

10 May 2016

London, 10 May 2016 -- Moody's Investors Service (Moody's) has today upgraded to Ba3 from B1 the corporate family rating (CFR) and to Ba3-PD from B1-PD the probability of default rating (PDR) assigned to Fiat Chrysler Automobiles N.V.'s (FCA or the company). The outlook on the ratings is stable.

"Our decision to upgrade FCA's rating to Ba3 reflects continued positive earnings growth in two of its core regions, NAFTA and EMEA, mainly due to rising passenger car and SUV demand and the success of key brands such as Jeep and Ram. FCA's upgrade also factors in anticipated improvements in the company's financial profile in 2016, on the back of ongoing efforts to simplify its capital structure and reduce debt", says Yasmina Serghini, a Moody's Senior Credit Officer and lead analyst for FCA.

A full list of affected ratings/entities can be found at the end of this press release.

RATINGS RATIONALE

Today's upgrade of FCA's CFR to Ba3 reflects Moody's view that the company's profitability will continue to move higher in the next 12 to 18 months, as it benefits from favourable market dynamics in Western Europe. Improving market conditions will improve FCA's operating leverage in the region.

Moody's also expects that FCA's margins will rise in the North American Free Trade Agreement (NAFTA) region helped by (1) the steadily increasing demand for SUVs and trucks, fuelling Jeep and Ram sales, together with (2) continued measures to enhance local pricing power. Moody's views the global roll out of the Jeep brand as a cornerstone of FCA's strategy. The roll out has particularly helped the company improve its competitiveness in the Far East and leverage its industrial base in Western Europe, and has, over time, boosted its resilience in these regions.

FCA posted encouraging results for the first quarter ended 31 March 2016 as evidenced by a significant increase in EBIT (as adjusted by the company) to nearly EUR1.4 billion from EUR0.7 billion in the same period of 2015. This was largely driven by an increase in Adjusted EBIT in NAFTA together with improving earnings trends in both EMEA and Latin America. Moody's acknowledges that the company's operational performance in Latin America has been resilient in recent months amidst very weak industry conditions with a modest positive Adjusted EBIT in the first quarter of 2016 of EUR11 million.

Moreover, following the elimination of the ring fencing at FCA US LLC in March 2016 and the prepayment of USD2.0 billion of term loan Bs, FCA has simplified its debt structure and has gained unimpeded access to the cash and cash flows of its US subsidiary. Moody's expects that FCA's enhanced cash and cash equivalents and current securities balance (EUR18.4 billion as of 31 March 2016) will help it pay down debt, which, in turn, will improve the company's gross leverage metric. By end-2016, Moody's anticipates that FCA's Moody's-adjusted (gross) debt/EBITDA ratio is likely to fall to 4.0x then 3.5x in 2017 from 5.2x at year-end 2015. The company's leverage metric will reflect the conversion into common stock in December 2016 of the mandatory convertible securities, which Moody's currently treats as 100% debt.

Notwithstanding the above, Moody's cautions that FCA operates in a highly competitive global automotive market that constrains pricing power. Moreover, its profitability outside of the NAFTA market remains weak and some of the company's strategic initiatives (e.g. revival of the Alfa brands) will take time to bear fruits. Industry conditions have also weakened in emerging markets such as Latin America and China resulting in a large margin compression for FCA, including earnings erosion at its luxury brand Maserati, since the start of 2015.

Moody's also notes heightened regulatory scrutiny especially in the areas of emissions reductions and safety. This creates additional costs and investments for automotive manufacturers in general and may constitutes a source of potential earnings volatility. Moreover, Moody's expects that FCA will sustain a high level of investments in the next 24 months with a peak in 2017, which will weigh on its free cash flow.

STRUCTURAL CONSIDERATIONS

On the basis of the unified capital structure following the elimination of the ring fencing at FCA US LLC in March 2016, Moody's has formally included FCA US LLC in its notching considerations. Moody's has considered the senior unsecured notes issued by FCA and its treasury companies as structurally subordinated to a significant portion of financial and non-financial debt (including the USD2.8billion worth of secured term loan Bs at FCA US), located at the level of FCA's operating subsidiaries largely consisting of trade payables. Consequently, the ratings of FCA's outstanding senior unsecured bonds is B1, or one notch below the Ba3 CFR, according to Moody's Loss Given Default Methodology, and the ratings assigned to FCA US's term loan Bs are Baa3.

RATIONALE FOR A STABLE OUTLOOK

The stable outlook is based on Moody's expectation of a continued improvement in FCA's margins and debt-protection ratios in the next 12 months supported by a recovery in demand in Western Europe, global roll out of the Jeep brand and debt reduction.

WHAT COULD CHANGE THE RATING UP/DOWN

Upward pressure on FCA's rating could materialise if the company were to successfully execute its strategy and build more resilience in its business, resulting in gradually improving profitability and cash flow generation. An upgrade of FCA's rating would also hinge on the company maintaining a financial policy that balances both the interests of shareholders and bondholders.

Quantitatively, an upgrade could occur if FCA were to deliver, on a sustainable basis, (1) a Moody's-adjusted EBITA margin above 4%, (2) a positive free cash flow, (3) a Moody's-adjusted EBITA/Interest Expense trending towards 2.0x and (4) a Moody's-adjusted (gross) debt/EBITDA below 3.5x.

Moody's could downgrade FCA's ratings if (1) the company were to lose significant market share in its key markets; (2) there is evidence that its product renewal programme for its key brands were to stall; and (3) its operating performance were to deteriorate with limited prospects for improvement within a reasonable timeline as a result of, for example, prolonged weakness in Latin America, a major source of profits and cash flows for the company, which would more than offset further improvements in other regions and at Maserati.

Inability to improve Moody's-adjusted EBITA margin towards 4% over time, to reduce Moody's-adjusted (gross) debt/EBITDA towards 3.5x and increase Moody's-adjusted EBITA/Interest Expense towards 1.7x could cause downward pressure on the rating.

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Global Automobile Manufacturer Industry published in June 2011. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

Fiat Chrysler Automobiles N.V. has its corporate seat in Amsterdam, the Netherlands, with principal executive office in the United Kingdom. FCA owns 100% of FCA US LLC (previously Chrysler Group LLC) and is one of the largest automotive manufacturers by unit sales. FCA common shares are listed on the New York Stock Exchange and on the Mercato Telematico Azionario (MTA) in Italy.

LIST OF AFFECTED RATINGS

Upgrades:

..Issuer: Fiat Chrysler Automobiles N.V.

.... Corporate Family Rating, Upgraded to Ba3 from B1

.... Probability of Default Rating, Upgraded to Ba3-PD from B1-PD

....Senior Unsecured Medium-Term Note Program, Upgraded to (P)B1 from (P)B2

....Senior Unsecured Regular Bond/Debenture, Upgraded to B1 from B2

..Issuer: Fiat Chrysler Finance Canada Ltd

....Backed Senior Unsecured Medium-Term Note Program, Upgraded to (P)B1 from (P)B2

..Issuer: Fiat Chrysler Finance Europe SA

....Backed Senior Unsecured Medium-Term Note Program, Upgraded to (P)B1 from (P)B2

....Backed Senior Unsecured Regular Bond/Debenture, Upgraded to B1 from B2

..Issuer: Fiat Chrysler Finance North America Inc.

....Backed Senior Unsecured Medium-Term Note Program, Upgraded to (P)B1 from (P)B2

....Backed Senior Unsecured Regular Bond/Debenture, Upgraded to B1 from B2

..Issuer: FCA US LLC

....Senior Secured Bank Credit Facility, Upgraded to Baa3 from Ba1

Affirmations:

..Issuer: Fiat Chrysler Automobiles N.V.

....Senior Unsecured Medium-Term Note Program (Local Currency), Affirmed (P)NP

..Issuer: Fiat Chrysler Finance Europe SA

....Backed Senior Unsecured Medium-Term Note Program (Local Currency), Affirmed (P)NP

..Issuer: Fiat Chrysler Finance North America Inc.

....Backed Senior Unsecured Medium-Term Note Program (Foreign Currency), Affirmed (P)NP

Withdrawals:

..Issuer: FCA US LLC

....Senior Secured Bank Credit Facility, Withdrawn , previously rated Ba1

Outlook Actions:

..Issuer: Fiat Chrysler Automobiles N.V.

....Outlook, Changed To Stable From Positive

..Issuer: Fiat Chrysler Finance Canada Ltd

....Outlook, Changed To Stable From Positive

..Issuer: Fiat Chrysler Finance Europe SA

....Outlook, Changed To Stable From Positive

..Issuer: Fiat Chrysler Finance North America Inc.

....Outlook, Changed To Stable From Positive

..Issuer: FCA US LLC

....Outlook, Changed To Stable From Positive

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Yasmina Serghini
VP - Senior Credit Officer
Corporate Finance Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Matthias Hellstern
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's upgrades FCA's rating to Ba3; stable outlook
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