Fca Us 10-Q 2012 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

Commission file number 000-54282

CHRYSLER GROUP LLC

(Exact name of Registrant as Specified in its Charter)

DELAWARE	27-0187394
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
1000 Chrysler Drive Auburn Hills, Michigan	48326
(Address of Principal Executive Offices)	(Zip Code)

(248) 512-2950

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	þ (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  þ

As of August 13, 2012, there were 1,061,225 Class A Membership Interests and 200,000 Class B Membership Interests issued and outstanding.

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Form 10-Q for the Quarterly Period Ended June 30, 2012

INDEX

Part I – Financial Information

	Forward-Looking Statements	1
Item 1.	Condensed Consolidated Financial Statements	3
	Report of Independent Registered Public Accounting Firm	3
	Condensed Consolidated Statements of Operations (unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)	5
	Condensed Consolidated Balance Sheets (unaudited)	6
	Condensed Consolidated Statements of Cash Flows (unaudited)	7
	Condensed Consolidated Statements of Members’ Deficit (unaudited)	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
	Note 1.      Background and Nature of Operations	9
	Note 2.      Basis of Presentation and Recent Accounting Pronouncements	9
	Note 3.      Interest Expense	10
	Note 4.      Inventories	11
	Note 5.      Other Intangible Assets	11
	Note 6.      Accrued Expenses and Other Liabilities	12
	Note 7.      Financial Liabilities	14
	Note 8.      Income Taxes	19
	Note 9.      Commitments, Contingencies and Concentrations	19
	Note 10.    Fair Value Measurements	23
	Note 11.    Derivative Financial Instruments and Risk Management	25
	Note 12.    Employee Retirement and Other Benefits	29
	Note 13.    Other Transactions with Related Parties	30
	Note 14.    Restructuring Actions	33
	Note 15.    Venezuelan Currency Regulations	35
	Note 16.    Supplemental Parent and Guarantor Condensed Consolidating Financial Statements	35
	Note 17.    Subsequent Event	41
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	63
Item 4.	Controls and Procedures	63
Part II – Other Information
Item 1.	Legal Proceedings	64
Item 6.	Exhibits	65
	Signature	66
	Exhibit Index	67

Unless otherwise specified, the terms “we,” “us,” “our,” “Chrysler Group” and the “Company” refer to Chrysler Group LLC and its consolidated subsidiaries, or any one or more of them, as the context may require. “Fiat” refers to Fiat S.p.A., a corporation organized under the laws of Italy, and its consolidated subsidiaries (excluding Chrysler Group) and its jointly controlled entities, or any one or more of them as the context may require.

Forward-Looking Statements

This report contains forward-looking statements that reflect our current views about future events. We use the words “anticipate,” “assume,” “believe,” “estimate,” “expect,” “will,” “intend,” “may,” “plan,” “project,” “should,” “could,” “seek,” “designed,” “potential,” “forecast,” “target,” “objective,” “goal,” or the negatives of such terms or other similar expressions. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. For additional discussion of these risks, refer toItem 1A. Risk Factors in our 2011 Annual Report on Form 10-K, or 2011 Form 10-K. These factors include, but are not limited to:

• economic weakness and weak vehicle demand, especially in North America;

• our ability to realize benefits from our industrial alliance with Fiat;

• our ability to increase vehicle sales outside of North America;

• our ability to continue to regularly introduce new and significantly refreshed vehicles that appeal to consumers;

• changes in consumer preferences that could reduce relative demand for our product offerings;

• increases in fuel prices that may adversely impact demand for our vehicles;

• competitive pressures that may limit our ability to manage sales incentives and achieve better pricing;

• our lack of a captive finance company and the potential inability of our dealers and customers to obtain affordably priced financing;

• our ability to control costs and implement cost reduction and productivity improvement initiatives;

• disruption of production or delivery of new vehicles due to shortages of materials, including supply disruptions resulting from natural disasters, labor strikes or supplier insolvencies;

• changes and fluctuations in the prices of raw materials, parts and components;

• our ability to accurately forecast demand for our vehicles;

• uncertainty relating to weak economic conditions in several European nations in which we plan to increase sales, and where Fiat, our alliance partner, is organized and derives significant revenues;

• our substantial indebtedness and limitations on our liquidity that may limit our ability to execute our business plan;

• changes in foreign currency exchange rates and interest rates;

• changes in laws, regulations and government policies, particularly those relating to vehicle emissions, fuel economy and safety; and

• the impact of vehicle defects and/or product recalls.

If any of these risks and uncertainties materialize, or if the assumptions underlying any of our forward-looking statements prove incorrect, then our actual results, level of activity, performance or achievements may be materially different from those we express or imply by such statements. The risks described inItem 1A. Risk Factors of our 2011 Form 10-K are not exhaustive. Other sections of our 2011 Form 10-K describe additional factors that could adversely affect our business, financial condition or results of operations. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and we

1

cannot predict all such risk factors, nor can we assess the impact of all such risks on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those implied by any forward-looking statements. We do not intend, or assume any obligation, to update these forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the cautionary statements referred to above and included elsewhere in this report.

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PART I – Financial Information

Item 1. Condensed Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Members of

Chrysler Group LLC

Auburn Hills, MI

We have reviewed the accompanying condensed consolidated balance sheet of Chrysler Group LLC and subsidiaries (“the Company”) as of June 30, 2012, and the related condensed consolidated statements of operations and comprehensive income (loss) for the three-month and six-month periods ended June 30, 2012 and 2011, and cash flows and members’ deficit for the six-month periods ended June 30, 2012 and 2011. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2011, and the related consolidated statements of operations, comprehensive loss, cash flows, and members’ deficit for the year then ended (not presented herein); and in our report dated March 6, 2012, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2011 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ DELOITTE & TOUCHE LLP

Detroit, Michigan

August 13, 2012

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited - in millions of dollars)

		Three Months Ended June 30,						Six Months Ended June 30,
	Notes	2012			2011			2012			2011
Revenues, net		$	16,795		$	13,661		$	33,154		$	26,785
Cost of sales			14,252			11,457			28,043			22,534
GROSS MARGIN			2,543			2,204			5,111			4,251
Selling, administrative and other expenses			1,225			1,255			2,445			2,440
Research and development expenses, net			545			392			1,134			746
Restructuring (income) expenses, net	14		(34	)		2			(48	)		13
Interest expense	3		278			328			555			676
Interest income			(12	)		(11	)		(22	)		(22	)
Loss on extinguishment of debt	7		—			551			—			551
INCOME (LOSS) BEFORE INCOME TAXES			541			(313	)		1,047			(153	)
Income tax expense	8		105			57			138			101
NET INCOME (LOSS)		$	436		$	(370	)	$	909		$	(254	)

See accompanying notes to condensed consolidated financial statements.

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited - in millions of dollars)

	Three Months Ended June 30,					Six Months Ended June 30,
	2012		2011			2012		2011
Net income (loss)	$	436	$	(370	)	$	909	$	(254	)
Other comprehensive income (loss)(1)		78		20			3		(28	)
TOTAL COMPREHENSIVE INCOME (LOSS)	$	514	$	(350	)	$	912	$	(282	)

(1) Net of $0 of taxes

See accompanying notes to condensed consolidated financial statements.

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited - in millions of dollars)

	Notes	June 30, 2012			December 31, 2011
CURRENT ASSETS:
Cash and cash equivalents		$	12,075		$	9,601
Restricted cash	9		65			106
Trade receivables, net of allowance for doubtful accounts of $58 and $68, respectively			1,512			845
Inventories	4		4,491			4,366
Prepaid expenses and other assets			1,245			1,603
Deferred taxes			30			25
TOTAL CURRENT ASSETS			19,418			16,546
PROPERTY AND EQUIPMENT:
Property, plant and equipment, net of accumulated depreciation of $7,149 and $6,109, respectively			14,547			13,965
Equipment on operating leases, net			1,364			1,421
TOTAL PROPERTY AND EQUIPMENT			15,911			15,386
OTHER ASSETS:
Advances to related parties and other financial assets			62			56
Restricted cash	9		342			355
Goodwill			1,361			1,361
Other intangible assets, net	5		3,313			3,371
Prepaid expenses and other assets			428			421
Deferred taxes			37			47
TOTAL OTHER ASSETS			5,543			5,611
TOTAL ASSETS		$	40,872		$	37,543
CURRENT LIABILITIES:
Trade liabilities		$	10,287		$	8,566
Accrued expenses and other liabilities	6		8,401			7,707
Current maturities of financial liabilities	7		205			230
Deferred revenue			1,141			1,171
Deferred taxes			69			73
TOTAL CURRENT LIABILITIES			20,103			17,747
LONG-TERM LIABILITIES:
Accrued expenses and other liabilities	6		12,771			12,758
Financial liabilities	7		12,302			12,344
Deferred revenue			753			653
Deferred taxes			72			76
TOTAL LONG-TERM LIABILITIES			25,898			25,831
Commitments and contingencies	9		—			—
MEMBERS’ DEFICIT:
Membership Interests
Class A Membership Interests — 1,061,225 units authorized, issued and outstanding at June 30, 2012 and December 31, 2011			—			—
Class B Membership Interests — 200,000 units authorized, issued and outstanding at June 30, 2012 and December 31, 2011			—			—
Contributed capital			2,651			2,657
Accumulated losses			(3,345	)		(4,254	)
Accumulated other comprehensive loss			(4,435	)		(4,438	)
TOTAL MEMBERS’ DEFICIT			(5,129	)		(6,035	)
TOTAL LIABILITIES AND MEMBERS’ DEFICIT		$	40,872		$	37,543

See accompanying notes to condensed consolidated financial statements.

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - in millions of dollars)

		Six Months Ended June 30,
	Notes	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
NET CASH PROVIDED BY OPERATING ACTIVITIES		$	4,342		$	3,708
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment and intangible assets			(1,854	)		(1,185	)
Proceeds from disposals of property, plant and equipment			2			15
Purchases of equipment on operating leases			(6	)		(23	)
Proceeds from disposals of equipment on operating leases			70			465
Change in restricted cash			54			218
Change in loans and notes receivables			1			4
Proceeds from USDART	9		—			96
Other			(1	)		17
NET CASH USED IN INVESTING ACTIVITIES			(1,734	)		(393	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of U.S. Treasury first lien credit facilities	7		—			(5,460	)
Repayment of Export Development Canada credit facilities	7		—			(1,723	)
Proceeds from Senior Secured Notes	7		—			3,160
Proceeds from Tranche B Term Loan	7		—			2,933
Repayments of Tranche B Term Loan			(15	)		—
Repayments of Gold Key Lease financing	7		(41	)		(515	)
Repayments of Auburn Hills Headquarters loan			(25	)		(6	)
Net repayments of other financial liabilities			(44	)		(58	)
Debt issuance costs			—			(54	)
Proceeds from Fiat’s incremental equity call option exercise	13		—			1,268
Distribution for state tax withholding obligations on behalf of members			(4	)		(6	)
NET CASH USED IN FINANCING ACTIVITIES			(129	)		(461	)
Effect of exchange rate changes on cash and cash equivalents			(5	)		(26	)
Net change in cash and cash equivalents			2,474			2,828
Cash and cash equivalents at beginning of period			9,601			7,347
Cash and cash equivalents at end of period		$	12,075		$	10,175
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES:
Capitalized interest on Canadian Health Care Trust Notes	7	$	—		$	27

See accompanying notes to condensed consolidated financial statements.

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF MEMBERS’ DEFICIT

(Unaudited - in millions of dollars)

	Notes	Contributed Capital			Accumulated Losses			Accumulated Other Comprehensive Loss			Total
Balance at January 1, 2012		$	2,657		$	(4,254	)	$	(4,438	)	$	(6,035	)
Distribution for state tax withholding obligations on behalf of members			(3	)								(3	)
Net income						473						473
Total other comprehensive loss									(75	)		(75	)
Balance at March 31, 2012		$	2,654		$	(3,781	)	$	(4,513	)	$	(5,640	)
Distribution for state tax withholding obligations on behalf of members			(3	)								(3	)
Net income						436						436
Total other comprehensive income									78			78
Balance at June 30, 2012		$	2,651		$	(3,345	)	$	(4,435	)	$	(5,129	)
Balance at January 1, 2011		$	1,399		$	(4,437	)	$	(1,451	)	$	(4,489	)
Distribution for state tax withholding obligations on behalf of members			(6	)								(6	)
Net income						116						116
Total other comprehensive loss									(48	)		(48	)
Balance at March 31, 2011		$	1,393		$	(4,321	)	$	(1,499	)	$	(4,427	)
Exercise of Fiat’s incremental equity call option	13		1,268									1,268
Net loss						(370	)					(370	)
Total other comprehensive income									20			20
Balance at June 30, 2011		$	2,661		$	(4,691	)	$	(1,479	)	$	(3,509	)

See accompanying notes to condensed consolidated financial statements.

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 1. Background and Nature of Operations

Unless otherwise specified, the terms “we,” “us,” “our,” “Chrysler Group” and the “Company” refer to Chrysler Group LLC and its consolidated subsidiaries, or any one or more of them, as the context may require. “Fiat” refers to Fiat S.p.A, a corporation organized under the laws of Italy, and its consolidated subsidiaries (excluding Chrysler Group) and its jointly controlled entities, or any one or more of them as the context may require.

Background

Chrysler Group was formed on April 28, 2009 as a Delaware limited liability company. On June 10, 2009, we completed the transaction contemplated by the master transaction agreement dated April 30, 2009, among the Company, Fiat and Old Carco LLC (“Old Carco”) and certain of its subsidiaries, which was approved under section 363 of the U.S. Bankruptcy Code (the “363 Transaction”). In connection with the closing of the 363 Transaction, we received capital contributions from the United Auto Workers’ Retiree Medical Benefits Trust (the “VEBA Trust”), Fiat, the United States Department of the Treasury (the “U.S. Treasury”) and Canada CH Investment Corporation, a wholly-owned subsidiary of the Canada Development Investment Corporation, a Canadian federal Crown Corporation, in exchange for ownership interests in the Company.

As a result of a series of transactions during 2011 and early 2012 that were contemplated in our governance documents and certain other agreements, our continuing members are now Fiat, which holds a 58.5 percent ownership interest in us, and the VEBA Trust, which holds the remaining 41.5 percent ownership interest in us. Refer to Note 13,Other Transactions with Related Parties and Note 17,Subsequent Event, for additional information.

Nature of Operations

We design, engineer, manufacture, distribute and sell vehicles under the brand names Chrysler, Jeep, Dodge and Ram. As part of our industrial alliance with Fiat, we also manufacture Fiat vehicles in North America, which we distribute for ourselves throughout North America and sell to Fiat for distribution outside North America. Our product lineup includes passenger cars, utility vehicles, which include sport utility vehicles and crossover vehicles, minivans, pick-up trucks, and medium-duty trucks. We also sell automotive service parts and accessories under the Mopar brand name.

Our products are sold in more than 120 countries around the world. We sell our products to dealers and distributors for sale to retail customers and fleet customers, which include rental car companies, commercial fleet customers, leasing companies and government entities. The majority of our operations, employees, independent dealers and sales are in North America, primarily in the U.S. Approximately 10 percent of our vehicle sales in 2011 were outside North America, principally in South America, Asia Pacific and Europe. Vehicle, service parts and accessories sales outside of North America are primarily through wholly-owned, affiliated or independent distributors and dealers. In June 2011, Fiat became the general distributor of our vehicles and service parts in Europe, selling our products through a network of newly appointed dealers. Refer to Note 13,Other Transactions with Related Parties, for additional information.

Note 2. Basis of Presentation and Recent Accounting Pronouncements

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the information contained herein reflects all adjustments necessary for a fair presentation of the information presented. All such adjustments are of a normal recurring nature. The results of operations for interim periods are not necessarily indicative of the results to be expected for the fiscal

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 2. Basis of Presentation and Recent Accounting Pronouncements —Continued

Basis of Presentation —Continued

year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in our 2011 Annual Report on Form 10-K (“2011 Form 10-K”) as filed with the U.S. Securities and Exchange Commission (“SEC”).

Recent Accounting Pronouncements

In July 2012, the Financial Accounting Standards Board (“FASB”) issued updated guidance on the annual testing of indefinite-lived intangible assets for impairment. The amendments allow an entity to first assess qualitative factors to determine whether it is more likely than not that the indefinite-lived intangible asset is impaired. If, based on its qualitative assessment, an entity concludes it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount, quantitative impairment testing is required. However, if an entity concludes otherwise, quantitative impairment testing is not required. This guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. We are evaluating the potential impact of this guidance on our consolidated financial statements.

In May 2011, the FASB issued updated guidance to achieve common fair value measurement and disclosure requirements between International Financial Reporting Standards and U.S. GAAP. The amendments clarify the FASB’s intent about the application of existing requirements and provide for changes in measuring the fair value of financial instruments that are managed within a portfolio and the application of premiums or discounts. This guidance requires us to, among other things, expand existing disclosures for recurring Level 3 fair value measurements and for those assets and liabilities not measured at fair value on the balance sheet, but for which fair value is disclosed. This guidance is effective for fiscal periods beginning after December 15, 2011, and is to be applied prospectively. We adopted this guidance as of January 1, 2012, and it did not have a material impact on our consolidated financial statements.

Note 3. Interest Expense

Interest expense included the following (in millions of dollars):

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Financial interest expense:
Related parties (see Note 13)	$	111		$	181		$	220		$	413
Other		163			111			324			187
Interest accretion, primarily related to debt discounts, debt issuance costs and fair value adjustments		31			51			62			109
Payable-in-kind interest — related party (see Note 13)		—			10			—			27
Capitalized interest related to capital expenditures		(27	)		(25	)		(51	)		(60	)
Total	$	278		$	328		$	555		$	676

Related party amounts above include activities with the U.S. Treasury during the three and six months ended June 30, 2011. Refer to Note 13,Other Transactions with Related Parties, for additional information.

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 4. Inventories

The components of inventories were as follows (in millions of dollars):

	June 30, 2012		December 31, 2011
Finished products, including service parts	$	2,818	$	2,655
Work in process		1,504		1,544
Raw materials and manufacturing supplies		169		167
Total	$	4,491	$	4,366

Note 5. Other Intangible Assets

The components of other intangible assets were as follows (in millions of dollars):

	Range of Useful Lives (years)		June 30, 2012
			Gross Carrying Amount		Accumulated Amortization		Net Intangible Assets
Brand names		Indefinite	$	2,210	$	—	$	2,210
Dealer networks		20		390		60		330
Fiat contributed intellectual property rights		10		320		98		222
Other intellectual property rights		3 - 12		263		27		236
Patented and unpatented technology		4 - 10		208		104		104
Favorable operating lease contracts		1 - 16		22		13		9
Software and other		2 - 5		387		185		202
		Total	$	3,800	$	487	$	3,313

	Range of Useful Lives (years)		December 31, 2011
			Gross Carrying Amount		Accumulated Amortization		Net Intangible Assets
Brand names		Indefinite	$	2,210	$	—	$	2,210
Dealer networks		20		390		50		340
Fiat contributed intellectual property rights		10		320		82		238
Other intellectual property rights		3 - 12		263		19		244
Patented and unpatented technology		4 - 10		208		87		121
Favorable operating lease contracts		1 - 16		29		19		10
Software and other		2 - 5		352		144		208
		Total	$	3,772	$	401	$	3,371

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 5. Other Intangible Assets —Continued

The following summarizes the amount of intangible asset amortization expense included in the respective financial statement captions of the accompanying Condensed Consolidated Statements of Operations (in millions of dollars):

	Financial Statement Caption		Three Months Ended June 30,				Six Months Ended June 30,
			2012		2011		2012		2011
Favorable operating lease contracts		Revenues, Net	$	—	$	5	$	1	$	14
Patented and unpatented technology, intellectual property, software and other		Cost of Sales		30		70		82		102
Dealer networks and other		Selling, Administrative and Other Expenses		5		25		10		31
		Total	$	35	$	100	$	93	$	147

Based on the gross carrying amount of other intangible assets as of June 30, 2012, the estimated future amortization expense for the next five years was as follows (in millions of dollars):

Remainder of 2012	$	73
2013		142
2014		131
2015		120
2016		98

Note 6. Accrued Expenses and Other Liabilities

The components of accrued expenses and other liabilities were as follows (in millions of dollars):

	June 30, 2012						December 31, 2011
	Current		Non- Current		Total		Current		Non- Current		Total
Pension and postretirement benefits	$	185	$	9,108	$	9,293	$	185	$	9,198	$	9,383
Product warranty costs		1,236		2,248		3,484		1,196		2,122		3,318
Sales incentives		2,854		—		2,854		2,431		—		2,431
Personnel costs		579		404		983		585		391		976
Accrued interest(1)		592		—		592		330		—		330
Vehicle residual value guarantees, excluding Gold Key Lease financing		490		—		490		438		—		438
Amounts due to related parties (see Note 13) (2)		469		—		469		381		—		381
Workers’ compensation		44		283		327		43		284		327
Income and other taxes		201		94		295		287		118		405
Restructuring actions (see Note 14)		84		—		84		150		—		150
Other		1,667		634		2,301		1,681		645		2,326
Total	$	8,401	$	12,771	$	21,172	$	7,707	$	12,758	$	20,465

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 6. Accrued Expenses and Other Liabilities —Continued

(1) Includes $438 million and $220 million of accrued interest due to related parties as of June 30, 2012 and December 31, 2011, respectively. Refer to Note 13, Other Transactions with Related Parties, for additional information.

(2) Excludes amounts due to related parties for accrued interest separately discussed in (1) above.

We issue various types of product warranties under which we generally guarantee the performance of products delivered for a certain period or term. The reserve for product warranties includes the expected costs of warranty obligations imposed by law or contract, as well as the expected costs for mandatory or voluntary actions to recall and repair vehicles and for buyback commitments. Estimates are principally based on assumptions regarding the lifetime warranty costs of each vehicle line and each model year of that vehicle line, as well as historical claims experience for our vehicles.

The changes in accrued product warranty costs (excluding deferred revenue from separately-priced extended warranty and service contracts, as well as supplier recoveries) were as follows (in millions of dollars):

	Six Months Ended June 30,
	2012			2011
Balance at beginning of period	$	3,318		$	3,171
Provision for current period warranties		894			790
Net adjustments to pre-existing warranties		(10	)		(17	)
Net warranty settlements		(721	)		(717	)
Interest accretion, translation and other adjustments		3			71
Balance at end of period	$	3,484		$	3,298

We recognized recoveries from suppliers related to warranty claims of $25 million and $38 million during the three months ended June 30, 2012 and 2011, respectively, and $59 million and $66 million during the six months ended June 30, 2012 and 2011, respectively, which are excluded from the change in warranty costs above.

We also offer customers the opportunity to purchase separately-priced extended warranty and service contracts. In addition, from time to time we sell certain vehicles with a service contract included in the sales price of the vehicle. The service contract and vehicle qualified as separate units of accounting in accordance with the accounting guidance for multiple-element arrangements. The revenue from these contracts, as well as our separately-priced extended warranty and service contracts, is recorded as a component of Deferred Revenue in the accompanying Condensed Consolidated Balance Sheets at the inception of the contract and is recognized as revenue over the contract period in proportion to the costs expected to be incurred based on historical information.

The following summarizes the changes in deferred revenue from these contracts (in millions of dollars):

	Six Months Ended June 30,
	2012			2011
Balance at beginning of period	$	926		$	829
Deferred revenues for current period service contracts		300			263
Earned revenues in current period		(225	)		(219	)
Refunds of cancelled contracts		(24	)		(27	)
Interest accretion, translation and other adjustments		21			37
Balance at end of period	$	998		$	883

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 7. Financial Liabilities

The components of financial liabilities were as follows (in millions of dollars):

	June 30, 2012
	Interest Rate	Face Value		Carrying Value
Financial Liabilities Payable Within One Year:
	Effective
Tranche B Term Loan	6.46% (1)	$	30	$	30
Canadian Health Care Trust Note — Tranche D	5.50% (2)		25		25
Mexican development banks credit facility due 2025	9.55% (3)		28		28
	Weighted Average
Other:
Capital lease obligations	11.49%		35		26
Other financial obligations	11.34%		104		96
Total other financial liabilities			139		122
Total financial liabilities payable within one year		$	222	$	205

	Maturity		Interest Rate	Face Value		Carrying Value
Financial Liabilities Payable After One Year:
			Effective
VEBA Trust Note		7/15/2023	11.71%	$	4,836	$	4,220
Tranche B Term Loan		5/24/2017	6.46% (1)		2,940		2,883
Secured Senior Notes due 2019		6/15/2019	8.21% (4)		1,500		1,483
Secured Senior Notes due 2021		6/15/2021	8.44% (5)		1,700		1,681
Canadian Health Care Trust Notes:
Tranche A		6/30/2017	7.98% (6)		436		463
Tranche B		6/30/2024	9.21% (6)		435		446
Tranche C		6/30/2024	9.68% (7)		98		82
Total Canadian Health Care Trust Notes					969		991
Mexican development banks credit facilities:
Credit facility due 2021		12/23/2021	8.46% (8)		220		220
Credit facility due 2025		7/19/2025	9.55% (3)		347		347
Total Mexican development banks credit facilities					567		567

		Weighted Average
Other:
Capital lease obligations	2013-2020	12.37%		269		228
Other financial obligations	2013-2024	13.00%		271		249
Total other financial liabilities				540		477
Total financial liabilities payable after one year				13,052		12,302
Total			$	13,274	$	12,507

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 7. Financial Liabilities —Continued

	December 31, 2011
	Interest Rate	Face Value		Carrying Value
Financial Liabilities Payable Within One Year:
	Effective
Tranche B Term Loan	6.46% (1)	$	30	$	30
Canadian Health Care Trust Note — Tranche D	5.50% (2)		24		23
Mexican development banks credit facility due 2025	9.60%(3)		14		14
	Weighted Average
Other:
Asset-backed note payable — Gold Key Lease	4.46%		41		41
Capital lease obligations	11.01%		38		28
Other financial obligations	10.37%		104		94
Total other financial liabilities			183		163
Total financial liabilities payable within one year		$	251	$	230

	Maturity		Interest Rate	Face Value		Carrying Value
Financial Liabilities Payable After One Year:
			Effective
VEBA Trust Note		7/15/2023	11.71%	$	4,836	$	4,193
Tranche B Term Loan		5/24/2017	6.46% (1)		2,955		2,893
Secured Senior Notes due 2019		6/15/2019	8.21% (4)		1,500		1,482
Secured Senior Notes due 2021		6/15/2021	8.44% (5)		1,700		1,680
Canadian Health Care Trust Notes:
Tranche A		6/30/2017	7.98% (6)		434		465
Tranche B		6/30/2024	9.21% (6)		433		445
Tranche C		6/30/2024	9.68% (7)		98		81
Total Canadian Health Care Trust Notes					965		991
Mexican development banks credit facilities:
Credit facility due 2021		12/23/2021	8.49% (8)		214		214
Credit facility due 2025		7/19/2025	9.60% (3)		353		353
Total Mexican development banks credit facilities					567		567

		Weighted Average
Other:
Capital lease obligations	2013-2020	12.42%		282		237
Other financial obligations	2013-2024	12.81%		326		301
Total other financial liabilities				608		538
Total financial liabilities payable after one year				13,131		12,344
Total			$	13,382	$	12,574

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 7. Financial Liabilities —Continued

(1) Loan bears interest at LIBOR (subject to a 1.25 percent floor) + 4.75 percent. Commencing in July 2011, interest has been reset every three months. Stated interest rate as of both June 30, 2012 and December 31, 2011 was 6.00 percent.

(2) Canadian Health Care Trust Note – Tranche D is non-interest bearing.

(3) Represents the stated interest rate. Loan bears interest at the 28 day Interbank Equilibrium Interest Rate (“TIIE”) + 4.80 percent subject to a quarterly reset of TIIE.

(4) Notes bear interest at a stated rate of 8.00 percent.

(5) Notes bear interest at a stated rate of 8.25 percent.

(6) Note bears interest at a stated rate of 9.00 percent.

(7) Note bears interest at a stated rate of 7.50 percent.

(8) Represents the stated interest rate. Loan bears interest at the 28 day TIIE + 3.70 percent subject to a monthly reset of TIIE.

As of June 30, 2012, the carrying amounts of our financial obligations were net of fair value adjustments, discounts, premiums and loan origination fees totaling $767 million related to the following obligations (in millions of dollars):

VEBA Trust Note	$	616
Tranche B Term Loan		57
Secured Senior Notes due 2019		17
Secured Senior Notes due 2021		19
Canadian Health Care Trust Notes		(22	)
Liabilities for capital lease and other financial obligations		80
Total	$	767

As of June 30, 2012, aggregate annual contractual maturities of financial liabilities at face values were as follows (in millions of dollars):

Remainder of 2012	$	121
2013		464
2014		465
2015		495
2016		527
2017 and thereafter		11,202
Total	$	13,274

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 7. Financial Liabilities —Continued

Repayment of U.S. Treasury and Export Development Canada Credit Facilities

On May 24, 2011, we repaid all amounts outstanding under the U.S. Treasury first lien credit agreement and Export Development Canada (“EDC”) loan and security agreement. Refer to our 2011 Form 10-K for additional information related to these agreements.

Payments were made as follows (in millions of dollars):

	Principal			Accrued Interest		Total Payment
U.S. Treasury first lien credit facilities:
Tranche B	$	2,080	(1)	$	22	$	2,102
Tranche C		3,675	(2)		65		3,740
Zero Coupon Note		100			—		100
Total U.S Treasury first lien credit facilities		5,855			87		5,942
EDC credit facilities:
Tranche X		1,319			14		1,333
Tranche X-2		404			4		408
Total EDC credit facilities		1,723			18		1,741
Total U.S Treasury and EDC credit facilities	$	7,578		$	105	$	7,683

(1) Includes $80 million of payable-in-kind (“PIK”) interest previously capitalized. The payment of PIK interest is included as a component of Net Cash Provided by Operating Activities in the accompanying Condensed Consolidated Statements of Cash Flows.

(2) Includes $315 million of PIK interest previously capitalized. The payment of PIK interest is included as a component of Net Cash Provided by Operating Activities in the accompanying Condensed Consolidated Statements of Cash Flows. In addition, as a result of the termination of the Ally Master Transaction Agreement (“Ally MTA”) and in accordance with the U.S. Treasury first lien credit agreement, amounts outstanding under that agreement were reduced by $4 million, the amount of qualifying losses incurred by Ally Financial Inc. (“Ally”) through April 2011. Refer to Note 9, Commitments, Contingencies and Concentrations, for additional information related to the Ally MTA.

In connection with the repayment of our outstanding obligations under the U.S. Treasury and EDC credit facilities, we recognized a $551 million loss on extinguishment of debt, which consisted of the write off of $136 million of unamortized discounts and $34 million of unamortized debt issuance costs associated with the U.S. Treasury credit facilities and $367 million of unamortized discounts and $14 million of unamortized debt issuance costs associated with the EDC credit facilities. These charges are included in Loss on Extinguishment of Debt in the accompanying Condensed Consolidated Statements of Operations.

Senior Credit Facilities and Secured Senior Notes

On May 24, 2011, we and certain of our U.S. subsidiaries as guarantors entered into the following arrangements:

• Senior Credit Facilities — a $3.0 billion Tranche B Term Loan maturing on May 24, 2017, which was fully drawn on May 24, 2011 and a $1.3 billion Revolving Facility which matures on May 24, 2016 and remains undrawn;

• Secured Senior Notes due 2019 — issuance of $1.5 billion of 8 percent secured senior notes due June 15, 2019 (“Original 2019 Notes”); and

• Secured Senior Notes due 2021 — issuance of $1.7 billion of 8 ¹/₄ percent secured senior notes due June 15, 2021 (“Original 2021 Notes”).

Refer to our 2011 Form 10-K for additional information related to these arrangements.

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 7. Financial Liabilities —Continued

Secured Senior Notes Exchange Offer

In connection with the offering of the Original 2019 Notes and Original 2021 Notes, collectively referred to as the “Original Notes”, we entered into a registration rights agreement with the initial purchasers of the Original Notes. In the registration rights agreement, we agreed to register notes having substantially identical terms as the Original Notes with the SEC as part of an offer to exchange freely tradable exchange notes for the Original Notes. On December 29, 2011, and subject to the terms and conditions set forth in our prospectus, we commenced an offer to exchange our new 8 percent secured senior notes due 2019 (“2019 Notes”) for the outstanding Original 2019 Notes and our new 8 ¹/₄ percent secured senior notes due 2021 (“2021 Notes”) for the outstanding Original 2021 Notes. The 2019 Notes and 2021 Notes are collectively referred to as the “Notes.”

On February 1, 2012, our offers to exchange the Original 2019 Notes and Original 2021 Notes expired. Substantially all of the Original Notes were tendered for the Notes. The holders of the Notes received an equal principal amount of 2019 Notes for the Original 2019 Notes and an equal principal amount of 2021 Notes for the Original 2021 Notes. The form and terms of the Notes are identical in all material respects to the Original Notes, except that, the Notes do not contain restrictions on transfer.

Canadian Health Care Trust Notes

In 2010, Chrysler Canada Inc. (“Chrysler Canada”) issued four unsecured promissory notes to an independent Canadian Health Care Trust (“Canadian Health Care Trust Notes”). The scheduled Tranche A and Tranche B note payments through 2012 do not fully satisfy the interest accrued at the stated rate of 9.0 percent per annum. Accordingly, on the payment date, the difference between a scheduled payment and the interest accrued through the payment date will be capitalized as additional debt. We are not required to make a payment on the Tranche C note until 2020. However, interest accrued on the Tranche C note will be capitalized as additional debt on the payment date of the Tranche B note through 2019.

Payments on the Canadian Health Care Trust Notes are due on June 30 of each year unless that day is not a business day in Canada, in which case, payments are due on the next business day. Therefore, the scheduled payments for 2012 will be made on July 3, 2012. On that date, $74 million ($76 million Canadian Dollars “CAD”) of interest accrued in excess of the scheduled payments will be capitalized as additional debt.

Gold Key Lease

Chrysler Canada maintains our Gold Key Lease vehicle lease portfolio. The related vehicles are leased to Canadian consumers and were financed by asset-backed securitization facilities, as well as a $4.9 billion ($5.0 billion CAD) secured revolving credit facility. In June 2012, we repaid the remaining outstanding balance of the asset-backed note payable. These obligations were primarily repaid out of collections from the operating leases and proceeds from the sales of the related vehicles. We are currently winding down the Gold Key Lease program, therefore, we anticipate no additional funding will be required. No vehicles were added to the portfolio during the six months ended June 30, 2012 and 2011.

Amounts Available for Borrowing under Credit Facilities

As of June 30, 2012, our $1.3 billion revolving credit facility that matures in May 2016, remains undrawn and the Tranche B Term Loan and Mexican development banks credit facilities remain fully drawn. Our $4.9 billion ($5.0 billion CAD) Gold Key Lease secured revolving credit facility remains undrawn as of June 30, 2012, however, we do not anticipate any additional funding will be provided due to winding down the Gold Key Lease program.

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 8. Income Taxes

For interim tax reporting, we estimate our annual effective tax rate and apply it to our year to date ordinary income (loss). The tax effect of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates are reported in the interim period in which they occur. There have been no significant changes in our estimates or the provision for income taxes during the six months ended June 30, 2012.

During the three months ended March 31, 2011, we received $374 million of reimbursements from Daimler AG (“Daimler”) related to payments previously made by us which had been applied by the Canada Revenue Agency and the Provincial Tax Authorities in relation to additional taxes assessed to Chrysler Canada for transfer pricing adjustments. No such reimbursements were received during the three months ended June 30, 2011 and the six months ended June 30, 2012. Refer to our 2011 Form 10-K for further discussion regarding the Canadian transfer pricing matter.

Note 9. Commitments, Contingencies and Concentrations

Litigation

Various legal proceedings, claims and governmental investigations are pending against us on a wide range of topics, including vehicle safety; emissions and fuel economy; dealer, supplier and other contractual relationships; intellectual property rights; product warranties and environmental matters. Some of these proceedings allege defects in specific component parts or systems (including airbags, seats, seat belts, brakes, ball joints, transmissions, engines and fuel systems) in various vehicle models or allege general design defects relating to vehicle handling and stability, sudden unintended movement or crashworthiness. These proceedings seek recovery for damage to property, personal injuries or wrongful death and in some cases include a claim for exemplary or punitive damages. Adverse decisions in one or more of these proceedings could require us to pay substantial damages, or undertake service actions, recall campaigns or other costly actions.

Litigation is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance. We establish an accrual in connection with pending or threatened litigation if a loss is probable and can be reasonably estimated. Since these accruals represent estimates, it is reasonably possible that the resolution of some of these matters could require us to make payments in excess of the amounts accrued. It is also reasonably possible that the resolution of some of the matters for which accruals could not be made may require us to make payments in an amount or range of amounts that could not be reasonably estimated at June 30, 2012.

The term “reasonably possible” is used herein to mean that the chance of a future transaction or event occurring is more than remote but less than likely. Although the final resolution of any such matters could have a material effect on our operating results for the particular reporting period in which an adjustment of the estimated reserve is recorded, we believe that any resulting adjustment would not materially affect our consolidated financial position or cash flows.

Environmental Matters

We are subject to potential liability under government regulations and various claims and legal actions that are pending or may be asserted against us concerning environmental matters. Estimates of future costs of such environmental matters are inevitably imprecise due to numerous uncertainties, including the enactment of new laws and regulations, the development and application of new technologies, the identification of new sites for which we may have remediation responsibility and the apportionment and collectability of remediation costs among responsible parties. We establish reserves for these environmental matters when a loss is probable and reasonably estimable. It is reasonably possible that the final resolution of some of these matters may require us to make expenditures, in excess of established reserves, over an extended period of time and in a range of amounts

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 9. Commitments, Contingencies and Concentrations —Continued

Environmental Matters —Continued

that cannot be reasonably estimated. Although the final resolution of any such matters could have a material effect on our operating results for the particular reporting period in which an adjustment of the estimated reserve is recorded, we believe that any resulting adjustment would not materially affect our consolidated financial position or cash flows.

Voluntary Service Actions and Recall Actions

We periodically initiate voluntary service and recall actions to address various customer satisfaction, safety and emissions issues related to vehicles we sell. We establish reserves for product warranty obligations, including the estimated cost of these service and recall actions, when the related sale is recognized. Refer to Note 6,Accrued Expenses and Other Liabilities, for additional information. The estimated future costs of these actions are based primarily on historical claims experience for our vehicles. Estimates of the future costs of these actions are inevitably imprecise due to numerous uncertainties, including the enactment of new laws and regulations, the number of vehicles affected by a service or recall action and the nature of the corrective action that may result in adjustments to the established reserves. It is reasonably possible that the ultimate cost of these service and recall actions may require us to make expenditures in excess of established reserves, over an extended period of time and in a range of amounts that cannot be reasonably estimated. Although the ultimate cost of these service and recall actions could have a material effect on our operating results for the particular reporting period in which an adjustment of the estimated reserve is recorded, we believe that any such adjustment would not materially affect our consolidated financial position or cash flows.

Restricted Cash

Restricted cash, which includes cash equivalents, was $407 million as of June 30, 2012. Restricted cash included $259 million held on deposit or otherwise pledged to secure our obligations under various commercial agreements guaranteed by a subsidiary of Daimler, $50 million of collateral for foreign currency exchange and commodity hedge contracts and $98 million of collateral for standby letters of credit and other contractual agreements.

Concentrations

Suppliers

Although we have not experienced any significant deterioration in our annual production volumes as a result of materials or parts shortages, we have from time to time experienced short term interruptions and variability in quarterly production schedules as a result of temporary supply constraints or disruptions in the availability of raw materials, parts and components as a result of natural disasters and other unexpected events. Additionally, we regularly source systems, components, parts, equipment and tooling from a sole provider or limited number of providers. Therefore, we are at risk for production delays and losses should any supplier fail to deliver goods and services on time. We continuously work with our suppliers to monitor potential supply constraints and to mitigate the effects of any emerging shortages on our production volumes and revenues. We also maintain insurance coverage for losses we might incur due to shortages or other supplier disruptions. During the three months ended March 31, 2012, we recognized insurance recoveries totaling $72 million related to losses sustained in 2011 due to supply disruptions. These recoveries were recognized as a reduction to Cost of Sales in the accompanying Condensed Consolidated Statements of Operations. The proceeds from these recoveries were fully collected during the three months ended June 30, 2012. There were no similar insurance recoveries during the three months ended June 30, 2012 and the six months ended June 30, 2011.

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 9. Commitments, Contingencies and Concentrations —Continued

Concentrations —Continued

Employees

In the U.S. and Canada combined, most of our hourly employees and approximately one-quarter of our salaried employees were represented by unions under collective bargaining agreements, which represented approximately 64 percent of our worldwide workforce as of June 30, 2012. The International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”) and the National Automobile, Aerospace, Transportation and General Workers Union of Canada (“CAW”) represent substantially all of these represented employees in the U.S. and Canada, respectively.

Our collective bargaining agreement with the CAW expires in September 2012.

Other Matters

Ally MTA

Prior to May 2011, we were a party to the Ally Master Transaction Agreement (“Ally MTA”) between the U.S. Treasury, Ally Financial Inc. (“Ally”) and U.S. Dealer Automotive Receivables Transition LLC (“USDART”). The Ally MTA provided for a risk sharing arrangement, in which USDART would reimburse Ally for qualifying losses on loans with third party Chrysler dealerships issued prior to November 21, 2009. On May 19, 2011, all parties mutually agreed to terminate the Ally MTA. Under the terms of the agreement, $96 million, which represented the remaining balance of a previous advance to USDART, was transferred to us. In addition, under the terms of the U.S. Treasury first lien credit agreement, amounts outstanding under that agreement were reduced by $4 million, the amount of qualifying losses incurred by Ally through April 2011.

Ally Auto Finance Operating Agreement and Repurchase Obligations

In accordance with the terms of the Ally Auto Finance Operating Agreement (“Ally Agreement”), Ally provides wholesale and retail financing to our dealers and retail customers in the U.S. and Canada in accordance with its usual and customary lending standards. Our agreement with Ally is not exclusive. Ally provides consumer and dealer financing to other manufacturers. Our dealers and retail customers also obtain financing from other financing sources.

From time to time, we work with Ally and certain other lenders to subsidize interest rates or cash at the inception of a financing arrangement to incentivize customers to purchase our vehicles, a practice known as “subvention.” Under the Ally Agreement, we must first offer all subvention programs to Ally, and we are required to ensure that Ally finances a specified minimum percentage of the vehicles we sell in North America under rate subvention programs in which it elects to participate. We may, from time to time, offer lease products to retail customers through Ally, but Ally is not obligated to offer lease products.

Under the Ally Agreement, we are required to repurchase Ally-financed dealer inventory, upon certain triggering events and with certain exceptions, in the event of an actual or constructive termination of a dealer’s franchise agreement (including in certain circumstances when Ally forecloses on all assets of a dealer securing financing provided by Ally). These obligations exclude vehicles that have been damaged or altered, that are missing equipment or that have excessive mileage or an original invoice date that is more than one year prior to the repurchase date.

As of June 30, 2012, the maximum potential amount of future payments required to be made to Ally under this guarantee was approximately $7.5 billion and was based on the aggregate repurchase value of eligible vehicles

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 9. Commitments, Contingencies and Concentrations —Continued

Other Matters —Continued

Ally Auto Finance Operating Agreement and Repurchase Obligations —Continued

financed by Ally in our U.S. and Canadian dealer stock. If vehicles are required to be repurchased under this arrangement, the total exposure would be reduced to the extent the vehicles can be resold to another dealer. The fair value of the guarantee was less than $0.1 million at June 30, 2012, which considers both the likelihood that the triggering events will occur and the estimated payment that would be made net of the estimated value of inventory that would be reacquired upon the occurrence of such events. The estimate reflects our actual experience.

The Ally Agreement is effective through April 30, 2013, with automatic one-year renewals unless either party elects not to renew. We have notified Ally of our election not to renew the Ally Agreement for an additional term.

Other Repurchase Obligations

In accordance with the terms of other wholesale financing arrangements in Mexico, we are required to repurchase dealer inventory financed under these arrangements, upon certain triggering events and with certain exceptions, including in the event of an actual or constructive termination of a dealer’s franchise agreement. These obligations exclude certain vehicles including, but not limited to, vehicles that have been damaged or altered, that are missing equipment or that have excessive mileage.

As of June 30, 2012, the maximum potential amount of future payments required to be made in accordance with these other wholesale financing arrangements was approximately $230 million and was based on the aggregate repurchase value of eligible vehicles financed through such arrangements in the respective dealer’s stock. If vehicles are required to be repurchased through such arrangements, the total exposure would be reduced to the extent the vehicles can be resold to another dealer. The fair value of the guarantee was less than $0.1 million at June 30, 2012, which considers both the likelihood that the triggering events will occur and the estimated payment that would be made net of the estimated value of inventory that would be reacquired upon the occurrence of such events. The estimate reflects our actual experience.

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 10. Fair Value Measurements

The following summarizes our financial assets and liabilities measured at fair value on a recurring basis (in millions of dollars):

	June 30, 2012
	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	11,116	$	959	$	—	$	12,075
Restricted cash		407		—		—		407
Derivatives:
Currency forwards and swaps		—		51		—		51
Commodity swaps		—		1		—		1
Total	$	11,523	$	1,011	$	—	$	12,534
Liabilities:
Derivatives:
Currency forwards and swaps	$	—	$	13	$	—	$	13
Commodity swaps		—		51		30		81
Total	$	—	$	64	$	30	$	94
	December 31, 2011
	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	8,976	$	625	$	—	$	9,601
Restricted cash		461		—		—		461
Derivatives:
Currency forwards and swaps		—		67		—		67
Commodity swaps		—		—		1		1
Total	$	9,437	$	692	$	1	$	10,130
Liabilities:
Derivatives:
Currency forwards and swaps	$	—	$	6	$	—	$	6
Commodity swaps		—		88		36		124
Total	$	—	$	94	$	36	$	130

During the six months ended June 30, 2012, there were no transfers between Level 1 and Level 2 or into or out of Level 3.

We enter into over-the-counter currency forward and swap contracts to manage our exposure to risk relating to changes in foreign currency exchange rates. We estimate the fair value of currency forward and swap contracts by discounting future net cash flows derived from market-based expectations for exchange rates to a single present value.

We enter into over-the-counter commodity swaps to manage our exposure to risk relating to changes in market prices of various commodities. Swap contracts are fair valued by discounting future net cash flows derived from market-based expectations for commodity prices to a single present value. For certain commodities within our portfolio, market-based expectations of these prices are less observable, and alternative sources are used to develop these inputs. We have classified these commodity swaps as Level 3 within the fair value hierarchy.

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Notes to Condensed Consolidated Financial Statements

Note 10. Fair Value Measurements —Continued

We take into consideration credit valuation adjustments on both assets and liabilities taking into account credit risk of our counterparties and non-performance risk as described in Note 11,Derivative Financial Instruments and Risk Management.

The following summarizes the changes in Level 3 items measured at fair value on a recurring basis (in millions of dollars):

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Derivatives Assets (Liabilities):
Balance at beginning of the period	$	(16	)	$	23		$	(35	)	$	41
Total realized and unrealized gains (losses):
Included in Net Income (Loss)		(8	)		16			(11	)		20
Included in Other Comprehensive Income (Loss)		(17	)		(17	)		(3	)		(24	)
Settlements (1)		11			(13	)		19			(28	)
Transfers into Level 3		—			—			—			—
Transfers out of Level 3		—			—			—			—
Fair value at end of the period	$	(30	)	$	9		$	(30	)	$	9
Changes in unrealized losses relating to instruments held at end of period(2)	$	—		$	—		$	—		$	1

(1) There were no purchases, issuances or sales during the three and six months ended June 30, 2012 and 2011.

(2) The related unrealized losses are recognized in Cost of Sales in the accompanying Condensed Consolidated Statements of Operations.

The following summarizes the unobservable inputs related to Level 3 items measured at fair value on a recurring basis as of June 30, 2012:

	Net Liability (in millions of dollars)		Valuation Technique	Unobservable Input	Range	Unit of Measure
Commodity Swaps	$	30	Discounted	Platinum forward points	$ 0.38 — $11.54	Per troy ounce
			cash flow	Palladium forward points	$ 0.19 — $  5.31	Per troy ounce
				Natural gas forward points	$ 0.19 — $  1.57	Per giga-joule

The forward points that were used in the valuation of platinum, palladium and certain natural gas contracts were deemed unobservable. Significant increases or decreases in any of the unobservable inputs in isolation would not significantly impact our fair value measurements.

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 10. Fair Value Measurements —Continued

The carrying amounts and estimated fair values of our financial instruments were as follows (in millions of dollars):

	June 30, 2012				December 31, 2011
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cash and cash equivalents	$	12,075	$	12,075	$	9,601	$	9,601
Restricted cash		407		407		461		461
Financial liabilities(1)		12,507		13,059		12,574		12,183
Derivatives:
Included in Prepaid Expenses and Other Assets and Advances to Related Parties and Other Financial Assets		52		52		68		68
Included in Accrued Expenses and Other Liabilities		94		94		130		130

(1) The fair value of financial liabilities includes $6.3 billion measured utilizing Level 2 inputs and $6.8 billion measured utilizing Level 3 inputs at June 30, 2012.

The estimated fair values have been determined by using available market information and valuation methodologies as described below. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we could realize in a current market exchange. The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair values.

The methods and assumptions used to estimate the fair value of financial instruments are consistent with the definition presented in the accounting guidance for fair value measurements and are as follows:

Cash and cash equivalents, including restricted cash

The carrying value of cash and cash equivalents approximates fair value due to the short maturity of these instruments and consists primarily of money market funds, certificates of deposit, commercial paper, time deposits and bankers’ acceptances.

Financial liabilities

We estimate the fair values of our financial liabilities using quoted market prices where available. Where market prices are not available, we estimate fair value by discounting future cash flows using market interest rates, adjusted for non-performance risk over the remaining term of the financial liability.

Derivative instruments

The fair values of derivative instruments are based on pricing models or formulas using current estimated cash flow and discount rate assumptions.

Note 11. Derivative Financial Instruments and Risk Management

All derivative instruments are recognized in the accompanying Condensed Consolidated Balance Sheets at fair value. The fair values of our derivative financial instruments are based on pricing models or formulas using current estimated cash flow and discount rate assumptions. We include an adjustment for non-performance risk in the recognized measure of fair value of derivative instruments. The adjustment is estimated based on the net

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 11. Derivative Financial Instruments and Risk Management —Continued

exposure by counterparty. We use an estimate of the counterparty’s non-performance risk when we are in a net asset position and an estimate of our own non-performance risk when we are in a net liability position. As of June 30, 2012 and December 31, 2011, the adjustment for non-performance risk did not materially impact the fair value of derivative instruments.

The use of derivatives exposes us to the risk that a counterparty may default on a derivative contract. We establish exposure limits for each counterparty to minimize this risk and provide counterparty diversification. Substantially all of our derivative exposures are with counterparties that have long-term credit ratings of single–A or better. The aggregate fair value of derivative instruments in asset positions as of June 30, 2012 and December 31, 2011 was approximately $52 million and $68 million, respectively, representing the maximum loss that we would recognize at that date if all counterparties failed to perform as contracted. We enter into master agreements with counterparties that generally allow for netting of certain exposures; therefore, the actual loss that we would recognize if all counterparties failed to perform as contracted, could be significantly lower.

The terms of the agreements with our counterparties for foreign currency exchange and commodity hedge contracts require us to post collateral when derivative instruments are in a liability position. In addition, these agreements contain cross-default provisions that, if triggered, would permit the counterparty to declare a default and require settlement of the outstanding net asset or liability positions. These cross-default provisions could be triggered if there was a non-performance event under certain debt obligations. The fair value of the related gross liability positions as of June 30, 2012 and December 31, 2011, which represent our maximum potential exposure, were $94 million and $130 million, respectively. As of June 30, 2012 and December 31, 2011, we posted $50 million and $96 million, respectively, as collateral for foreign currency exchange and commodity hedge contracts. The cash collateral is included in Restricted Cash in the accompanying Condensed Consolidated Balance Sheets. After giving consideration to offsetting asset positions for each counterparty, if cross-default provisions were triggered, there would have been an additional settlement liability of $9 million and $1 million due to the counterparties as of June 30, 2012 and December 31, 2011, respectively.

The notional amounts of the derivative financial instruments do not necessarily represent amounts exchanged by the parties and, therefore, are not a direct measure of our exposure to the financial risks described above. The amounts exchanged are calculated by reference to the notional amounts and by other terms of the derivative instruments, such as foreign currency exchange rates or commodity volumes and prices.

Cash Flow Hedges

We use financial instruments designated as cash flow hedges to hedge exposure to foreign currency exchange risk associated with transactions in currencies other than the functional currency in which we operate. We also use financial instruments designated as cash flow hedges to hedge our exposure to commodity price risk associated with buying certain commodities used in the ordinary course of our operations.

Changes in the fair value of designated derivatives that are highly effective as cash flow hedges are recorded in accumulated other comprehensive income (loss) (“AOCI”), net of estimated income taxes. These changes in the fair value are then released into earnings contemporaneously with the earnings effects of the hedged items. Cash flows associated with cash flow hedges are reported in Net Cash Provided by Operating Activities in the accompanying Condensed Consolidated Statements of Cash Flows. The ineffective portions of the fair value changes are recognized in the results of operations immediately. The amount of ineffectiveness recorded for the three and six months ended June 30, 2012 and 2011 was immaterial. Our cash flow hedges mature within 18 months.

We discontinue hedge accounting prospectively and hold amounts in AOCI with future changes in fair value recorded directly in earnings when (i) it is determined that a derivative is no longer highly effective in off-setting

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 11. Derivative Financial Instruments and Risk Management —Continued

Cash Flow Hedges —Continued

changes in cash flows of a hedged item; (ii) the derivative is discontinued as a hedge instrument because it is not probable that a forecasted transaction will occur or (iii) the derivative expires or is sold, terminated or exercised. Those amounts held in AOCI are subsequently reclassified into income over the same period or periods during which the forecasted transaction affects income.

When hedge accounting is discontinued because it is determined that the forecasted transactions will not occur, the derivative continues to be carried on the balance sheet at fair value, and gains and losses that were recorded in AOCI are recognized immediately in earnings. The hedged item may be designated prospectively into a new hedging relationship with another derivative instrument.

The following summarizes the fair values of derivative instruments designated as cash flow hedges which were outstanding (in millions of dollars):

	June 30, 2012
	Notional Amounts		Derivative Assets(1)		Derivative Liabilities(2)
Currency forwards and swaps	$	3,080	$	47	$	(7	)
Commodity swaps		267		—		(39	)
Total	$	3,347	$	47	$	(46	)

	December 31, 2011
	Notional Amounts		Derivative Assets(1)		Derivative Liabilities(2)
Currency forwards and swaps	$	2,597	$	63	$	(4	)
Commodity swaps		313		1		(50	)
Total	$	2,910	$	64	$	(54	)

(1) The related derivative instruments are recognized in Prepaid Expenses and Other Assets and Advances to Related Parties and Other Financial Assets in the accompanying Condensed Consolidated Balance Sheets.

(2) The related derivative instruments are recognized in Accrued Expenses and Other Liabilities in the accompanying Condensed Consolidated Balance Sheets.

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 11. Derivative Financial Instruments and Risk Management —Continued

Cash Flow Hedges —Continued

The following summarizes the gains (losses) recorded in other comprehensive income (loss) and reclassified from AOCI to income (in millions of dollars):

	Three Months Ended June 30, 2012
	AOCI as of April 1, 2012			Gain (Loss) Recorded in OCI			Gain (Loss) reclassified from AOCI to Income			AOCI as of June 30, 2012
Currency forwards and swaps	$	(26	)	$	75		$	10		$	39
Commodity swaps		(36	)		(24	)		(12	)		(48	)
Total	$	(62	)	$	51		$	(2	)	$	(9	)
	Three Months Ended June 30, 2011
	AOCI as of April 1, 2011			Gain (Loss) Recorded in OCI			Gain (Loss) reclassified from AOCI to Income			AOCI as of June 30, 2011
Currency forwards and swaps	$	(108	)	$	(57	)	$	(74	)	$	(91	)
Commodity swaps		37			(3	)		15			19
Total	$	(71	)	$	(60	)	$	(59	)	$	(72	)
	Six Months Ended June 30, 2012
	AOCI as of January 1, 2012			Gain (Loss) Recorded in OCI			Gain (Loss) reclassified from AOCI to Income			AOCI as of June 30, 2012
Currency forwards and swaps	$	57		$	(5	)	$	13		$	39
Commodity swaps		(51	)		(19	)		(22	)		(48	)
Total	$	6		$	(24	)	$	(9	)	$	(9	)
	Six Months Ended June 30, 2011
	AOCI as of January 1, 2011			Gain (Loss) Recorded in OCI			Gain (Loss) reclassified from AOCI to Income			AOCI as of June 30, 2011
Currency forwards and swaps	$	(74	)	$	(152	)	$	(135	)	$	(91	)
Commodity swaps		42			(8	)		15			19
Total	$	(32	)	$	(160	)	$	(120	)	$	(72	)

We expect to reclassify existing net losses of $9 million from AOCI to income within the next 12 months.

Derivatives Not Designated as Hedges

Some derivatives do not qualify for hedge accounting; for others, we elect not to apply hedge accounting. We use derivatives to economically hedge our financial and operational exposures. Unrealized and realized gains and losses related to derivatives that are not designated as accounting hedges are included in Revenues, Net or Cost of Sales in the accompanying Condensed Consolidated Statements of Operations as appropriate depending on the nature of the risk being hedged. Cash flows associated with derivatives that are not designated as hedges are reported in Net Cash Provided by Operating Activities in the accompanying Condensed Consolidated Statements of Cash Flows.

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Notes to Condensed Consolidated Financial Statements

Note 11. Derivative Financial Instruments and Risk Management —Continued

Derivatives Not Designated as Hedges —Continued

The following summarizes the fair values of derivative instruments not designated as hedges (in millions of dollars):

	June 30, 2012
	Notional Amounts		Derivative Assets(1)		Derivative Liabilities(2)
Currency forwards and swaps	$	406	$	4	$	(6	)
Commodity swaps		400		1		(42	)
Total	$	806	$	5	$	(48	)
	December 31, 2011
	Notional Amounts		Derivative Assets(1)		Derivative Liabilities(2)
Currency forwards and swaps	$	341	$	4	$	(2	)
Commodity swaps		465		—		(74	)
Total	$	806	$	4	$	(76	)

(1) The related derivative instruments are recognized in Prepaid Expenses and Other Assets and Advances to Related Parties and Other Financial Assets in the accompanying Condensed Consolidated Balance Sheets.

(2) The related derivative instruments are recognized in Accrued Expenses and Other Liabilities in the accompanying Condensed Consolidated Balance Sheets.

The following summarizes the effect of derivative instruments not designated as hedges in the respective financial statement captions of the accompanying Condensed Consolidated Statements of Operations (in millions of dollars):

	Financial Statement Caption	Three Months Ended June 30,						Six Months Ended June 30,
		2012 Gain (Loss)			2011 Gain (Loss)			2012 Gain (Loss)			2011 Gain (Loss)
Currency forwards and swaps	Revenues, Net	$	6		$	(3	)	$	(5	)	$	(9	)
Commodity swaps	Cost of Sales		(40	)		(15	)		(19	)		7
Interest rate swaps	Cost of Sales		—			—			—			1
	Total	$	(34	)	$	(18	)	$	(24	)	$	(1	)

Note 12. Employee Retirement and Other Benefits

We sponsor both noncontributory and contributory defined benefit pension plans. The majority of the plans are funded plans. The noncontributory pension plans cover certain of our hourly and salaried employees. Benefits are based on a fixed rate for each year of service. Additionally, contributory benefits are provided to certain of our salaried employees under the salaried employees’ retirement plans. These plans provide benefits based on the employee’s cumulative contributions, years of service during which the employee contributions were made and the employee’s average salary during the five consecutive years in which the employee’s salary was highest in the fifteen years preceding retirement.

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Notes to Condensed Consolidated Financial Statements

Note 12. Employee Retirement and Other Benefits —Continued

We provide health care, legal and life insurance benefits to certain of our hourly and salaried employees. Upon retirement from the Company, employees may become eligible for continuation of certain benefits. Benefits and eligibility rules may be modified periodically.

Benefits Expense

The components of pension and other postretirement benefits (“OPEB”) expense (income) were as follows (in millions of dollars):

	Three Months Ended June 30,												Six Months Ended June 30,
	2012						2011						2012							2011
	Pension Benefits			OPEB			Pension Benefits			OPEB			Pension Benefits			OPEB				Pension Benefits			OPEB
Service cost	$	76		$	6		$	65		$	5		$	155		$	12			$	132		$	10
Interest cost		376			33			380			35			753			66				760			69
Expected return on plan assets		(454	)		—			(454	)		—			(909	)		—				(908	)		—
Gain on VEBA claims adjustment		—			—			—			(15	)		—			—				—			(15	)
Amortization of unrecognized loss		20			5			—			2			39			10		��		—			5
Amortization of prior service credit		—			(10	)		—			—			—			(20	)			—			—
Other		—			—			—			—			—			(1	)			—			—
Net periodic benefit costs (credit)		18			34			(9	)		27			38			67				(16	)		69
Special early retirement costs		1			—			27			—			1			—				27			—
Total benefits expense	$	19		$	34		$	18		$	27		$	39		$	67			$	11		$	69

Contributions and Payments

During the six months ended June 30, 2012, employer contributions to our funded pension plans amounted to $84 million. Employer contributions to our funded pension plans are expected to be $557 million for the remainder of 2012, of which discretionary contributions of $259 million are expected to be made to the U.S. plans and $2 million and $281 million will be made to our U.S. and Canadian plans, respectively, to satisfy minimum funding requirements. Employer contributions to our unfunded pension and OPEB plans amounted to $6 million and $97 million, respectively, for the six months ended June 30, 2012. Employer contributions to our unfunded pension and OPEB plans are expected to be $4 million and $91 million, respectively, for the remainder of 2012, which represent the expected benefit payments to participants.

In connection with the 363 Transaction, we acquired a $600 million receivable from Daimler to fund contributions to our U.S. pension plans. This receivable was payable to us in three equal annual installments, of which, the third and final $200 million installment was received by us in June 2011 and was utilized to fund a portion of our contributions to our funded pension plans during the six months ended June 30, 2011.

Note 13. Other Transactions with Related Parties

We engage in transactions with unconsolidated subsidiaries, associated companies and other related parties on commercial terms that are normal in the respective markets, considering the characteristics of the goods or services involved.

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Notes to Condensed Consolidated Financial Statements

Note 13. Other Transactions with Related Parties —Continued

VEBA Trust

As of June 30, 2012, the VEBA Trust had a 41.5 percent ownership interest in the Company, which takes into account the dilutive effect that resulted from our achievement of the third and final Class B Event in January 2012, as discussed below. Interest expense on the VEBA Trust Note totaled $109 million and $106 million for the three months ended June 30, 2012 and 2011, respectively, and $218 million and $211 million for the six months ended June 30, 2012 and 2011, respectively.

Fiat

Ownership Interest

As of June 30, 2012, Fiat had a 58.5 percent ownership interest in the Company. Through a series of transactions in 2011 and 2012, which included our achievement of the three Class B Events described in our governance documents and Fiat’s exercise of its incremental equity call option in May 2011, Fiat increased its ownership interest in the Company from 20.0 percent to 58.5 percent.

In January 2012, we notified the U.S. Treasury that we irrevocably committed to begin assembly of a vehicle based on a Fiat platform or vehicle technology that has a verified unadjusted combined fuel economy of at least 40 miles per gallon in commercial quantities in a production facility in the U.S. As a result, we achieved our third and final Class B Event and Fiat’s ownership interest in the Company increased from 53.5 percent on a fully-diluted basis to 58.5 percent. We had achieved the first and second Class B Events during 2011.

In May 2011, and concurrent with the repayment of our U.S. Treasury and EDC credit facilities, Fiat exercised its incremental equity call option and acquired an additional 16 percent fully-diluted ownership interest in the Company. We received the entire exercise price of $1,268 million in cash, increasing our contributed capital by the proceeds received, and we issued new Class A Membership Interests to Fiat.

Refer to Note 17,Subsequent Event, for additional information regarding ownership interests.

Industrial Alliance

Pursuant to our master industrial agreement with Fiat, we established an industrial alliance in which we collaborate with Fiat on a number of fronts, including product and platform sharing and development, global distribution, procurement, information technology infrastructure and process improvement. The alliance is comprised of various commercial arrangements entered into pursuant to the master industrial agreement. As part of the alliance, we manufacture vehicles for Fiat to distribute and sell in countries outside of North America. In addition, as part of the alliance, we also have access to certain of Fiat’s platforms, vehicles, products and technology. We are obligated to make royalty payments to Fiat related to the intellectual property that was contributed to us by Fiat. These royalty payments are calculated based on a percentage of the material cost of the vehicle, or portion of the vehicle or component, in which we utilize the Fiat intellectual property. In May 2012, and pursuant to a 2011 definitive technology license agreement, Fiat paid us a $37 million license fee, which is included in Deferred Revenue in the accompanying Condensed Consolidated Balance Sheets. Royalty income on the license fee will be amortized over a seven year period when production utilizing the technology begins. In addition, we have agreed to share costs related to certain engineering and development activities and will reimburse each other for costs in excess of the agreed upon cost sharing arrangement. We have also entered into other transactions with Fiat, including the purchase of goods and services in the ordinary course of business.

In June 2011, Fiat became the general distributor of our vehicles and service parts in Europe, selling our products through a network of newly appointed dealers, and we are the exclusive distributor of Fiat brand vehicles and service parts throughout North America.

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 13. Other Transactions with Related Parties —Continued

Fiat —Continued

Industrial Alliance —Continued

The following summarizes our transactions with Fiat (in millions of dollars):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Sales of vehicles, parts and services provided to Fiat	$	870	$	561	$	1,916	$	769
Purchases of vehicles, parts and services from Fiat		346		264		656		402
Purchases capitalized in property, plant and equipment, net and other intangible assets, net		59		45		112		84
Reimbursements to Fiat recognized (1)		5		8		10		14
Reimbursements from Fiat recognized (1)		10		33		28		43
Royalty fees incurred for intellectual property contributed by Fiat		1		1		1		1
Interest income on financial resources provided to Fiat		1		—		1		—
Interest expense on financial resources provided by Fiat		2		—		2		—

(1) Includes reimbursements recognized for costs related to shared engineering and development activities performed under the product and platform sharing agreement that is part of our industrial alliance.

U.S. Treasury

Effective July 21, 2011, the U.S. Treasury is no longer deemed to be a related party as a result of Fiat acquiring beneficial ownership of all of the membership interests in the Company held by the U.S. Treasury.

Related party transactions with the U.S. Treasury disclosed below are related to transactions during the six months ended June 30, 2011, and are limited to activities related to individual contractual agreements and not statutory requirements, such as taxes.

Interest expense on financial resources provided by the U.S. Treasury totaled $85 million and $229 million for the three and six months ended June 30, 2011, respectively. Interest expense included payable-in-kind (“PIK”) interest of $10 million and $27 million for the three and six months ended June 30, 2011, respectively. For the three months ended March 31, 2011, $17 million of PIK interest was capitalized as additional debt in accordance with the loan agreements. No PIK interest was capitalized during the three months ended June 30, 2011 due to the repayment of the U.S. Treasury credit facilities in May 2011. Refer to Note 7,Financial Liabilities,for additional information.

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Notes to Condensed Consolidated Financial Statements

Note 13. Other Transactions with Related Parties —Continued

Related Party Summary

Amounts due from and to related parties were as follows (in millions of dollars):

	June 30, 2012
	VEBA Trust		Fiat		Other		Total
Amounts due from related parties (included in Prepaid Expenses and Other Assets and Advances to Related Parties and Other Financial Assets)	$	—	$	708	$	11	$	719
Amounts due to related parties (included in Accrued Expenses and Other Liabilities)	$	438	$	464	$	5	$	907
Financial liabilities to related parties (included in Financial Liabilities)		4,220		—		5		4,225
Total due to related parties	$	4,658	$	464	$	10	$	5,132
	December 31, 2011
	VEBA Trust		Fiat		Other		Total
Amounts due from related parties (included in Prepaid Expenses and Other Assets and Advances to Related Parties and Other Financial Assets)	$	—	$	978	$	12	$	990
Amounts due to related parties (included in Accrued Expenses and Other Liabilities)	$	220	$	374	$	7	$	601
Financial liabilities to related parties (included in Financial Liabilities)		4,193		—		5		4,198
Total due to related parties	$	4,413	$	374	$	12	$	4,799

Amounts included in “Other” above relate to balances with related unconsolidated companies as a result of transactions in the ordinary course of business.

Note 14. Restructuring Actions

In connection with the 363 Transaction, we assumed certain liabilities related to specific restructuring actions commenced by Old Carco. These liabilities represented costs for workforce reduction actions related to our represented and non-represented hourly and salaried workforce, as well as specific contractual liabilities assumed for other costs, including supplier cancellation claims.

Key initiatives for Old Carco’s restructuring actions included workforce reductions, elimination of excess production capacity, refinements to its product portfolio and restructuring of international distribution operations. To eliminate excess production capacity, Old Carco eliminated manufacturing work shifts, reduced line speeds at certain manufacturing facilities, adjusted volumes at stamping and powertrain facilities and idled certain manufacturing plants. Old Carco’s restructuring actions also included the cancellation of five existing products from its portfolio, discontinued development on certain previously planned product offerings and the closure of certain parts distribution centers in the U.S. and Canada. We will continue to execute the remaining actions under Old Carco’s restructuring initiatives over the next year. The remaining actions principally include the completion

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CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 14. Restructuring Actions —Continued

of the activities associated with the idling of two manufacturing facilities and the restructuring of our international distribution operations, the plans for which have been refined, including the integration of the operations of our European distribution and dealer network into Fiat’s distribution organization. Costs associated with these remaining actions include, but are not limited to: employee severance, relocations, legal claims, and other international dealer network related costs. The remaining workforce reductions will affect represented and non-represented hourly and salaried employees and will be achieved through a combination of retirements, special programs, attrition and involuntary separations.

We recorded charges, net of discounting, of $1 million and $34 million for the three months ended June 30, 2012 and 2011, respectively, and $1 million and $48 million for the six months ended June 30, 2012 and 2011, respectively. During the three and six months ended June 30, 2012, the charges primarily included costs associated with employee relocations for previously announced restructuring initiatives. During the three and six months ended June 30, 2011, the charges primarily included costs associated with employee relocations and plant deactivations for previously announced restructuring initiatives, as well as other transition costs of $20 million resulting from the integration of the operations of our European distribution and dealer network into Fiat’s distribution organization.

We made refinements to existing reserve estimates resulting in net reductions of $35 million and $32 million for the three months ended June 30, 2012 and 2011, respectively and $49 million and $35 million for the six months ended June 30, 2012 and 2011, respectively. During the three and six months ended June 30, 2012, the adjustments related to decreases in the expected workforce reduction costs and legal claim reserves, as well as other transition costs of $5 million resulting from the integration of the operations of our European distribution and dealer network into Fiat’s distribution organization. These refinements, which were based on management’s adequacy reviews, took into consideration the status of the restructuring actions and the estimated costs to complete the actions. During the three and six months ended June 30, 2011, the adjustments related to decreases in the expected workforce reduction costs, as well as legal and supplier cancellation claim reserves as a result of management’s adequacy reviews.

The restructuring charges and reserve adjustments are included in Restructuring (Income) Expenses, Net in the accompanying Condensed Consolidated Statements of Operations and would have otherwise been reflected in Cost of Sales.

Additional charges of approximately $2 million related to employee relocations are expected to be recognized during the remainder of 2012 and 2013. We anticipate that the total costs we will incur related to these restructuring activities, including the initial assumption of the $554 million obligation from Old Carco, will be $552 million, including $362 million related to employee termination benefits and $190 million of other costs. We expect to make payments of approximately $86 million over the next year.

34

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 14. Restructuring Actions —Continued

Restructuring reserves are included in Accrued Expenses and Other Liabilities in the accompanying Condensed Consolidated Balance Sheets. The following summarizes the restructuring reserves activity (in millions of dollars):

	Six Months Ended June 30,
	2012									2011
	Workforce Reductions			Other			Total			Workforce Reductions			Other			Total
Balance at beginning of period	$	29		$	121		$	150		$	79		$	160		$	239
Charges		1			—			1			11			17			28
Adjustments to reserve estimates		(4	)		(40	)		(44	)		(8	)		(27	)		(35	)
Payments		(3	)		(15	)		(18	)		(25	)		(8	)		(33	)
Amounts recognized and transferred to employee benefit plans		—			—			—			(1	)		—			(1	)
Other, including currency translation		—			(5	)		(5	)		(5	)		5			—
Balance at end of period	$	23		$	61		$	84		$	51		$	147		$	198

Note 15. Venezuelan Currency Regulations

The functional currency of Chrysler de Venezuela (“CdV”), our wholly-owned subsidiary in Venezuela, is the U.S. dollar (“USD”). Pursuant to certain Venezuelan foreign currency exchange control regulations, the Central Bank of Venezuela centralizes all foreign currency transactions in the country. Under these regulations, the purchase and sale of foreign currency must be made through the Commission for the Administration of Foreign Exchange (“CADIVI”). As a result, we remeasure assets and liabilities denominated in Venezuelan bolivarfuerte (“BsF”), at the official CADIVI rate of 4.30 BsF per USD.

As of June 30, 2012 and December 31, 2011, the net monetary assets of CdV denominated in BsF were 1,463 million ($340 million USD) and 1,167 million ($271 million USD), respectively, which included cash and cash equivalents denominated in BsF of 1,617 million ($376 million USD) and 1,253 million ($291 million USD), respectively.

Note 16. Supplemental Parent and Guarantor Condensed Consolidating Financial Statements

Chrysler Group LLC (“Parent”), CG Co-Issuer Inc. (“CG Co-Issuer”), a special purpose finance subsidiary, and certain of our wholly-owned U.S. subsidiaries (the “Guarantors”) fully and unconditionally guarantee our Notes on a joint and several basis. CG Co-Issuer does not have any operations, assets, liabilities (other than the Notes) or revenues. CG Co-Issuer and each of the guarantors also guarantee the Senior Credit Facilities.

The following condensed consolidating financial statements present financial data for (i) the Parent; (ii) the combined Guarantors; (iii) the combined Non-Guarantors (all subsidiaries that are Non-Guarantors); (iv) consolidating adjustments to arrive at the information for the Parent, Guarantors and Non-Guarantors on a consolidated basis; and (v) the consolidated financial results for Chrysler Group.

35

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 16. Supplemental Parent and Guarantor Condensed Consolidating Financial Statements —Continued

Investments in subsidiaries are accounted for by the Parent and Guarantors using the equity method for this presentation. Results of operations of subsidiaries are therefore classified in the Parent’s and Guarantors’ investments in subsidiaries accounts. The consolidating adjustments set forth in the following condensed consolidating financial statements eliminate investments in subsidiaries, as well as intercompany balances, transactions, income and expense between the Parent, Guarantors and Non-Guarantors.

Condensed Consolidating Statements of Operations (in millions of dollars):

	Three Months Ended June 30, 2012
	Parent			Guarantors			Non-Guarantors			Consolidating Adjustments			Chrysler Group LLC Consolidated
Revenues, net	$	17,876		$	2,430		$	9,868		$	(13,379	)	$	16,795
Cost of sales		15,714			2,448			9,400			(13,310	)		14,252
GROSS MARGIN		2,162			(18	)		468			(69	)		2,543
Selling, administrative and other expenses		1,001			55			149			20			1,225
Research and development expenses, net		536			1			8			—			545
Restructuring expenses (income), net		—			(33	)		(1	)		—			(34	)
Interest expense		248			3			38			(11	)		278
Interest income		(5	)		—			(7	)		—			(12	)
INCOME (LOSS) BEFORE INCOME TAXES		382			(44	)		281			(78	)		541
Income tax expense (benefit)		7			—			99			(1	)		105
Equity in net (income) loss of subsidiaries		(61	)		(4	)		—			65			—
NET INCOME (LOSS)		436			(40	)		182			(142	)		436
Other comprehensive income (loss)		78			—			1			(1	)		78
TOTAL COMPREHENSIVE INCOME (LOSS)	$	514		$	(40	)	$	183		$	(143	)	$	514
	Three Months Ended June 30, 2011
	Parent			Guarantors			Non-Guarantors			Consolidating Adjustments			Chrysler Group LLC Consolidated
Revenues, net	$	13,926		$	1,521		$	8,294		$	(10,080	)	$	13,661
Cost of sales		12,081			1,624			7,800			(10,048	)		11,457
GROSS MARGIN		1,845			(103	)		494			(32	)		2,204
Selling, administrative and other expenses		1,018			35			157			45			1,255
Research and development expenses, net		386			—			6			—			392
Restructuring expenses (income), net		(8	)		10			—			—			2
Interest expense		269			1			69			(11	)		328
Interest income		(6	)		1			(6	)		—			(11	)
Loss on extinguishment of debt		170			—			381			—			551
INCOME (LOSS) BEFORE INCOME TAXES		16			(150	)		(113	)		(66	)		(313	)
Income tax expense (benefit)		5			—			52			—			57
Equity in net (income) loss of subsidiaries		381			(6	)		—			(375	)		—
NET INCOME (LOSS)		(370	)		(144	)		(165	)		309			(370	)
Other comprehensive income (loss)		20			—			22			(22	)		20
TOTAL COMPREHENSIVE INCOME (LOSS)	$	(350	)	$	(144	)	$	(143	)	$	287		$	(350	)

36

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 16. Supplemental Parent and Guarantor Condensed Consolidating Financial Statements —Continued

Condensed Consolidating Statements of Operations (in millions of dollars) —Continued:

	Six Months Ended June 30, 2012
	Parent			Guarantors			Non-Guarantors			Consolidating Adjustments			Chrysler Group LLC Consolidated
Revenues, net	$	34,809		$	4,781		$	19,280		$	(25,716	)	$	33,154
Cost of sales		30,506			4,795			18,395			(25,653	)		28,043
GROSS MARGIN		4,303			(14	)		885			(63	)		5,111
Selling, administrative and other expenses		1,946			103			308			88			2,445
Research and development expenses, net		1,116			1			17			—			1,134
Restructuring expenses (income), net		(1	)		(46	)		(1	)		—			(48	)
Interest expense		498			6			74			(23	)		555
Interest income		(9	)		—			(13	)		—			(22	)
INCOME (LOSS) BEFORE INCOME TAXES		753			(78	)		500			(128	)		1,047
Income tax expense (benefit)		7			—			132			(1	)		138
Equity in net (income) loss of subsidiaries		(163	)		(11	)		—			174			—
NET INCOME (LOSS)		909			(67	)		368			(301	)		909
Other comprehensive income (loss)		3			—			8			(8	)		3
TOTAL COMPREHENSIVE INCOME (LOSS)	$	912		$	(67	)	$	376		$	(309	)	$	912
	Six Months Ended June 30, 2011
	Parent			Guarantors			Non-Guarantors			Consolidating Adjustments			Chrysler Group LLC Consolidated
Revenues, net	$	26,853		$	2,513		$	16,231		$	(18,812	)	$	26,785
Cost of sales		23,469			2,559			15,294			(18,788	)		22,534
GROSS MARGIN		3,384			(46	)		937			(24	)		4,251
Selling, administrative and other expenses		1,970			79			304			87			2,440
Research and development expenses, net		735			—			11			—			746
Restructuring expenses (income), net		(2	)		15			—			—			13
Interest expense		547			1			150			(22	)		676
Interest income		(10	)		1			(13	)		—			(22	)
Loss on extinguishment of debt		170			—			381			—			551
INCOME (LOSS) BEFORE INCOME TAXES		(26	)		(142	)		104			(89	)		(153	)
Income tax expense (benefit)		7			—			92			2			101
Equity in net (income) loss of subsidiaries		221			(13	)		—			(208	)		—
NET INCOME (LOSS)		(254	)		(129	)		12			117			(254	)
Other comprehensive income (loss)		(28	)		—			38			(38	)		(28	)
TOTAL COMPREHENSIVE INCOME (LOSS)	$	(282	)	$	(129	)	$	50		$	79		$	(282	)

37

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 16. Supplemental Parent and Guarantor Condensed Consolidating Financial Statements —Continued

Condensed Consolidating Balance Sheets (in millions of dollars):

	June 30, 2012
	Parent			Guarantors			Non-Guarantors			Consolidating Adjustments			Chrysler Group LLC Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	9,098		$	398		$	2,579		$	—		$	12,075
Restricted cash		65			—			—			—			65
Trade receivables, net		728			357			427			—			1,512
Inventories		2,662			119			1,861			(151	)		4,491
Prepaid expenses and other assets
Due from subsidiaries		—			—			884			(884	)		—
Other		362			578			305			—			1,245
Deferred taxes		—			—			27			3			30
TOTAL CURRENT ASSETS		12,915			1,452			6,083			(1,032	)		19,418
PROPERTY AND EQUIPMENT:
Property, plant and equipment, net		9,653			597			4,437			(140	)		14,547
Equipment on operating leases, net		766			263			390			(55	)		1,364
TOTAL PROPERTY AND EQUIPMENT		10,419			860			4,827			(195	)		15,911
OTHER ASSETS:
Advances to related parties and other financial assets
Due from subsidiaries		1,080			—			94			(1,174	)		—
Other		54			—			8			—			62
Investment in subsidiaries		2,022			108			—			(2,130	)		—
Restricted cash		328			—			14			—			342
Goodwill		1,361			—			—			—			1,361
Other intangible assets, net		3,204			26			1,043			(960	)		3,313
Prepaid expenses and other assets		302			7			119			—			428
Deferred taxes		—			—			37			—			37
TOTAL OTHER ASSETS		8,351			141			1,315			(4,264	)		5,543
TOTAL ASSETS	$	31,685		$	2,453		$	12,225		$	(5,491	)	$	40,872
CURRENT LIABILITIES:
Trade liabilities	$	7,288		$	146		$	2,853		$	—		$	10,287
Accrued expenses and other liabilities
Due to subsidiaries		1,295			699			—			(1,994	)		—
Other		5,612			49			2,740			—			8,401
Current maturities of financial liabilities
Due to subsidiaries		26			—			66			(92	)		—
Other		99			—			106			—			205
Deferred revenue		981			34			126			—			1,141
Deferred taxes		—			—			69			—			69
TOTAL CURRENT LIABILITIES		15,301			928			5,960			(2,086	)		20,103
LONG-TERM LIABILITIES:
Accrued expenses and other liabilities		10,286			227			2,258			—			12,771
Financial liabilities
Due to subsidiaries		—			240			—			(240	)		—
Other		10,696			—			1,606			—			12,302
Deferred revenue		503			78			172			—			753
Deferred taxes		28			—			40			4			72
TOTAL LONG-TERM LIABILITIES		21,513			545			4,076			(236	)		25,898
MEMBERS’ INTEREST (DEFICIT):
Membership interests		—			—			409			(409	)		—
Contributed capital		2,651			1,643			1,827			(3,470	)		2,651
Accumulated (losses) income		(3,345	)		(663	)		884			(221	)		(3,345	)
Accumulated other comprehensive loss		(4,435	)		—			(931	)		931			(4,435	)
TOTAL MEMBERS’ INTEREST (DEFICIT)		(5,129	)		980			2,189			(3,169	)		(5,129	)
TOTAL LIABILITIES AND MEMBERS’ INTEREST (DEFICIT)	$	31,685		$	2,453		$	12,225		$	(5,491	)	$	40,872

38

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 16. Supplemental Parent and Guarantor Condensed Consolidating Financial Statements —Continued

Condensed Consolidating Balance Sheets (in millions of dollars) —Continued:

	December 31, 2011
	Parent			Guarantors			Non-Guarantors			Consolidating Adjustments			Chrysler Group LLC Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	7,405		$	322		$	1,874		$	—		$	9,601
Restricted cash		102			—			4			—			106
Trade receivables, net		321			253			271			—			845
Inventories		2,812			60			1,685			(191	)		4,366
Prepaid expenses and other assets
Due from subsidiaries		—			—			826			(826	)		—
Other		318			893			392			—			1,603
Deferred taxes		—			—			23			2			25
TOTAL CURRENT ASSETS		10,958			1,528			5,075			(1,015	)		16,546
PROPERTY AND EQUIPMENT:
Property, plant and equipment, net		9,177			619			4,313			(144	)		13,965
Equipment on operating leases, net		893			274			254			—			1,421
TOTAL PROPERTY AND EQUIPMENT		10,070			893			4,567			(144	)		15,386
OTHER ASSETS:
Advances to related parties and other financial assets
Due from subsidiaries		852			—			33			(885	)		—
Other		47			—			9			—			56
Investment in subsidiaries		1,956			97			—			(2,053	)		—
Restricted cash		343			—			12			—			355
Goodwill		1,361			—			—			—			1,361
Other intangible assets, net		3,258			27			1,042			(956	)		3,371
Prepaid expenses and other assets		297			6			118			—			421
Deferred taxes		—			—			47			—			47
TOTAL OTHER ASSETS		8,114			130			1,261			(3,894	)		5,611
TOTAL ASSETS	$	29,142		$	2,551		$	10,903		$	(5,053	)	$	37,543
CURRENT LIABILITIES:
Trade liabilities	$	6,177		$	167		$	2,222		$	—		$	8,566
Accrued expenses and other liabilities
Due to subsidiaries		1,167			623			—			(1,790	)		—
Other		5,280			155			2,272			—			7,707
Current maturities of financial liabilities
Due to subsidiaries		26			—			—			(26	)		—
Other		91			—			139			—			230
Deferred revenue		998			76			97			—			1,171
Deferred taxes		—			—			73			—			73
TOTAL CURRENT LIABILITIES		13,739			1,021			4,803			(1,816	)		17,747
LONG-TERM LIABILITIES:
Accrued expenses and other liabilities		10,260			185			2,313			—			12,758
Financial liabilities
Due to subsidiaries		—			230			—			(230	)		—
Other		10,711			—			1,633			—			12,344
Deferred revenue		439			58			156			—			653
Deferred taxes		28			—			44			4			76
TOTAL LONG-TERM LIABILITIES		21,438			473			4,146			(226	)		25,831
MEMBERS’ INTEREST (DEFICIT):
Membership interests		—			—			409			(409	)		—
Contributed capital		2,657			1,643			1,927			(3,570	)		2,657
Accumulated (losses) income		(4,254	)		(586	)		557			29			(4,254	)
Accumulated other comprehensive loss		(4,438	)		—			(939	)		939			(4,438	)
TOTAL MEMBERS’ INTEREST (DEFICIT)		(6,035	)		1,057			1,954			(3,011	)		(6,035	)
TOTAL LIABILITIES AND MEMBERS’ INTEREST (DEFICIT)	$	29,142		$	2,551		$	10,903		$	(5,053	)	$	37,543

39

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 16. Supplemental Parent and Guarantor Condensed Consolidating Financial Statements —Continued

Condensed Consolidating Statements of Cash Flows (in millions of dollars):

	Six Months Ended June 30, 2012
	Parent			Guarantors			Non-Guarantors			Consolidating Adjustments			Chrysler Group LLC Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	3,194		$	75		$	1,337		$	(264	)	$	4,342
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment and intangible assets		(1,374	)		(10	)		(470	)		—			(1,854	)
Proceeds from disposals of property, plant and equipment		1			—			1			—			2
Purchases of equipment on operating leases		—			(6	)		—			—			(6	)
Proceeds from disposals of equipment on operating leases		—			17			53			—			70
Change in restricted cash		52			—			2			—			54
Change in loans and notes receivables		1			—			—			—			1
Other		(1	)		—			—			—			(1	)
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES		(1,321	)		1			(414	)		—			(1,734	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of Tranche B Term Loan		(15	)		—			—			—			(15	)
Repayments of Gold Key Lease financing		—			—			(41	)		—			(41	)
Repayments of Auburn Hills Headquarters loan		—			—			(25	)		—			(25	)
Net repayments of other financial liabilities		(33	)		—			(11	)		—			(44	)
Distribution for state tax withholding obligations on behalf of members		(4	)		—			—			—			(4	)
Dividends issued to subsidiaries		—			(10	)		(41	)		51			—
Net increase (decrease) in loans to subsidiaries		(128	)		10			(95	)		213			—
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(180	)		—			(213	)		264			(129	)
Effect of exchange rate changes on cash and cash equivalents		—			—			(5	)		—			(5	)
Net change in cash and cash equivalents		1,693			76			705			—			2,474
Cash and cash equivalents at beginning of period		7,405			322			1,874			—			9,601
Cash and cash equivalents at end of period	$	9,098		$	398		$	2,579		$	—		$	12,075

40

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 16. Supplemental Parent and Guarantor Condensed Consolidating Financial Statements —Continued

Condensed Consolidating Statements of Cash Flows (in millions of dollars) —Continued:

	Six Months Ended June 30, 2011
	Parent			Guarantors			Non-Guarantors			Consolidating Adjustments			Chrysler Group LLC Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	2,355		$	126		$	1,679		$	(452	)	$	3,708
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment and intangible assets		(750	)		(77	)		(358	)		—			(1,185	)
Proceeds from disposals of property, plant and equipment		1			8			6			—			15
Purchases of equipment on operating leases		—			(23	)		—			—			(23	)
Proceeds from disposals of equipment on operating leases		—			14			451			—			465
Change in restricted cash		51			—			167			—			218
Change in loans and notes receivables		2			—			2			—			4
Proceeds from USDART		96			—			—			—			96
Other		17			—			—			—			17
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES		(583	)		(78	)		268			—			(393	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of U.S. Treasury first lien credit facilities		(5,460	)		—			—			—			(5,460	)
Repayment of Export Development Canada credit facilities		—			—			(1,723	)		—			(1,723	)
Proceeds from Senior Secured Notes		3,160			—			—			—			3,160
Proceeds from Tranche B Term Loan		2,933			—			—			—			2,933
Repayments of Gold Key Lease financing		—			—			(515	)		—			(515	)
Repayments of Auburn Hills Headquarters loan		—			—			(6	)		—			(6	)
Net repayments of other financial liabilities		(31	)		—			(27	)		—			(58	)
Debt issuance costs		(54	)		—			—			—			(54	)
Proceeds from Fiat’s incremental equity call option exercise		1,268			—			—			—			1,268
Distribution for state tax withholding obligations on behalf of members		(6	)		—			—			—			(6	)
Dividends issued to subsidiaries		—			(5	)		(65	)		70			—
Net increase (decrease) in loans to subsidiaries		(400	)		50			(32	)		382			—
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		1,410			45			(2,368	)		452			(461	)
Effect of exchange rate changes on cash and cash equivalents		—			—			(26	)		—			(26	)
Net change in cash and cash equivalents		3,182			93			(447	)		—			2,828
Cash and cash equivalents at beginning of period		4,871			81			2,395			—			7,347
Cash and cash equivalents at end of period	$	8,053		$	174		$	1,948		$	—		$	10,175

Note 17. Subsequent Event

Members’ Ownership Interests

In July 2012, Fiat notified the VEBA Trust of its intent to exercise its option to acquire a portion of the VEBA Trust’s membership interests in the Company. In the event the transaction is completed as contemplated, Fiat will own 61.86 percent of the ownership interests in the Company and the VEBA Trust will hold the remaining 38.14 percent.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The discussion of our financial condition and operating results should be read together with our accompanying condensed consolidated financial statements and our 2011 Annual Report on Form 10-K, or 2011 Form 10-K, filed with the U.S. Securities and Exchange Commission, or SEC.

Selected Financial and Other Data

The following sets forth selected financial and other data for the periods presented:

	Three Months Ended June 30,										Six Months Ended June 30,
	2012		Percentage of Revenues			2011			Percentage of Revenues		2012		Percentage of Revenues			2011			Percentage of  Revenues
									(in millions of		dollars)
Condensed Consolidated Statements of Operations Data:
Revenues, net	$	16,795		100.0	%	$	13,661			100.0%	$	33,154		100.0	%	$	26,785			100.0	%
Gross margin		2,543		15.1	%		2,204			16.1%		5,111		15.4	%		4,251			15.9	%
Selling, administrative and other expenses		1,225		7.3	%		1,255			9.2%		2,445		7.4	%		2,440			9.1	%
Research and development expenses, net		545		3.2	%		392			2.9%		1,134		3.4	%		746			2.8	%
Interest expense		278		1.7	%		328			2.4%		555		1.7	%		676			2.5	%
Loss on extinguishment of debt		—		—			551			4.0%		—		—			551			2.1	%
Net income (loss)		436		2.6	%		(370	)		(2.7)%		909		2.7	%		(254	)		(0.9	)%

	June 30, 2012			December 31, 2011
Condensed Consolidated Balance Sheets Data:		(in millions of dollars)
Cash and cash equivalents	$	12,075		$	9,601
Restricted cash		407			461
Total assets		40,872			37,543
Current maturities of financial liabilities		205			230
Long-term financial liabilities		12,302			12,344
Members’ deficit		(5,129	)		(6,035	)
	Six Months Ended June 30,
	2012			2011
Condensed Consolidated Statements of Cash Flows Data:		(in millions of dollars)
Cash flows provided by (used in):
Operating activities	$	4,342		$	3,708
Investing activities		(1,734	)		(393	)
Financing activities		(129	)		(461	)
Other Financial Information:
Depreciation and amortization expense	$	1,380		$	1,510
Capital expenditures		1,854			1,185

	Three Months Ended June 30,				Six Months Ended June 30,
Other Statistical Information:	2012		2011		2012		2011
Net worldwide factory shipments (in thousands)(1)		625		488		1,244		966
Worldwide vehicle sales (in thousands)(2)		582		486		1,105		880
U.S. dealer inventory at period end (in thousands)						358		314
Number of employees at period end						62,223		55,067

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(1) Represents vehicle sales to our dealers, distributors, contract manufacturing customers and fleet customers adjusted for Guaranteed Depreciation Program activity during the period. For additional information refer to Results of Operations —Worldwide Factory Shipments.

(2) Certain fleet sales that are accounted for as operating leases are included in vehicle sales.

Overview of our Operations

Chrysler Group was formed on April 28, 2009 as a Delaware limited liability company. Our current members are Fiat, which holds a 58.5 percent ownership interest in us, and the United Auto Workers’ Retiree Medical Benefits Trust, or the VEBA Trust, which holds the remaining ownership interest in us. We design, engineer, manufacture, distribute and sell vehicles under the brand names Chrysler, Jeep, Dodge and Ram. As part of our industrial alliance with Fiat, we also manufacture Fiat vehicles in North America, which we distribute for ourselves throughout North America and sell to Fiat for distribution outside North America. We generate revenues, income and cash primarily from our sales of these vehicles, as well as automotive service parts and accessories under the Mopar brand name, to dealers and distributors for sale to retail customers and fleet customers, which include rental car companies, commercial fleet customers, leasing companies and government entities. The majority of our operations, employees, independent dealers and sales are in North America, primarily in the U.S. Approximately 10 percent of our vehicle sales in 2011 were outside North America, principally in South America, Asia Pacific and Europe. Vehicle, service parts and accessories sales outside of North America are primarily through wholly-owned, affiliated or independent distributors and dealers. In June 2011, Fiat became the general distributor of our vehicles and service parts in Europe, selling our products through a network of newly appointed dealers.

We also generate revenues, income and cash from the sale of separately-priced extended warranty service contracts to consumers and from providing contract manufacturing services to other vehicle manufacturers. Our dealers enter into wholesale financing arrangements to purchase vehicles to hold in inventory which are available for sale to retail customers. Our retail customers use a variety of finance and lease programs to acquire vehicles from our dealers.

Fiat Ownership Interest

Through a series of transactions in 2011 and 2012, which included our achievement of the three Class B Events described in our governance documents and Fiat’s exercise of its incremental equity call option in May 2011, Fiat increased its ownership interest in the Company from 20.0 percent to 58.5 percent.

In January 2012, we notified the United States Department of the Treasury, or U.S. Treasury, that we irrevocably committed to begin assembly of a vehicle based on a Fiat platform or vehicle technology that has a verified unadjusted combined fuel economy of at least 40 miles per gallon in commercial quantities in a production facility in the U.S. As a result, we achieved our third and final Class B Event and Fiat’s ownership interest in the Company increased from 53.5 percent on a fully-diluted basis to 58.5 percent. We had achieved the first and second Class B Events during 2011.

In May 2011, and concurrent with the repayment of our U.S. Treasury and Export Development Canada, or EDC, credit facilities, Fiat exercised its incremental equity call option and acquired an additional 16 percent fully-diluted ownership interest in the Company. We received the entire exercise price of $1,268 million in cash, increasing our contributed capital by the proceeds received, and we issued new Class A Membership Interests to Fiat.

Refer to Note 17,Subsequent Event, in the accompanying Condensed Consolidated Financial Statements for additional information regarding ownership interests.

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Vehicle Sales

The following summarizes our new vehicle sales by geographic market for the periods presented. Vehicles manufactured by Chrysler Group for other companies, including for Fiat, are excluded from our new vehicle sales.

	Three Months Ended June 30,													Six Months Ended June 30,
	2012(1)(2)							2011(1)(2)						2012(1)(2)							2011(1)(2)
	Chrysler Group		Industry		Percentage of Industry(3)			Chrysler Group		Industry		Percentage of Industry (3)		Chrysler Group		Industry		Percentage of Industry(3)			Chrysler Group		Industry		Percentage of Industry (3)
												(vehicles in		thousands)
U. S.		436		3,883		11.2	%		353		3,337		10.6%		834		7,422		11.2	%		640		6,449		9.9	%
Canada		75		513		14.5	%		72		482		14.9%		131		884		14.7	%		122		822		14.8	%
Mexico		20		237		8.5	%		19		209		8.9%		40		478		8.4	%		39		427		9.1	%
Total North America		531		4,633		11.5	%		444		4,028		11.0%		1,005		8,784		11.4	%		801		7,698		10.4	%
Rest of World		51							42						100							79
Total Worldwide		582							486						1,105							880

(1) Certain fleet sales that are accounted for as operating leases are included in vehicle sales.

(2) The Company’s estimated industry and market share data presented are based on management’s estimates of industry sales data, which use certain data provided by third-party sources, including IHS Global Insight, Ward’s Automotive and R.L. Polk Data.

(3) Percentages are calculated based on the unrounded vehicle sales volume for Chrysler Group and the industry.

The following summarizes the total U.S. industry sales of new motor vehicles of domestic and foreign models and our relative competitive position for the periods presented. Vehicles manufactured by Chrysler Group for other companies, including for Fiat, are excluded from our new vehicle sales.

	Three Months Ended June 30,														Six Months Ended June 30,
	2012(1)(2)							2011(1)(2)							2012(1)(2)							2011(1)(2)
	Chrysler Group		Industry		Percentage of Industry(3)			Chrysler Group		Industry		Percentage of Industry (3)			Chrysler Group		Industry		Percentage of Industry (3)			Chrysler Group		Industry		Percentage of Industry (3)
								(vehicles in							thousands)
Cars
Small		14		724		1.9	%		16		618		2.6	%		26		1,423		1.8	%		26		1,202		2.2	%
Mid-size		65		738		8.8	%		38		608		6.3	%		115		1,420		8.1	%		61		1,182		5.2	%
Full-size		45		238		18.6	%		32		231		13.8	%		87		460		18.8	%		52		435		11.9	%
Sport		18		198		9.5	%		14		175		8.1	%		34		358		9.6	%		25		309		8.1	%
Total Cars		142		1,898		7.5	%		100		1,632		6.1	%		262		3,661		7.2	%		164		3,128		5.2	%
Minivans		66		152		43.6	%		51		125		41.1	%		130		284		45.8	%		103		245		42.1	%
Utility Vehicles		157		1,193		13.1	%		138		1,018		13.6	%		303		2,250		13.5	%		253		2,002		12.6	%
Pick-up Trucks		66		461		14.3	%		60		411		14.6	%		131		901		14.5	%		114		803		14.2	%
Van & Medium Duty Truck		5		179		2.9	%		4		151		2.1	%		8		326		2.5	%		6		271		2.1	%
Total Vehicles		436		3,883		11.2	%		353		3,337		10.6	%		834		7,422		11.2	%		640		6,449		9.9	%

(1) Certain fleet sales that are accounted for as operating leases are included in vehicle sales.

(2) The Company’s estimated industry and market share data presented are based on management’s estimates of industry sales data, which use certain data provided by third-party sources, including IHS Global Insight, Ward’s Automotive and R.L. Polk Data.

(3) Percentages are calculated based on the unrounded vehicle sales volume for Chrysler Group and the industry.

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Cyclical Nature of Business

As is typical in the automotive industry, our vehicle sales are highly sensitive to general economic conditions, availability of affordably priced financing for dealers and retail customers and other external factors, including fuel prices, and as a result may vary substantially from quarter to quarter and year to year. Retail customers tend to delay the purchase of a new vehicle when disposable income and consumer confidence are low. In addition, our vehicle production volumes and related revenues may vary from month to month, sometimes due to plant shutdowns, which may occur for several reasons, including production changes from one model year to the next. Model year changeovers occur throughout the year. Plant shutdowns, whether associated with model year changeovers or other factors, such as temporary supplier interruptions, can have a negative impact on our revenues and a negative impact on our working capital as we continue to pay suppliers under standard contract terms while we do not receive proceeds from vehicle sales.

Results of Operations

Worldwide Factory Shipments

The following table summarizes our gross and net worldwide factory shipments, which include vehicle sales to our dealers, distributors, fleet customers and contract manufacturing customers. Management believes that this data provides meaningful information regarding our operating results. Shipments of vehicles manufactured by our assembly facilities are generally aligned with current period production, which is driven by consumer demand. Revenue is generally recognized when the risks and rewards of ownership of a vehicle have been transferred to our customer, which usually occurs upon release of the vehicle to the carrier responsible for transporting the vehicle to our customer. Our fleet customers include rental car companies, commercial fleet customers, leasing companies and governmental entities. Our fleet shipments include vehicle sales through our Guaranteed Depreciation Program, or GDP, under which we guarantee the residual value or otherwise assume responsibility for the minimum resale value of the vehicle. We account for such sales similar to an operating lease and recognize rental income over the contractual term of the lease on a straight-line basis. At the end of the lease term, we recognize revenue for the portion of the vehicle sales price which had not been previously recognized as rental income and recognize, in cost of sales, the remainder of the cost of the vehicle which had not been previously recognized as depreciation expense over the lease term. We include GDP vehicle sales in our worldwide factory shipments at the time of auction, rather than at the time of sale to the fleet customer, consistent with the timing of revenue recognition. We consider these net worldwide factory shipments to approximate the timing of revenue recognition.

	Three Months Ended June 30,						Increase (Decrease)		Six Months Ended June 30,						Increase (Decrease)
	2012			2011					2012			2011
	(vehicles in thousands)
Retail		465			379			86		890			747			143
Fleet		142			124			18		291			234			57
Contract manufacturing		23			11			12		56			18			38
Worldwide Factory Shipments		630			514			116		1,237			999			238
Adjust for GDP activity during the period:
Less: Vehicles shipped		(25	)		(37	)		12		(42	)		(62	)		20
Plus: Vehicles auctioned		20			11			9		49			29			20
Net Worldwide Factory Shipments		625			488			137		1,244			966			278

Consolidated Results

The following is a discussion of the results of operations for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011 and for the six months ended June 30, 2012 as compared to the six months ended June 30, 2011. The discussion of certain line items (cost of sales, gross margin, selling, administrative and other expenses, and research and development expenses) includes a presentation of such line items as a percentage of revenues, for the respective periods presented, to facilitate the discussion of the three months ended June 30, 2012 compared to the same period in 2011, and for the six months ended June 30, 2012 compared to the same period in 2011.

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Three Months Ended June 30, 2012 Compared to the Three Months Ended June 30, 2011

Revenues, Net

	Three Months Ended June 30,				Increase (Decrease)
	2012		2011
	(in millions of dollars)
Revenues, net	$	16,795	$	13,661	$	3,134	22.9%

Revenues for the three months ended June 30, 2012 increased $3,134 million as compared to the three months ended June 30, 2011, approximately $3.6 billion of which was attributable to an increase in our net worldwide factory shipments from 488 thousand vehicles for the three months ended June 30, 2011 to 625 thousand vehicles for the three months ended June 30, 2012. The 28 percent period over period increase in our shipments was driven by increased demand for our vehicles, as evidenced by an increase in our U.S. retail market share from 9.2 percent for the three months ended June 30, 2011 to 10.3 percent for the three months ended June 30, 2012. In addition, the increase in our shipments was due to the continuing improvement in the U.S. automotive market, which experienced a 16 percent increase in industry vehicle sales from the three months ended June 30, 2011 to the three months ended June 30, 2012.

Approximately $200 million of the revenue increase was attributable to more favorable pricing of our 2012 model year vehicles as compared to prior model years, which was driven by our ability to adjust prices for our vehicle content enhancements in the current market. These increases were partially offset by an $800 million decrease in revenues due to a shift in sales mix from trucks, SUVs and crossovers to passenger cars, as well as consumers purchasing vehicles with option packages that group commonly selected options at a value price, such as offering leather and DVD systems as standard features in certain vehicles. The shift in sales mix was also attributable to the percentage increase in contract manufacturing sales to Fiat outpacing the percentage increase in retail shipments.

Cost of Sales

	Three Months Ended June 30,								Increase (Decrease)
	2012		Percentage of Revenues		2011		Percentage of Revenues
	(in millions of dollars)
Cost of sales	$	14,252		84.9%	$	11,457		83.9%	$	2,795	24.4%
Gross margin	$	2,543		15.1%	$	2,204		16.1%	$	339	15.4%

Fluctuations in our cost of sales are driven primarily by the number of vehicles we produce and sell. We procure a variety of raw materials, parts, supplies, utilities, transportation and other services from numerous suppliers to manufacture our vehicles, parts and accessories, primarily on a purchase order basis. The raw materials we use typically consist of steel, aluminum, resin, copper, lead and precious metals including platinum, palladium and rhodium.

The cost of materials and components makes up a majority of our cost of sales, which was approximately 75 percent and 73 percent for the three months ended June 30, 2012 and 2011, respectively. The remaining costs primarily include labor costs consisting of direct and indirect wages and fringe benefits, depreciation and amortization, and transportation costs. Cost of sales also includes warranty and product-related costs, as well as depreciation expense related to our GDP vehicles. The period over period percentage increase in the cost of materials and components is mainly due to our continuing investments in vehicle components and enhancements. These enhancements include improved engine and transmission technologies, primarily the 3.6L Pentastar V-6 engine and 8-speed automatic transmission, as well as upgraded media components such as the Uconnect Touch featuring an 8.4 inch screen. In addition, we continue to upgrade the interiors of our vehicles with features such as premium leather and LED accent lighting.

Cost of sales for the three months ended June 30, 2012 increased $2,795 million as compared to the same period in 2011 primarily due to higher production volumes in connection with the increased vehicle shipments described

46

above, which accounted for approximately $2.8 billion of the increase. In addition, material costs for the three months ended June 30, 2012 increased approximately $100 million as compared to the same period in 2011 due to enhanced features and content in our 2012 model year vehicles, which were partially offset by efficiencies achieved through our ongoing implementation of World Class Manufacturing processes. The increase in cost of sales was also partially offset by reduced costs associated with the shift in sales mix from trucks, SUVs and crossovers to passenger cars, as well as our increased sales of vehicles with the value option packages noted above in—Revenues, Net.

Price increases for certain raw materials had a negative impact on our cost of sales of approximately $200 million. However, we were able to partially offset these price increases by achieving certain cost savings, principally from commercial re-negotiations and technical efficiencies, such as modifying the material content of a part.

Selling, Administrative and Other Expenses

	Three Months Ended June 30,								Increase (Decrease)
	2012		Percentage of Revenues		2011		Percentage of Revenues
	(in millions of dollars)
Selling, administrative and other expenses	$	1,225		7.3%	$	1,255		9.2%		$  (30	)	(2.4%)

Selling, administrative and other expenses include personnel, advertising, warehousing and other costs. Advertising costs accounted for approximately 55 percent of these costs during both the three months ended June 30, 2012 and 2011. During 2012, we continued to place great emphasis on our brand and vehicle focused advertising campaigns to continue to build consumer interest in our current portfolio, and we incurred costs at levels similar to campaigns for new or refreshed vehicle launches. Typically, we incur greater advertising costs in the initial months that new or refreshed vehicles are available to customers in dealerships. Our all-new Dodge Dart began arriving at dealerships at the end of the second quarter of 2012. However, due to the timing of the retail launch of this vehicle, our advertising campaigns were limited. Our advertising costs during the three months ended June 30, 2011 were reflective of the retail launch of 11 new or refreshed vehicles that began arriving in dealerships during the first quarter of 2011.

Research and Development Expenses, Net

	Three Months Ended June 30,								Increase (Decrease)
	2012		Percentage of Revenues		2011		Percentage of Revenues
	(in millions of dollars)
Research and development expenses, net	$	545		3.2%	$	392		2.9%	$	153	39.0%

Research and development expenses consist of material costs and personnel related expenses associated with engineering, design and development. Our research and development spending has been focused on improving the quality of our vehicles and reducing the time-to-market of new vehicles. Our efforts entail both short-term improvements related to existing vehicles, which include easily recognizable and extensive upgrades to vehicle interiors, and longer term product and powertrain programs. Our research and development expenses for the three months ended June 30, 2012 and 2011, are net of $10 million and $33 million, respectively, of reimbursements recognized for costs related to shared engineering and development activities performed under the product and platform sharing agreement that is part of our industrial alliance with Fiat.

The increase in research and development expenses for the three months ended June 30, 2012 as compared to the same period in 2011, was primarily due to increased spending for direct and indirect materials related to mid-cycle actions, principally the Ram truck lineup and Jeep Grand Cherokee, as well as joint development programs with Fiat, including the Compact U.S. Wide platform utilized for the all-new Dodge Dart. In addition,

47

we continue to invest in vehicle and technology enhancements for Fiat vehicles that we will produce and distribute within North America. To support these efforts, we have increased our average headcount for research and development by approximately 17 percent period over period, while also increasing the average headcount of our temporary contract workers by approximately 10 percent period over period to meet specialized needs.

Interest Expense

	Three Months Ended June 30,				Increase      (Decrease)
	2012		2011
	(in millions of dollars)
Interest expense	$	278	$	328	$	(50) (15.2)%

Interest expense for the three months ended June 30, 2012 and 2011 included the following:

	Three Months Ended June 30,
	2012			2011
	(in millions of dollars)
Financial Interest Expense:
VEBA Trust Note	$	109		$	106
2019 and 2021 Notes		65			27
Tranche B Term Loan		45			19
Canadian Health Care Trust Notes		25			22
Mexican development banks credit facilities		15			11
U.S. Treasury first lien credit facilities		—			75
EDC credit facilities		—			16
Other		15			16
Interest accretion, primarily related to debt discounts, debt issuance costs and fair value adjustments		31			51
Payable-in-kind interest		—			10
Capitalized interest related to capital expenditures		(27	)		(25	)
Total	$	278		$	328

The decrease in interest expense for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011 was primarily due to the interest savings and reduced interest accretion achieved as a result of our debt refinancing transaction in May 2011. In that transaction, we repaid our outstanding obligations under the U.S. Treasury and EDC credit facilities and entered into the Tranche B Term Loan and issued the 2019 Notes and 2021 Notes. Refer to—Liquidity and Capital Resourcesbelow, for additional information regarding our refinancing transaction. The interest savings and reduced interest accretion are primarily due to the Tranche B Term Loan and 2019 Notes and 2021 Notes having lower effective interest rates and debt discounts than the U.S. Treasury and EDC credit facilities. Refer to—Loss on Extinguishment of Debt below, for additional information regarding the write off of the U.S. Treasury and EDC credit facilities unamortized discounts and debt issuance costs.

Loss on Extinguishment of Debt

	Three Months Ended June 30,				Increase     (Decrease)
	2012		2011
	(in millions of dollars)
Loss on extinguishment of debt	$	—	$	551	$	(551) (100.0%	)

In connection with the repayment of our outstanding obligations under the U.S. Treasury and EDC credit facilities, we recognized a $551 million loss on extinguishment of debt, which consisted of the write off of $136 million of unamortized discounts and $34 million of unamortized debt issuance costs associated with the U.S.

48

Treasury credit facilities and $367 million of unamortized discounts and $14 million of unamortized debt issuance costs associated with the EDC credit facilities. Refer to —Liquidity and Capital Resources below, for additional information regarding our refinancing transaction.

Six Months Ended June 30, 2012 Compared to the Six Months Ended June 30, 2011

Revenues, Net

	Six Months Ended June 30,				Increase     (Decrease)
	2012		2011
	(in millions of dollars)
Revenues, net	$	33,154	$	26,785	$	6,369	23.8%

Revenues for the six months ended June 30, 2012 increased $6,369 million as compared to the six months ended June 30, 2011, approximately $7.2 billion of which was attributable to an increase in our net worldwide factory shipments from 966 thousand vehicles for the six months ended June 30, 2011 to 1,244 thousand vehicles for the six months ended June 30, 2012. The 29 percent period over period increase in our shipments was driven by increased demand for our vehicles, as evidenced by an increase in our U.S. retail market share from 8.6 percent for the six months ended June 30, 2011 to 10.1 percent for the six months ended June 30, 2012. In addition, the increase in our shipments was due to the continuing improvement in the U.S. automotive market, which experienced a 15 percent increase in industry vehicle sales from the six months ended June 30, 2011 to the six months ended June 30, 2012.

Approximately $500 million of the revenue increase was attributable to more favorable pricing of our 2012 model year vehicles as compared to prior model years, which was driven by our ability to adjust prices for our vehicle content enhancements in the current market. These increases were partially offset by a $1.5 billion decrease in revenues due to a shift in sales mix from trucks, SUVs and crossovers to passenger cars, as well as consumers purchasing vehicles with option packages that group commonly selected options at a value price, such as offering leather and DVD systems as standard features in certain vehicles. The shift in sales mix was also attributable to the percentage increase in contract manufacturing sales to Fiat outpacing the percentage increase in retail shipments.

Cost of Sales

	Six Months Ended June 30,								Increase     (Decrease)
	2012		Percentage of Revenues		2011		Percentage of Revenues
	(in millions of dollars)
Cost of sales	$	28,043		84.6%	$	22,534		84.1%	$	5,509	24.4%
Gross margin	$	5,111		15.4%	$	4,251		15.9%	$	860	20.2%

Fluctuations in our cost of sales are driven primarily by the number of vehicles we produce and sell. We procure a variety of raw materials, parts, supplies, utilities, transportation and other services from numerous suppliers to manufacture our vehicles, parts and accessories, primarily on a purchase order basis. The raw materials we use typically consist of steel, aluminum, resin, copper, lead and precious metals including platinum, palladium and rhodium.

The cost of materials and components makes up a majority of our cost of sales, which was approximately 75 percent and 73 percent for the six months ended June 30, 2012 and 2011, respectively. The remaining costs primarily include labor costs consisting of direct and indirect wages and fringe benefits, depreciation and amortization, and transportation costs. Cost of sales also includes warranty and product-related costs, as well as depreciation expense related to our GDP vehicles. The period over period percentage increase in the cost of materials and components is mainly due to our continuing investments in vehicle components and enhancements. These enhancements include improved engine and transmission technologies, primarily the 3.6L Pentastar V-6 engine and 8-speed automatic transmission, as well as upgraded media components such as the Uconnect Touch featuring an 8.4 inch screen. In addition, we continue to upgrade the interiors of our vehicles with features such as premium leather and LED accent lighting.

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Cost of sales for the six months ended June 30, 2012 increased $5,509 million as compared to the same period in 2011 primarily due to higher production volumes in connection with the increased vehicle shipments described above, which accounted for approximately $5.6 billion of the increase. In addition, material costs for the six months ended June 30, 2012, increased approximately $200 million as compared to the same period in 2011 due to enhanced features and content in our 2012 model year vehicles, which were partially offset by efficiencies achieved through our ongoing implementation of World Class Manufacturing processes. The increase in cost of sales was also partially offset by reduced costs associated with the shift in sales mix from trucks, SUVs and crossovers to passenger cars, as well as our increased sales of vehicles with the value option packages noted above in—Revenues, Net.

Price increases for certain raw materials had a negative impact on our cost of sales of approximately $400 million, however, we were able to partially offset these price increases by achieving certain cost savings, principally from commercial re-negotiations and technical efficiencies, such as modifying the material content of a part. During the three months ended March 31, 2012 we also recognized insurance recoveries totaling $72 million related to losses sustained in 2011 due to supply disruptions. The proceeds from these recoveries were fully collected during the three months ended June 30, 2012. There were no similar insurance recoveries during the three months ended June 30, 2012 and the six months ended June 30, 2011.

Selling, Administrative and Other Expenses

	Six Months Ended June 30,								Increase     (Decrease)
	2012		Percentage of Revenues		2011		Percentage of Revenues
	(in millions of dollars)
Selling, administrative and other expenses	$	2,445		7.4%	$	2,440		9.1%	$	5	0.2%

Selling, administrative and other expenses include personnel, advertising, warehousing and other costs. Advertising costs accounted for approximately 55 percent of these costs during both the six months ended June 30, 2012 and 2011. During 2012, we continued to place great emphasis on our brand and vehicle focused advertising campaigns to continue to build consumer interest in our current portfolio, and we incurred costs at levels similar to campaigns for new or refreshed vehicle launches. Typically, we incur greater advertising costs in the initial months that new or refreshed vehicles are available to customers in dealerships. Our all-new Dodge Dart began arriving at dealerships at the end of the second quarter of 2012. However, due to the timing of the retail launch of this vehicle, our advertising campaigns were limited. Our advertising costs during the six months ended June 30, 2011 were reflective of the retail launch of 11 new or refreshed vehicles that began arriving in dealerships during the first quarter of 2011.

Research and Development Expenses, Net

	Six Months Ended June 30,								Increase     (Decrease)
	2012		Percentage of Revenues		2011		Percentage of Revenues
	(in millions of dollars)
Research and development expenses, net	$	1,134		3.4%	$	746		2.8%	$	388	52%

Research and development expenses consist of material costs and personnel related expenses associated with engineering, design and development. Our research and development spending has been focused on improving the quality of our vehicles and reducing the time-to-market of new vehicles. Our efforts entail both short-term improvements related to existing vehicles, which include easily recognizable and extensive upgrades to vehicle interiors, and longer term product and powertrain programs. Our research and development expenses for the six months ended June 30, 2012 and 2011, are net of $28 million and $43 million, respectively, of reimbursements recognized for costs related to shared engineering and development activities performed under the product and platform sharing agreement that is part of our industrial alliance with Fiat.

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The increase in research and development expenses for the six months ended June 30, 2012 as compared to the same period in 2011, was primarily due to increased spending for direct and indirect materials related to mid-cycle actions, principally the Ram truck lineup and Jeep Grand Cherokee, as well as joint development programs with Fiat, including the Compact U.S. Wide platform utilized for the all-new Dodge Dart. In addition, we continue to invest in vehicle and technology enhancements for Fiat vehicles that we will produce and distribute within North America. To support these efforts, we have increased our average headcount for research and development by approximately 21 percent period over period, while also increasing the average headcount of our temporary contract workers by approximately 22 percent period over period to meet specialized needs.

Interest Expense

	Six Months Ended June 30,				Increase (Decrease)
	2012		2011
	(in millions of dollars)
Interest expense	$	555	$	676	$	(121)   (17.9%)

Interest expense for the six months ended June 30, 2012 and 2011 included the following:

	Six Months Ended June 30,
	2012			2011
	(in millions of dollars)
Financial Interest Expense:
VEBA Trust Note	$	218		$	211
2019 and 2021 Notes		130			27
Tranche B Term Loan		90			19
Canadian Health Care Trust Notes		48			44
Mexican development banks credit facilities		29			21
U.S. Treasury first lien credit facilities		—			202
EDC credit facilities		—			44
Other		29			32
Interest accretion, primarily related to debt discounts, debt issuance costs and fair value adjustments		62			109
Payable-in-kind interest		—			27
Capitalized interest related to capital expenditures		(51	)		(60	)
Total	$	555		$	676

The decrease in interest expense for the six months ended June 30, 2012 as compared to the six months ended June 30, 2011 was primarily due to the interest savings and reduced interest accretion achieved as a result of our debt refinancing transaction in May 2011. In that transaction, we repaid our outstanding obligations under the U.S. Treasury and EDC credit facilities and entered into the Tranche B Term Loan and the 2019 Notes and 2021 Notes. Refer to —Liquidity and Capital Resourcesbelow, for additional information regarding our refinancing transaction. The interest savings and reduced interest accretion are primarily due to the Tranche B Term Loan and 2019 Notes and 2021 Notes having lower effective interest rates and debt discounts than the U.S. Treasury and EDC credit facilities. Refer to —Loss on Extinguishment of Debt below, for additional information regarding the write off of the U.S. Treasury and EDC credit facilities unamortized discounts and debt issuance costs.

Loss on Extinguishment of Debt

	Six Months Ended June 30,				Increase (Decrease)
	2012		2011
	(in millions of dollars)
Loss on extinguishment of debt	$	—	$	551	$	(551)   (100%)

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In connection with the repayment of our outstanding obligations under the U.S. Treasury and EDC credit facilities, we recognized a $551 million loss on extinguishment of debt, which consisted of the write off of $136 million of unamortized discounts and $34 million of unamortized debt issuance costs associated with the U.S. Treasury credit facilities and $367 million of unamortized discounts and $14 million of unamortized debt issuance costs associated with the EDC credit facilities. Refer to —Liquidity and Capital Resourcesbelow, for additional information regarding our refinancing transaction.

Liquidity and Capital Resources

Liquidity Overview

We require significant liquidity in order to meet our obligations and fund our business plan. Short-term liquidity is required to purchase raw materials, parts and components required for vehicle production, and to fund selling, administrative, research and development, and other expenses. In addition to our general working capital needs, we expect to use significant amounts of cash for the following purposes: (i) capital expenditures to support our existing and future products; (ii) principal and interest payments under our financial obligations and (iii) pension and other postretirement employee benefits, or OPEB, payments. Our capital expenditures are estimated to be approximately $2 billion for the remainder of 2012, which we plan to fund with cash generated primarily from our operating activities.

Liquidity needs are met primarily through cash generated from operations, including the sale of vehicles and service parts to dealers, distributors and other customers worldwide. We also have access to an undrawn revolving credit facility as detailed under the caption —Total Available Liquidity below. In addition, long-term liquidity needs may involve some level of debt refinancing as outstanding debt becomes due or we are required to make amortization or other principal payments.

Although we believe that our current level of total available liquidity is sufficient to meet our short-term and long-term liquidity requirements, we regularly evaluate opportunities to improve our liquidity position and reduce our net industrial debt over time in order to enhance our financial flexibility and to achieve and maintain a liquidity and capital position consistent with that of our principal competitors.

Any actual or perceived limitations of our liquidity may affect the ability or willingness of counterparties, including dealers, suppliers and financial service providers, to do business with us, or require us to restrict additional amounts of cash to provide collateral security for our obligations. Our liquidity levels are subject to a number of risks and uncertainties, including those described above in —Forward-Looking Statements, and inItem 1A —Risk Factors in our 2011 Form 10-K.

Total Available Liquidity

At June 30, 2012, our total available liquidity was $13,375 million, including $1,300 million available to be borrowed under our revolving credit facility that matures in May 2016, or the Revolving Facility. We may access these funds subject to the conditions of our senior credit facilities, which includes the Tranche B Term Loan and the Revolving Facility, or the Senior Credit Facilities. The proceeds from the Revolving Facility may be used for general corporate and/or working capital purposes. The terms of our Senior Credit Facilities require us to maintain a minimum liquidity of $3.0 billion inclusive of any amounts undrawn on our Revolving Facility. Total available liquidity includes cash and cash equivalents, which are subject to intra-month, foreign exchange and seasonal fluctuations. Restricted cash is not included in our presentation of total available liquidity. The following summarizes our total available liquidity (in millions of dollars):

	June 30, 2012		December 31, 2011
Cash and cash equivalents(1)	$	12,075	$	9,601
Revolving Facility availability(2)		1,300		1,300
Total Available Liquidity	$	13,375	$	10,901

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(1) The foreign subsidiaries for which we have elected to permanently reinvest earnings outside of the U.S. held $1.2 billion and $0.7 billion of cash and cash equivalents as of June 30, 2012 and December 31, 2011, respectively. Our current plans do not demonstrate a need to, nor do we have plans to, repatriate the retained earnings from these subsidiaries, as the earnings are permanently reinvested. However, if we determine, in the future, that it is necessary to repatriate these funds or we sell or liquidate any of these subsidiaries, we may be required either to pay taxes, even though we are not currently a taxable entity for U.S. federal income tax purposes, or make distributions to our members to pay taxes associated with the repatriation or the sale or liquidation of these subsidiaries. We may also be required to accrue and pay withholding taxes, depending on the foreign jurisdiction from which the funds are repatriated.

(2) Prior to the final maturity date of the Senior Credit Facilities, we have the option to increase the amount of these facilities in an aggregate principal amount not to exceed $1.2 billion, either through an additional term loan, an increase in the Revolving Facility or a combination of both.

The increase of $2,474 million in total available liquidity from December 31, 2011 to June 30, 2012, reflects a $2,474 million increase in cash and cash equivalents resulting from net cash provided by operating activities of $4,342 million, offset by net cash used in investing activities of $1,734 million and net cash used in financing activities of $129 million. Refer to —Cash Flows below, for additional information regarding our changes in cash and cash equivalents.

Repayment of U.S. Treasury and Export Development Canada Credit Facilities

On May 24, 2011, we repaid all amounts outstanding under the U.S. Treasury first lien credit agreement and EDC loan and security agreement. Refer to our 2011 Form 10-K for additional information related to these agreements.

Payments were made as follows (in millions of dollars):

	Principal			Accrued Interest		Total Payment
U.S. Treasury first lien credit facilities:
Tranche B	$	2,080	(1)	$	22	$	2,102
Tranche C		3,675	(2)		65		3,740
Zero Coupon Note		100			—		100
Total U.S Treasury first lien credit facilities		5,855			87		5,942
EDC credit facilities:
Tranche X		1,319			14		1,333
Tranche X-2		404			4		408
Total EDC credit facilities		1,723			18		1,741
Total U.S Treasury and EDC credit facilities	$	7,578		$	105	$	7,683

(1) Includes $80 million of payable-in-kind, or PIK, interest previously capitalized. The payment of PIK interest is included as a component of Net Cash Provided by Operating Activities in the accompanying Condensed Consolidated Statements of Cash Flows.

(2) Includes $315 million of PIK interest previously capitalized. The payment of PIK interest is included as a component of Net Cash Provided by Operating Activities in the accompanying Condensed Consolidated Statements of Cash Flows. In addition, as a result of the termination of the Ally Master Transaction Agreement, or the Ally MTA, and in accordance with the U.S. Treasury first lien credit agreement, amounts outstanding under that agreement were reduced by $4 million, the amount of qualifying losses incurred by Ally Financial Inc. through April 2011. Refer to Note 9, Commitments, Contingencies and Concentrations, in the accompanying Condensed Consolidated Financial Statements for additional information related to the Ally MTA.

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Senior Credit Facilities and Secured Senior Notes

On May 24, 2011, we and certain of our U.S. subsidiaries as guarantors entered into the following arrangements:

• Senior Credit Facilities — a $3.0 billion Tranche B Term Loan maturing on May 24, 2017, which was fully drawn on May 24, 2011 and a $1.3 billion Revolving Facility which matures on May 24, 2016 and remains undrawn;

• Secured Senior Notes due 2019 — issuance of $1.5 billion of 8 percent secured senior notes due June 15, 2019, or the Original 2019 Notes; and

• Secured Senior Notes due 2021 — issuance of $1.7 billion of 8 ¹/₄ percent secured senior notes due June 15, 2021, or the Original 2021 Notes.

Refer to our 2011 Form 10-K for additional information related to these arrangements.

Secured Senior Notes Exchange Offer

In connection with the offering of the Original 2019 Notes and Original 2021 Notes, collectively referred to as the Original Notes, we entered into a registration rights agreement with the initial purchasers of the Original Notes. In the registration rights agreement, we agreed to register notes having substantially identical terms as the Original Notes with the SEC as part of an offer to exchange freely tradable exchange notes for the Original Notes. On December 29, 2011, and subject to the terms and conditions set forth in our prospectus, we commenced an offer to exchange our new 8 percent secured senior notes due 2019, or the 2019 Notes, for the outstanding Original 2019 Notes and our new 8  ¹/₄ percent secured senior notes due 2021, or the 2021 Notes, for the outstanding Original 2021 Notes. The 2019 Notes and 2021 Notes are collectively referred to as the “Notes.”

On February 1, 2012, our offers to exchange the Original 2019 Notes and Original 2021 Notes expired. Substantially all of the Original Notes were tendered for the Notes. The holders of the Notes received an equal principal amount of 2019 Notes for the Original 2019 Notes and an equal principal amount of 2021 Notes for the Original 2021 Notes. The form and terms of the Notes are identical in all material respects to the Original Notes, except that, the Notes do not contain restrictions on transfer.

Canadian Health Care Trust Notes

In 2010, Chrysler Canada Inc., or Chrysler Canada, issued four unsecured promissory notes to an independent Canadian Health Care Trust, or the Canadian Health Care Trust Notes. The scheduled Tranche A and Tranche B note payments through 2012 do not fully satisfy the interest accrued at the stated rate of 9.0 percent per annum. Accordingly, on the payment date, the difference between a scheduled payment and the interest accrued through the payment date will be capitalized as additional debt. We are not required to make a payment on the Tranche C note until 2020. However, interest accrued on the Tranche C note will be capitalized as additional debt on the payment date of the Tranche B note through 2019.

Payments on the Canadian Health Care Trust Notes are due on June 30 of each year unless that day is not a business day in Canada, in which case payments are due on the next business day. Therefore, the scheduled payments for 2012 were made on July 3, 2012. On that date, $74 million ($76 million Canadian Dollars, or CAD) of interest accrued in excess of the scheduled payments was capitalized as additional debt.

Gold Key Lease

Chrysler Canada maintains our Gold Key Lease vehicle lease portfolio. The related vehicles are leased to Canadian consumers and were financed by asset-backed securitization facilities, as well as a $4.9 billion ($5.0 billion CAD) secured revolving credit facility. In June 2012, we repaid the remaining outstanding balance of the asset-backed note payable. These obligations were primarily repaid out of collections from the operating leases and proceeds from the sales of the related vehicles. We are currently winding down the Gold Key Lease program, therefore, we anticipate no additional funding will be required. No vehicles were added to the portfolio during the six months ended June 30, 2012 and 2011.

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Restricted Cash

Restricted cash, which includes cash equivalents, was $407 million as of June 30, 2012. Restricted cash included $259 million held on deposit or otherwise pledged to secure our obligations under various commercial agreements guaranteed by a subsidiary of Daimler AG, or Daimler, $50 million of collateral for foreign currency exchange and commodity hedge contracts and $98 million of collateral for standby letters of credit and other contractual agreements.

Working Capital Cycle

Our business and results of operations depend upon our ability to achieve certain minimum vehicle sales volumes. As is typical for an automotive manufacturer, we have significant fixed costs, and therefore, changes in our vehicle sales volume can have a significant effect on profitability and liquidity. We generally receive payments on sales of vehicles in North America within a few days of shipment from our assembly plants, whereas there is a lag between the time we receive parts and materials from our suppliers and the time we are required to pay for them. Therefore, during periods of increasing vehicle sales, there is generally a corresponding positive impact on our cash flow and liquidity. On the other hand, during periods in which vehicle sales decline, there is generally a corresponding negative impact on our cash flow and liquidity. In addition, the timing of our vehicle sales under our Guaranteed Depreciation Program can cause seasonal fluctuations in our working capital. Typically, the number of vehicles sold under the program peak during the second quarter and then taper off during the third quarter.

Cash Flows

Six Months Ended June 30, 2012 compared to Six Months Ended June 30, 2011

Operating Activities —Six Months Ended June 30, 2012

For the six months ended June 30, 2012, our net cash provided by operating activities was $4,342 million and was primarily the result of:

(i) net income of $909 million, adjusted to add back $1,430 million of depreciation and amortization expense (including amortization and accretion of debt discounts, debt issuance costs, fair market value adjustments and favorable and unfavorable lease contracts);

(ii) a $1,732 million increase in trade liabilities, primarily due to increased production in response to increased consumer demand for our vehicles, which was consistent with the increase in our worldwide factory shipments;

(iii) a $423 million increase in accrued sales incentives, primarily due to an increase in our U.S. dealer inventory levels at June 30, 2012 versus December 31, 2011 mostly due to an increase in our shipments during the first half of 2012 versus the end of 2011 in order to meet consumer demand and maintain relatively consistent days’ supply of inventory at our U.S. dealers;

(iv) a $270 million decrease in receivables from Fiat due to collections during the period outpacing sales of vehicles to Fiat during the first half of 2012; and

(v) a $90 million increase in payables to Fiat due to increased purchases of parts, services and vehicles during 2012 as compared to the end of 2011.

These increases in our net cash provided by operating activities were partially offset by:

(i) a $668 million increase in trade receivables, primarily due to an increase in our worldwide factory shipments at the end of June 2012 as compared to December 2011 as a result of our annual December shutdown. We generally receive payments on sales of vehicles in North America within a few days of shipment from our assembly plants; and

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(ii) $187 million of pension and OPEB contributions.

Operating Activities —Six Months Ended June 30, 2011

For the six months ended June 30, 2011, our net cash provided by operating activities was $3,708 million and was primarily the result of:

(i) net loss of $254 million, adjusted to add back the $551 million loss on extinguishment of debt associated with the repayment of our U.S. Treasury and EDC credit facilities and $1,643 million of depreciation and amortization expense (including amortization and accretion of debt discounts, debt issuance costs, fair market value adjustments and favorable and unfavorable lease contracts);

(ii) a $1,437 million increase in trade liabilities, primarily due to increased production in response to increased consumer demand for our vehicles following the introduction of our 16 all-new or significantly refreshed vehicles, which was consistent with the increase in our worldwide factory shipments;

(iii) a $484 million increase in accrued sales incentives, primarily due to an increase in our U.S. dealer inventory levels at June 30, 2011 versus December 31, 2010 mostly due to an increase in our shipments during the first half of 2011 versus the end of 2010 in order to meet consumer demand for our 16 all-new or significantly refreshed vehicles and maintain relatively consistent days’ supply of inventory at our U.S. dealers;

(iv) $374 million in collections from Daimler related to the Daimler tax receivable; and

(v) a $271 million increase in payables to Fiat due to increased purchases of parts, services and vehicles during the first half of 2011 as compared to the end of 2010.

These increases in our net cash provided by operating activities were partially offset by:

(i) a $447 million increase in receivables from Fiat due to increased sales of vehicles, service parts and services to Fiat during 2011 as compared to the end of 2010, primarily due to the integration of our European distribution and dealer network organization into Fiat’s distribution organization;

(ii) $414 million of pension and OPEB contributions, partially offset by the collection of a $200 million pension receivable from Daimler; and

(iii) the repayment of $395 million of capitalized payable-in-kind, or PIK, interest on the U.S. Treasury credit facilities.

Investing Activities —Six Months Ended June 30, 2012

For the six months ended June 30, 2012, our net cash used in investing activities was $1,734 million and was primarily the result of:

(i) $1,854 million of capital expenditures to support our existing and future products.

These cash outflows were partially offset by:

(i) $70 million of proceeds from disposals of equipment on operating leases, primarily related to our Gold Key Lease vehicle lease portfolio; and

(ii) a $54 million decrease in restricted cash, primarily due to reduced collateral requirements as a result of positive mark to market adjustments for outstanding derivative instruments during the period.

Investing Activities —Six Months Ended June 30, 2011

For the six months ended June 30, 2011, our net cash used in investing activities was $393 million and was primarily the result of:

(i) $1,185 million of capital expenditures to support our existing and future products.

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These cash outflows were partially offset by:

(i) $465 million of proceeds from disposals of equipment on operating leases, primarily related to our Gold Key Lease vehicle lease portfolio;

(ii) a $218 million decrease in restricted cash. The decrease in restricted cash was primarily the result of the release of $167 million of collateral associated with the Gold Key Lease vehicle lease portfolio, which was used to pay down an equivalent amount outstanding on our Gold Key Lease credit facility. The decrease was also due to the release of initial margin collateral requirements for foreign currency exchange and commodity hedge contracts; and

(iii) $96 million of proceeds from U.S. Dealer Automotive Receivables Transition LLC, or USDART, which represented the remaining balance of a previous advance to USDART that was transferred to us in May 2011, in connection with the termination of the Ally Master Transaction Agreement, or Ally MTA, between the U.S. Treasury, Ally Financial Inc., or Ally, and USDART. Refer to Note 9,Commitments, Contingencies and Concentrations, of our accompanying Condensed Consolidated Financial Statements for additional information related to USDART and the Ally MTA.

Financing Activities —Six Months Ended June 30, 2012

For the six months ended June 30, 2012, our net cash used in financing activities was $129 million and was primarily the result of:

(i) $84 million of debt repayments, including $25 million related to the Auburn Hills Headquarters loan, $15 million related to the Tranche B Term Loan and $44 million related to capital leases and other financial obligations; and

(ii) $41 million of repayments of our Gold Key Lease financing obligations, which included the final repayment of the outstanding asset-backed note payable in June 2012. Gold Key Lease program proceeds used to fund these payments are included in operating and investing activities.

Financing Activities —Six Months Ended June 30, 2011

For the six months ended June 30, 2011, our net cash used in financing activities was $461 million and was primarily the result of:

(i) $515 million of repayments of our Gold Key Lease financing obligations, which included the full repayment of the amounts outstanding on our Gold Key Lease credit facility in April 2011.

These cash outflows were partially offset by net proceeds received from our refinancing transaction in May 2011, which consisted of:

(i) $3,160 million of net proceeds from the Secured Senior Notes;

(ii) $2,933 million of net proceeds from the Tranche B Term Loan;

(iii) $1,268 million of proceeds received from Fiat’s exercise of its incremental equity call option;

(iv) $5,460 million of principal repayments (excluding capitalized PIK interest) of our U.S. Treasury credit facilities; and

(v) $1,723 million of principal repayments of our EDC credit facilities.

Net Industrial Debt

Our calculation of Gross and Net Industrial Debt, as well as a detailed discussion of these measures, is included below in —Non-GAAP Financial Measures —Gross and Net Industrial Debt.

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Our Net Industrial Debt decreased by $2,500 million from $2,932 million at December 31, 2011 to $432 million at June 30, 2012, primarily due to a $2,474 million increase in cash and cash equivalents. Refer to—Cash Flowsabove, for additional information regarding the increase in our cash and cash equivalents for the six months ended June 30, 2012.

Free Cash Flow

Our calculation of Free Cash Flow, as well as a detailed discussion of this measure, is included below in —Non-GAAP Financial Measures —Free Cash Flow.

Free Cash Flow for the six months ended June 30, 2012 and 2011 totaled $2,566 million and $2,700 million, respectively.

The decrease in Free Cash Flow from 2011 to 2012 was primarily due to a:

(i) $669 million increase in our capital expenditures due to our continued investments to enhance our current and future product portfolio;

(ii) $395 million reduction in proceeds from disposals of equipment on operating leases, primarily related to the wind down of our Gold Key Lease vehicle lease portfolio; and

(iii) $164 million reduction in our change in restricted cash, primarily due to 2011 including the release of $167 million of collateral associated with the Gold Key Lease vehicle lease portfolio.

These decreases were partially offset by a:

(i) $634 million increase in our cash generated from operations. Refer to —Cash Flows above, for additional information regarding the change in our cash generated from operations; and

(ii) $474 million reduction in repayments on our Gold Key Lease financing obligations, primarily due to the significant reduction in the related outstanding obligations, which is consistent with the wind down of the program.

Daimler Tax Receivable

During the three months ended March 31, 2011, we received $374 million of reimbursements from Daimler related to payments previously made by us which had been applied by the Canada Revenue Agency and the Provincial Tax Authorities in relation to additional taxes assessed to Chrysler Canada for transfer pricing adjustments. No such reimbursements were received during the three months ended June 30, 2011 and the six months ended June 30, 2012. Refer to our 2011 Form 10-K for further discussion regarding the Canadian transfer pricing matter.

Defined Benefit Pension Plans and OPEB Plans—Contributions

During the six months ended June 30, 2012, employer contributions to our funded pension plans amounted to $84 million. Employer contributions to our funded pension plans are expected to be $557 million for the remainder of 2012, of which discretionary contributions of $259 million are expected to be made to the U.S. plans and $2 million and $281 million will be made to our U.S. and Canadian plans, respectively, to satisfy minimum funding requirements. Employer contributions to our unfunded pension and OPEB plans amounted to $6 million and $97 million, respectively, for the six months ended June 30, 2012. Employer contributions to our unfunded pension and OPEB plans are expected to be $4 million and $91 million, respectively, for the remainder of 2012, which represent the expected benefit payments to participants.

During the life of the plans, we intend to primarily utilize plan assets to fund benefit payments of our pension plans and minimize our cash contributions. OPEB payments are currently funded from our cash flows from operations.

In connection with our transaction with Old Carco LLC in June 2009, we acquired a $600 million receivable from Daimler to fund contributions to our U.S. pension plans. This receivable was payable to us in three equal

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annual installments, of which, the third and final $200 million installment was received by us in June 2011 and was utilized to fund a portion of our contributions to our unfunded pension plans during the six months ended June 30, 2011.

Non-GAAP Financial Measures

We monitor our operations through the use of several non-GAAP financial measures: Adjusted Net Income (Loss); Modified Operating Profit (Loss); Modified Earnings Before Interest, Taxes, Depreciation and Amortization, which we refer to as Modified EBITDA; Gross and Net Industrial Debt; as well as Free Cash Flow. We believe that these non-GAAP financial measures provide useful information about our operating results and enhance the overall ability to assess our financial performance. They provide us with comparable measures of our financial performance based on normalized operational factors which then facilitate management’s ability to identify operational trends, as well as make decisions regarding future spending, resource allocations and other operational decisions. These and similar measures are widely used in the industry in which we operate.

These financial measures may not be comparable to other similarly titled measures of other companies and are not an alternative to net income (loss) or income (loss) from operations as calculated and presented in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. These measures should not be used as a substitute for any U.S. GAAP financial measures.

Adjusted Net Income (Loss)

Adjusted Net Income (Loss) is defined as net income (loss) excluding the impact of infrequent charges, which includes losses on extinguishment of debt. We use Adjusted Net Income (Loss) as a key indicator of the trends in our overall financial performance, excluding the impact of such infrequent charges.

Modified Operating Profit (Loss)

We measure Modified Operating Profit (Loss) to assess the performance of our core operations, establish operational goals and forecasts that are used to allocate resources, and evaluate our performance period over period. Modified Operating Profit (Loss) is computed starting with net income (loss), and then adjusting the amount to (i) add back income tax expense and exclude income tax benefits, (ii) add back net interest expense (excluding interest expense related to financing activities associated with the Gold Key Lease vehicle lease portfolio), (iii) add back (exclude) all pension, OPEB and other employee benefit costs (gains) other than service costs, (iv) add back restructuring expense and exclude restructuring income, (v) add back other financial expense, (vi) add back losses and exclude gains due to cumulative change in accounting principles, and (vii) add back certain other costs, charges and expenses, which include the charges factored into the calculation of Adjusted Net Income (Loss). We also use performance targets based on Modified Operating Profit (Loss) as a factor in our incentive compensation calculations for our represented and non-represented employees.

Modified EBITDA

We measure the performance of our business using Modified EBITDA to eliminate the impact of items that we do not consider indicative of our core operating performance. We compute Modified EBITDA starting with net income (loss) adjusted to Modified Operating Profit (Loss) as described above, and then add back depreciation and amortization expense (excluding depreciation and amortization expense for vehicles held for lease). We believe that Modified EBITDA is useful to determine the operational profitability of our business, which we use as a basis for making decisions regarding future spending, budgeting, resource allocations and other operational decisions.

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The reconciliation of net income (loss) to Adjusted Net Income, Modified Operating Profit and Modified EBITDA is set forth below (in millions of dollars):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Net income (loss)	$	436	$	(370)	$	909	$	(254)
Plus:
Loss on extinguishment of debt		—		551		—		551
Adjusted Net Income		436		181		909		297
Plus:
Income tax expense		105		57		138		101
Net interest expense		266		317		533		654
Net pension, OPEB and other employee benefit gains other than service costs		(21)		(51)		(42)		(88)
Restructuring (income) expenses, net		(34)		2		(48)		13
Other financial expense, net		3		1		5		7
		��
Modified Operating Profit		755		507		1,495		984
Plus:
Depreciation and amortization expense		712		809		1,380		1,510
Less:
Depreciation and amortization expense for vehicles held for lease		(43)		(23)		(67)		(30)
Modified EBITDA	$	1,424	$	1,293	$	2,808	$	2,464

Gross and Net Industrial Debt

We compute Gross Industrial Debt as total financial liabilities less Gold Key Lease financing obligations. Gold Key Lease financing obligations were primarily satisfied out of collections from the related operating leases and proceeds from the sale of the related vehicles.

We deduct our cash and cash equivalents from Gross Industrial Debt to compute Net Industrial Debt. We use Net Industrial Debt as a measure of our financial leverage and believe it is useful to others in evaluating our financial leverage.

The following is a reconciliation of financial liabilities to Gross and Net Industrial Debt (in millions of dollars):

	June 30, 2012		December 31, 2011
Financial liabilities (1)	$	12,507	$	12,574
Less: Gold Key Lease obligations		—		41
Gross Industrial Debt	$	12,507	$	12,533
Less: cash and cash equivalents		12,075		9,601
Net Industrial Debt	$	432	$	2,932

(1) Refer to Note 7, Financial Liabilities, of our accompanying Condensed Consolidated Financial Statements for additional information regarding our financial liabilities.

Free Cash Flow

Free Cash Flow is defined as cash flows from operating and investing activities, excluding any debt related investing activities, adjusted for financing activities related to Gold Key Lease. Free Cash Flow is presented because we believe that it is used by analysts and other parties in evaluating the Company. However, Free Cash Flow does not necessarily represent

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cash available for discretionary activities, as certain debt obligations and capital lease payments must be funded out of Free Cash Flow. We also use performance targets based on Free Cash Flow as a factor in our incentive compensation calculations for our non-represented employees.

Free Cash Flow should not be considered as an alternative to, or substitute for, net change in cash and cash equivalents. We believe it is important to view Free Cash Flow as a complement to our accompanying Condensed Consolidated Statements of Cash Flows.

The following is a reconciliation of Net Cash Provided by (Used in) Operating and Investing Activities to Free Cash Flow (in millions of dollars):

	Six Months Ended June 30,
	2012		2011
Net Cash Provided by Operating Activities	$	4,342	$	3,708
Net Cash Used in Investing Activities		(1,734)		(393)
Investing activities excluded from Free Cash Flow:
Change in loans and notes receivables		(1)		(4)
Proceeds from USDART		—		(96)
Financing activities included in Free Cash Flow:
Repayments of Gold Key Lease financing		(41)		(515)
Free Cash Flow	$	2,566	$	2,700

Ally Repurchase Obligation

In accordance with the terms of the Ally Auto Finance Operating Agreement, or Ally Agreement, we are required to repurchase Ally financed dealer inventory, upon certain triggering events and with certain exceptions, in the event of an actual or constructive termination of a dealer’s franchise agreement (including in certain circumstances when Ally forecloses on all assets of a dealer securing financing provided by Ally). These obligations exclude vehicles that have been damaged or altered, that are missing equipment or that have excessive mileage or an original invoice date that is more than one year prior to the repurchase date.

As of June 30, 2012, the maximum potential amount of future payments required to be made to Ally under this guarantee was approximately $7.5 billion and was based on the aggregate repurchase value of eligible vehicles financed by Ally in our U.S. and Canadian dealer stock. If vehicles are required to be repurchased under this arrangement, the total exposure would be reduced to the extent the vehicles can be resold to another dealer. The fair value of the guarantee was less than $0.1 million at June 30, 2012, which considers both the likelihood that the triggering events will occur and the estimated payment that would be made net of the estimated value of inventory that would be reacquired upon the occurrence of such events. The estimate reflects our actual experience.

The Ally Agreement is effective through April 30, 2013, with automatic one-year renewals unless either party elects not to renew. We have notified Ally of our election not to renew the Ally Agreement for an additional term.

Other Repurchase Obligations

In accordance with the terms of other wholesale financing arrangements in Mexico, we are required to repurchase dealer inventory financed under these arrangements, upon certain triggering events and with certain exceptions, including in the event of an actual or constructive termination of a dealer’s franchise agreement. These obligations exclude certain vehicles including, but not limited to, vehicles that have been damaged or altered, that are missing equipment or that have excessive mileage.

As of June 30, 2012, the maximum potential amount of future payments required to be made in accordance with these other wholesale financing arrangements was approximately $230 million and was based on the aggregate

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repurchase value of eligible vehicles financed through such arrangements in the respective dealer’s stock. If vehicles are required to be repurchased through such arrangements, the total exposure would be reduced to the extent the vehicles can be resold to another dealer. The fair value of the guarantee was less than $0.1 million at June 30, 2012, which considers both the likelihood that the triggering events will occur and the estimated payment that would be made net of the estimated value of inventory that would be reacquired upon the occurrence of such events. The estimate reflects our actual experience.

Employees

The following summarizes the number of our hourly and salaried employees as of the dates noted below:

	June 30, 2012		December 31, 2011
Hourly		44,073		39,571
Salaried		18,150		16,116
Total		62,223		55,687

The increase in our total workforce during the six months ended June 30, 2012, is primarily attributable to the hiring of manufacturing employees to support our current and anticipated production volumes, as well as additional engineering, research and development and other highly skilled employees to support our product development and other corporate activities.

In the U.S. and Canada combined, most of our hourly employees and approximately one-quarter of our salaried employees were represented by unions under collective bargaining agreements, which represented approximately 64 percent of our worldwide workforce as of June 30, 2012. The International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, or UAW, and the National Automobile, Aerospace, Transportation and General Workers Union of Canada, or CAW, represent substantially all of these represented employees in the U.S. and Canada, respectively.

Our collective bargaining agreement with the CAW expires in September 2012.

Recent Accounting Pronouncements

In July 2012, the Financial Accounting Standards Board, or FASB, issued updated guidance on the annual testing of indefinite-lived intangible assets for impairment. The amendments allow an entity to first assess qualitative factors to determine whether it is more likely than not that the indefinite-lived intangible asset is impaired. If, based on its qualitative assessment, an entity concludes it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount, quantitative impairment testing is required. However, if an entity concludes otherwise, quantitative impairment testing is not required. This guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. We are evaluating the potential impact of this guidance on our consolidated financial statements.

In May 2011, the FASB issued updated guidance to achieve common fair value measurement and disclosure requirements between International Financial Reporting Standards and U.S. GAAP. The amendments clarify the FASB’s intent about the application of existing requirements and provide for changes in measuring the fair value of financial instruments that are managed within a portfolio and the application of premiums or discounts. This guidance requires us to, among other things, expand existing disclosures for recurring Level 3 fair value measurements and for those assets and liabilities not measured at fair value on the balance sheet, but for which fair value is disclosed. This guidance is effective for fiscal periods beginning after December 15, 2011, and is to be applied prospectively. We adopted this guidance as of January 1, 2012, and it did not have a material impact on our consolidated financial statements.

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Critical Accounting Estimates

The accompanying condensed consolidated financial statements are prepared in accordance with U.S. GAAP, which require the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses in the periods presented. We believe that the accounting estimates employed are appropriate and resulting balances are reasonable; however, due to inherent uncertainties in making estimates, actual results could differ from the original estimates, requiring adjustments to these balances in future periods. For a discussion of our critical accounting estimates, refer toItem 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations —Critical Accounting EstimatesandItem 8. Financial Statements and Supplementary Data —Note 2, Basis of Presentation and Significant Accounting Policies,included in our 2011 Form 10-K. There have been no significant changes in our critical accounting estimates during the six months ended June 30, 2012.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no significant changes in our exposure to financial market risks since December 31, 2011. Refer toItem 7A—Quantitative and Qualitative Disclosures about Marker Risk in our 2011 Form 10-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, an evaluation was carried out by our management, under the supervision and with the participation of our Chairman and Chief Executive Officer, President and Chief Operating Officer, or CEO, and our Senior Vice President and Chief Financial Officer, or CFO, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, or Exchange Act).

Based upon that evaluation, our management, including our CEO and CFO, have concluded that as of the end of the period covered by this report these disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC rules and forms, and that such information is communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the three months ended June 30, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—Other Information

Item 1. Legal Proceedings

Various legal proceedings, claims and governmental investigations are pending against us on a wide range of topics, including vehicle safety; emissions and fuel economy; dealer, supplier and other contractual relationships; intellectual property rights; product warranties and environmental matters. Some of these proceedings allege defects in specific component parts or systems (including airbags, seats, seat belts, brakes, ball joints, transmissions, engines and fuel systems) in various vehicle models or allege general design defects relating to vehicle handling and stability, sudden unintended movement or crashworthiness. These proceedings seek recovery for damage to property, personal injuries or wrongful death and in some cases include a claim for exemplary or punitive damages. Adverse decisions in one or more of these proceedings could require us to pay substantial damages, or undertake service actions, recall campaigns or other costly actions.

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Item 6. Exhibits

Exhibit Number	Description of Documents
31.1*	Section 302 Certification of the Chief Executive Officer
31.2*	Section 302 Certification of the Chief Financial Officer
32.1†	Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2†	Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS†ø	XBRL Instance Document
101.SCH†ø	XBRL Taxonomy Extension Schema Document
101.CAL†ø	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF†ø	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB†ø	XBRL Taxonomy Extension Label Linkbase Document
101.PRE†ø	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

† Furnished herewith

ø Submitted electronically herewith

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CHRYSLER GROUP LLC
Dated: August 13, 2012	By:	/s/ Richard K. Palmer
		Richard K. Palmer
		Senior Vice President and Chief Financial Officer

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CHRYSLER GROUP LLC

Exhibit Index

Exhibit Number	Description of Documents
31.1*	Section 302 Certification of the Chief Executive Officer
31.2*	Section 302 Certification of the Chief Financial Officer
32.1†	Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2†	Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS†ø	XBRL Instance Document
101.SCH†ø	XBRL Taxonomy Extension Schema Document
101.CAL†ø	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF†ø	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB†ø	XBRL Taxonomy Extension Label Linkbase Document
101.PRE†ø	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

† Furnished herewith

ø Submitted electronically herewith

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