##### Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



| | [ü] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
| | --- | ----------------------------------------------------------------------------------------



| |  | For the quarterly period ended March 31, 2011
| |  | ---------------------------------------------

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 ofincorporation or organization) |  | (I.R.S. EmployerIdentification 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  No ü

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post
such files). Yes  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.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  Noü

As of May 13, 2011, there were 800,000 Class
A Membership Interests and 200,000 Class B Membership Interests issued and outstanding.



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Form 10-Q for the Quarterly Period Ended March 31, 2011

INDEX



|        |  |                                                                                       |  |                                                            |    |  |    | 
|------- |  | ------------------------------------------------------------------------------------- |  | ---------------------------------------------------------- | -- |  | -- | 
|        |  | Part I  Financial Information                                                        |  |                                                            |    | 
|Item 1. |  | Report of Independent Registered Public Accounting Firm                               |  |                                                            | 3  | 
|        |  | Condensed Consolidated Statements of Operations (unaudited)                           |  |                                                            | 4  | 
|        |  | Condensed Consolidated Balance Sheets (unaudited)                                     |  |                                                            | 5  | 
|        |  | Condensed Consolidated Statements of Cash Flows (unaudited)                           |  |                                                            | 6  | 
|        |  | Condensed Consolidated Statements of Members Deficit
(unaudited)                     |  |                                                            | 7  | 
|        |  | Notes to Condensed Consolidated Financial Statements (unaudited)                      |  |                                                            | 8  | 
|        |  | Note 1.                                                                               |  | Background and Nature of Operations                        |    |  | 8  | 
|        |  | Note 2.                                                                               |  | Basis of Presentation and Recent Accounting Pronouncements |    |  | 8  | 
|        |  | Note 3.                                                                               |  | Interest Expense                                           |    |  | 9  | 
|        |  | Note 4.                                                                               |  | Inventories                                                |    |  | 10 | 
|        |  | Note 5.                                                                               |  | Other Intangible Assets                                    |    |  | 10 | 
|        |  | Note 6.                                                                               |  | Prepaid Expenses and Other Assets                          |    |  | 11 | 
|        |  | Note 7.                                                                               |  | Accrued Expenses and Other Liabilities                     |    |  | 12 | 
|        |  | Note 8.                                                                               |  | Financial Liabilities                                      |    |  | 14 | 
|        |  | Note 9.                                                                               |  | Income Taxes                                               |    |  | 17 | 
|        |  | Note 10.                                                                              |  | Commitments, Contingencies and Concentrations              |    |  | 18 | 
|        |  | Note 11.                                                                              |  | Fair Value Measurements                                    |    |  | 22 | 
|        |  | Note 12.                                                                              |  | Derivative Financial Instruments and Risk Management       |    |  | 24 | 
|        |  | Note 13.                                                                              |  | Employee Retirement and Other Benefits                     |    |  | 27 | 
|        |  | Note 14.                                                                              |  | Other Transactions with Related Parties                    |    |  | 28 | 
|        |  | Note 15.                                                                              |  | Restructuring Actions                                      |    |  | 31 | 
|        |  | Note 16.                                                                              |  | Venezuelan Currency Devaluation                            |    |  | 33 | 
|        |  | Note 17.                                                                              |  | Subsequent Events                                          |    |  | 33 | 
|Item 2. |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  |                                                            | 35 | 
|Item 3. |  | Quantitative and Qualitative Disclosures about Market Risk                            |  |                                                            | 49 | 
|Item 4. |  | Controls and Procedures                                                               |  |                                                            | 49 | 
|        |  |                                                                                      
|        |  | Part II  Other Information                                                           |  |                                                            |    | 
|Item 1. |  | Legal Proceedings                                                                     |  |                                                            | 49 | 
|Item 6. |  | Exhibits                                                                              |  |                                                            | 50 | 
|        |  | SIGNATURES                                                                            |  |                                                            | 51 | 



---

##### Table of Contents

Unless otherwise specified, the terms we, us, our, Chrysler
Group or the Company refer to Chrysler Group LLC and its consolidated subsidiaries, or any one or more of them, as the context may require, and Fiat refers to Fiat S.p.A, a corporation organized under the laws of Italy,
and its consolidated subsidiaries, 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. Any forward-looking statement speaks only as of the date it was made, and we do not undertake any obligation to revise publicly any forward-looking
statement, whether as a result of new information, future events or otherwise. For additional discussion of these risks, refer to Item 1A. Risk Factors in our Registration Statement on Form 10, as amended (File No. 000-54282). These
factors include, but are not limited to:



| |  |  | our ability to instill confidence in our long-term viability;
| | - |  | -------------------------------------------------------------



| |  |  | our ability to realize benefits from our industrial alliance with Fiat;
| | - |  | -----------------------------------------------------------------------



| |  |  | our ability to control costs and implement cost reduction and productivity improvement initiatives;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | continued economic weakness and weak vehicle demand, especially in North America;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | our lack of a captive finance company and the continued availability of financing for our dealers and customers;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | our ability to increase vehicle sales outside of North America;
| | - |  | ---------------------------------------------------------------



| |  |  | changes in currency exchange rates and interest rates;
| | - |  | ------------------------------------------------------



| |  |  | our ability to rapidly introduce new and significantly refreshed vehicles that appeal to consumers;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | competitive pressures which may limit our ability to reduce sales incentives and achieve better pricing;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | increases in fuel prices that may adversely impact demand for our vehicles;
| | - |  | ---------------------------------------------------------------------------



| |  |  | changes in consumer preferences which could reduce demand for our product offerings;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | our ability to accurately forecast demand for our vehicles;
| | - |  | -----------------------------------------------------------



| |  |  | our ability to qualify for U.S. Department of Energy funding of our advanced technology vehicle programs under Section 136 of the Energy
Independence and Security Act of 2007;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | disruption of production or delivery of new vehicles due to shortages of materials, labor strikes, or supplier insolvencies, including supply
disruptions resulting from the natural disasters in Japan in March 2011;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



1



---

##### Table of Contents

| |  |  | the impact of vehicle defects and/or product recalls; and
| | - |  | ---------------------------------------------------------



| |  |  | our inability to complete our planned refinancing transactions in the anticipated time frame and on acceptable terms.
| | - |  | ---------------------------------------------------------------------------------------------------------------------

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.



2



---

##### Table of Contents

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
March 31, 2011, and the related condensed consolidated statements of operations, cash flows, and members deficit for the three-month periods ended March 31, 2011 and 2010. These interim financial statements are the responsibility of
the Companys management.

We conducted our review 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 review, 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, 2010,
and the related consolidated statements of operations, cash flows, and members deficit for the year then ended (not presented herein); and in our report dated February 25, 2011 (May 6, 2011 as to Note 23), 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, 2010 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

May 13, 2011



3



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited - in millions of dollars)



|                                           |  |                              |        |   |      |   |       |  
|------------------------------------------ |  | ---------------------------- | ------ | - | ---- | - | ----- | -
|                                           |  | Three Months Ended March 31, |       
|                                           |  | 2011                         |        |   | 2010 |  
|Revenues, net                              |  | $                            | 13,124 |   |      | $ | 9,687 |  
|Cost of sales                              |  |                              | 11,077 |   |      |   | 8,330 |  
|                                           |  |                              |        |   |      |   |       |  
|GROSS MARGIN                               |  |                              | 2,047  |   |      |   | 1,357 |  
|Selling, administrative and other expenses |  |                              | 1,185  |   |      |   | 909   |  
|Research and development expenses          |  |                              | 354    |   |      |   | 294   |  
|Restructuring expenses, net (Note 15)      |  |                              | 11     |   |      |   | 21    |  
|Interest expense (Note 3)                  |  |                              | 348    |   |      |   | 311   |  
|Interest income                            |  |                              | (11    | ) |      |   | (16   | )
|                                           |  |                              |        |   |      |   |       |  
|INCOME (LOSS) BEFORE INCOME TAXES          |  |                              | 160    |   |      |   | (162  | )
|Income tax expense (Note 9)                |  |                              | 44     |   |      |   | 35    |  
|                                           |  |                              |        |   |      |   |       |  
|NET INCOME (LOSS)                          |  | $                            | 116    |   |      | $ | (197  | )
|                                           |  |                              |        |   |      |   |       |  





See accompanying notes to condensed consolidated financial statements.



4



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited - in millions of dollars)



|                                                                                |  |                |        |   |                   |   |        |  
|------------------------------------------------------------------------------- |  | -------------- | ------ | - | ----------------- | - | ------ | -
|                                                                                |  | March 31, 2011 |        |   | December 31, 2010 |  
|CURRENT ASSETS:                                                                 |  |                |        |   |                   |   |        |  
|Cash and cash equivalents                                                       |  | $              | 9,877  |   |                   | $ | 7,347  |  
|Restricted cash (Note 10)                                                       |  |                | 106    |   |                   |   | 304    |  
|Trade receivables, net                                                          |  |                | 1,205  |   |                   |   | 819    |  
|Inventories (Note 4)                                                            |  |                | 4,028  |   |                   |   | 3,647  |  
|Prepaid expenses and other assets (Note 6)                                      |  |                | 1,305  |   |                   |   | 2,173  |  
|Deferred taxes                                                                  |  |                | 37     |   |                   |   | 30     |  
|                                                                                |  |                |        |   |                   |   |        |  
|TOTAL CURRENT ASSETS                                                            |  |                | 16,558 |   |                   |   | 14,320 |  
|PROPERTY AND EQUIPMENT:                                                         |  |                |        |   |                   |   |        |  
|Property, plant and equipment, net                                              |  |                | 13,706 |   |                   |   | 13,817 |  
|Equipment on operating leases, net                                              |  |                | 1,605  |   |                   |   | 1,535  |  
|                                                                                |  |                |        |   |                   |   |        |  
|TOTAL PROPERTY AND EQUIPMENT                                                    |  |                | 15,311 |   |                   |   | 15,352 |  
|OTHER ASSETS:                                                                   |  |                |        |   |                   |   |        |  
|Advances to related parties and other financial assets                          |  |                | 148    |   |                   |   | 154    |  
|Restricted cash (Note 10)                                                       |  |                | 370    |   |                   |   | 367    |  
|Goodwill                                                                        |  |                | 1,361  |   |                   |   | 1,361  |  
|Other intangible assets, net (Note 5)                                           |  |                | 3,468  |   |                   |   | 3,504  |  
|Prepaid expenses and other assets (Note 6)                                      |  |                | 345    |   |                   |   | 352    |  
|Deferred taxes                                                                  |  |                | 40     |   |                   |   | 39     |  
|                                                                                |  |                |        |   |                   |   |        |  
|TOTAL OTHER ASSETS                                                              |  |                | 5,732  |   |                   |   | 5,777  |  
|                                                                                |  |                |        |   |                   |   |        |  
|TOTAL ASSETS                                                                    |  | $              | 37,601 |   |                   | $ | 35,449 |  
|                                                                                |  |                |        |   |                   |   |        |  
|CURRENT LIABILITIES:                                                            |  |                |        |   |                   |   |        |  
|Trade liabilities                                                               |  | $              | 8,940  |   |                   | $ | 7,028  |  
|Accrued expenses and other liabilities (Note 7)                                 |  |                | 7,770  |   |                   |   | 7,594  |  
|Current maturities of financial liabilities (Note 8)                            |  |                | 2,720  |   |                   |   | 2,758  |  
|Deferred revenue                                                                |  |                | 1,152  |   |                   |   | 888    |  
|Deferred taxes                                                                  |  |                | 79     |   |                   |   | 85     |  
|                                                                                |  |                |        |   |                   |   |        |  
|TOTAL CURRENT LIABILITIES                                                       |  |                | 20,661 |   |                   |   | 18,353 |  
|LONG-TERM LIABILITIES:                                                          |  |                |        |   |                   |   |        |  
|Accrued expenses and other liabilities (Note 7)                                 |  |                | 9,998  |   |                   |   | 9,961  |  
|Financial liabilities (Note 8)                                                  |  |                | 10,725 |   |                   |   | 10,973 |  
|Deferred revenue                                                                |  |                | 571    |   |                   |   | 580    |  
|Deferred taxes                                                                  |  |                | 73     |   |                   |   | 71     |  
|                                                                                |  |                |        |   |                   |   |        |  
|TOTAL LONG-TERM LIABILITIES                                                     |  |                | 21,367 |   |                   |   | 21,585 |  
|                                                                                |  |               
|Commitments and contingencies (Note 10)                                         |  |                | -      |   |                   |   | -      |  
|                                                                                |  |               
|MEMBERS DEFICIT                                                                |  |                |        |   |                   |   |        |  
|Membership Interests                                                            |  |                |        |   |                   |   |        |  
|Class A Membership Interests - 800,000 units authorized, issued and outstanding |  |                | -      |   |                   |   | -      |  
|Class B Membership Interests - 200,000 units authorized, issued and outstanding |  |                | -      |   |                   |   | -      |  
|Contributed capital                                                             |  |                | 1,393  |   |                   |   | 1,399  |  
|Accumulated losses                                                              |  |                | (4,321 | ) |                   |   | (4,437 | )
|Accumulated other comprehensive loss                                            |  |                | (1,499 | ) |                   |   | (1,451 | )
|                                                                                |  |                |        |   |                   |   |        |  
|TOTAL MEMBERS DEFICIT                                                          |  |                | (4,427 | ) |                   |   | (4,489 | )
|                                                                                |  |                |        |   |                   |   |        |  
|TOTAL LIABILITIES AND MEMBERS DEFICIT                                          |  | $              | 37,601 |   |                   | $ | 35,449 |  
|                                                                                |  |                |        |   |                   |   |        |  

See accompanying notes to condensed consolidated financial statements.



5



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - in millions of dollars)



|                                                                                     |  |                              |       |   |      |   |       |  
|------------------------------------------------------------------------------------ |  | ---------------------------- | ----- | - | ---- | - | ----- | -
|                                                                                     |  | Three Months Ended March 31, |      
|                                                                                     |  | 2011                         |       |   | 2010 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                |  |                              |       |   |      |   |       |  
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                            |  | $                            | 3,117 |   |      | $ | 2,386 |  
|                                                                                     |  |                              |       |   |      |   |       |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                |  |                              |       |   |      |   |       |  
|Purchases of property, plant and equipment and intangible assets                     |  |                              | (559  | ) |      |   | (580  | )
|Proceeds from disposals of property, plant and equipment                             |  |                              | 11    |   |      |   | 10    |  
|Proceeds from disposals of equipment on operating leases                             |  |                              | 199   |   |      |   | 325   |  
|Changes in restricted cash                                                           |  |                              | 192   |   |      |   | (15   | )
|Changes in loans and notes receivable                                                |  |                              | 3     |   |      |   | (2    | )
|                                                                                     |  |                              |       |   |      |   |       |  
|NET CASH USED IN INVESTING ACTIVITIES                                                |  |                              | (154  | ) |      |   | (262  | )
|                                                                                     |  |                              |       |   |      |   |       |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                |  |                              |       |   |      |   |       |  
|Repayment of Chrysler Receivables SPV, LLC loan (Note 14)                            |  |                              | -     |   |      |   | (123  | )
|Repayments of Gold Key Lease financing (Note 8)                                      |  |                              | (434  | ) |      |   | (478  | )
|Net repayment of other financial liabilities                                         |  |                              | (18   | ) |      |   | (22   | )
|                                                                                     |  |                              |       |   |      |   |       |  
|NET CASH USED IN FINANCING ACTIVITIES                                                |  |                              | (452  | ) |      |   | (623  | )
|                                                                                     |  |                              |       |   |      |   |       |  
|Effect of exchange rate changes on cash and cash equivalents                         |  |                              | 19    |   |      |   | (3    | )
|Net change in cash and cash equivalents                                              |  |                              | 2,530 |   |      |   | 1,498 |  
|Cash and cash equivalents at beginning of period                                     |  |                              | 7,347 |   |      |   | 5,862 |  
|                                                                                     |  |                              |       |   |      |   |       |  
|Cash and cash equivalents at end of period                                           |  | $                            | 9,877 |   |      | $ | 7,360 |  
|                                                                                     |  |                              |       |   |      |   |       |  
|SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES:                           |  |                              |       |   |      |   |       |  
|Recognition of a financial liability related to the VEBA Trust Note, net of discount |  |                              | -     |   |      |   | 3,854 |  
|Satisfaction of contribution receivable for the VEBA Trust Membership Interests      |  |                              | -     |   |      |   | 990   |  

See accompanying
notes to condensed consolidated financial statements.



6



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF MEMBERS DEFICIT

(Unaudited - in millions of dollars)



|                                                                                |  |                    |       |   |                   |   |        |                            |  |   |                                   |   |  |       |        |   |  |   |        |  
|------------------------------------------------------------------------------- |  | ------------------ | ----- | - | ----------------- | - | ------ | -------------------------- |  | - | --------------------------------- | - |  | ----- | ------ | - |  | - | ------ | -
|                                                                                |  | ContributedCapital |       |   | AccumulatedLosses |   |        | ComprehensiveIncome (Loss) |  |   | AccumulatedOtherComprehensiveLoss |   |  | Total |       
|Balance at January 1, 2011                                                      |  | $                  | 1,399 |   |                   | $ | (4,437 | )                          |  |   |                                   |   |  | $     | (1,451 | ) |  | $ | (4,489 | )
|Distribution for state tax withholding obligations on behalf of certain members |  |                    | (6    | ) |                   |   |        |                            |  |   |                                   |   |  |       |        |   |  |   | (6     | )
|Net income                                                                      |  |                    |       |   |                   |   | 116    |                            |  | $ | 116                               |   |  |       |        |   |  |   | 116    |  
|Other comprehensive loss:                                                       |  |                    |       |   |                   |   |        |                            |  |   |                                   |   |  |       |        |   |  |   |        |  
|Unrealized loss on derivatives recorded in AOCI, net(1)(Note 12)                |  |                    |       |   |                   |   |        |                            |  |   | (100                              | ) |  |       |        |   |  |   |        |  
|Realized loss on derivatives reclassified from AOCI to income, net (1)(Note 12) |  |                    |       |   |                   |   |        |                            |  |   | 61                                |   |  |       |        |   |  |   |        |  
|Foreign currency translation adjustments (1)                                    |  |                    |       |   |                   |   |        |                            |  |   | (12                               | ) |  |       |        |   |  |   |        |  
|Defined benefit plan adjustment:                                                |  |                    |       |   |                   |   |        |                            |  |   |                                   |   |  |       |        |   |  |   |        |  
|Actuarial gain (1)                                                              |  |                    |       |   |                   |   |        |                            |  |   | 3                                 |   |  |       |        |   |  |   |        |  
|                                                                                |  |                    |       |   |                   |   |        |                            |  |   |                                   |   |  |       |        |   |  |   |        |  
|Other comprehensive loss                                                        |  |                    |       |   |                   |   |        |                            |  |   | (48                               | ) |  |       | (48    | ) |  |   | (48    | )
|                                                                                |  |                    |       |   |                   |   |        |                            |  |   |                                   |   |  |       |        |   |  |   |        |  
|Comprehensive income                                                            |  |                    |       |   |                   |   |        |                            |  | $ | 68                                |   |  |       |        |   |  |   |        |  
|                                                                                |  |                    |       |   |                   |   |        |                            |  |   |                                   |   |  |       |        |   |  |   |        |  
|Balance at March 31, 2011                                                       |  | $                  | 1,393 |   |                   | $ | (4,321 | )                          |  |   |                                   |   |  | $     | (1,499 | ) |  | $ | (4,427 | )
|                                                                                |  |                    |       |   |                   |   |        |                            |  |   |                                   |   |  |       |        |   |  |   |        |  



|                                                                                |  |                    |       |  |                   |   |        |                            |  |   |                                   |   |  |       |      |   |  |   |        |  
|------------------------------------------------------------------------------- |  | ------------------ | ----- |  | ----------------- | - | ------ | -------------------------- |  | - | --------------------------------- | - |  | ----- | ---- | - |  | - | ------ | -
|                                                                                |  | ContributedCapital |       |  | AccumulatedLosses |   |        | ComprehensiveIncome (Loss) |  |   | AccumulatedOtherComprehensiveLoss |   |  | Total |     
|Balance at January 1, 2010                                                      |  | $                  | 409   |  |                   | $ | (3,785 | )                          |  |   |                                   |   |  | $     | (854 | ) |  | $ | (4,230 | )
|VEBA Trust contribution                                                         |  |                    | 990   |  |                   |   |        |                            |  |   |                                   |   |  |       |      |   |  |   | 990    |  
|Net loss                                                                        |  |                    |       |  |                   |   | (197   | )                          |  | $ | (197                              | ) |  |       |      |   |  |   | (197   | )
|Other comprehensive loss:                                                       |  |                    |       |  |                   |   |        |                            |  |   |                                   |   |  |       |      |   |  |   |        |  
|Unrealized loss on derivatives recorded in AOCI, net (1)(Note 12)               |  |                    |       |  |                   |   |        |                            |  |   | (16                               | ) |  |       |      |   |  |   |        |  
|Realized loss on derivatives reclassified from AOCI to income, net (1)(Note 12) |  |                    |       |  |                   |   |        |                            |  |   | 8                                 |   |  |       |      |   |  |   |        |  
|Foreign currency translation adjustments (1)                                    |  |                    |       |  |                   |   |        |                            |  |   | (39                               | ) |  |       |      |   |  |   |        |  
|Defined benefit plan adjustment:                                                |  |                    |       |  |                   |   |        |                            |  |   |                                   |   |  |       |      |   |  |   |        |  
|Actuarial gain (1)                                                              |  |                    |       |  |                   |   |        |                            |  |   | 1                                 |   |  |       |      |   |  |   |        |  
|                                                                                |  |                    |       |  |                   |   |        |                            |  |   |                                   |   |  |       |      |   |  |   |        |  
|Other comprehensive loss                                                        |  |                    |       |  |                   |   |        |                            |  |   | (46                               | ) |  |       | (46  | ) |  |   | (46    | )
|                                                                                |  |                    |       |  |                   |   |        |                            |  |   |                                   |   |  |       |      |   |  |   |        |  
|Comprehensive loss                                                              |  |                    |       |  |                   |   |        |                            |  | $ | (243                              | ) |  |       |      |   |  |   |        |  
|                                                                                |  |                    |       |  |                   |   |        |                            |  |   |                                   |   |  |       |      |   |  |   |        |  
|Balance at March 31, 2010                                                       |  | $                  | 1,399 |  |                   | $ | (3,982 | )                          |  |   |                                   |   |  | $     | (900 | ) |  | $ | (3,483 | )
|                                                                                |  |                    |       |  |                   |   |        |                            |  |   |                                   |   |  |       |      |   |  |   |        |  



| | (1) | Net of $0 of taxes.
| | --- | -------------------

See accompanying notes to condensed consolidated financial statements.



7



---

##### Table of Contents

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 or the Company refer to Chrysler Group LLC and its consolidated subsidiaries, or any one or more of them, as the context may
require, and Fiat refers to Fiat S.p.A, a corporation organized under the laws of Italy, and its consolidated subsidiaries, or any one or more of them, as the context may require.

Background

Chrysler Group LLC 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 (Canada CH) in exchange for ownership interests in the Company.
Refer to Note 14, Other Transactions with Related Parties,and Note 17,Subsequent Events,for additional information.

We filed
a Registration Statement on Form 10 (Form 10) which became effective on April 26, 2011. At that time we became subject to the reporting requirements of the Securities Exchange Act of 1934, as amended. The accompanying unaudited
condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our Form 10.

Nature of Operations

The nature of our primary operations includes the design,
engineering, manufacture and wholesale distribution of passenger cars, utility vehicles, which include sport utility vehicles and crossover vehicles, minivans, pick-up trucks and medium-duty trucks under the brand names Chrysler, Jeep, Dodge and
Ram. Our vehicles, as well as parts and accessories, including those sold under the Mopar brand name, are primarily produced and distributed in our principal markets of the United States, Canada and Mexico. Our products are sold in more than 120
countries around the world. In addition, in December 2010 we began production of the Fiat 500 and became the exclusive distributor of Fiat brand vehicles and service parts in North America in 2011. The majority of our operations, sales, independent
dealers and employees are in North America, primarily in the United States. Vehicle, parts and accessories sales outside of North America are primarily through our international distribution centers, which in turn sell to local independent dealers.
In 2010, Fiat assumed the management of our distribution and sales operations in select European countries, pending Fiats appointment as our general distributor in Europe in June 2011. Refer to Note 14, 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 principles 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 year. For further information, refer to the audited consolidated financial statements and footnotes thereto included in our Form 10.



8



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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



Recent Accounting Pronouncements

In December 2010, the Financial Accounting Standards Board (FASB) issued an update to the guidance on the

two-step goodwill impairment testing process for reporting units with zero or negative carrying amounts. For

those reporting units, an entity is required to perform the second step of the goodwill impairment test if

qualitative factors indicate that it is more likely than not that a goodwill impairment exists. This guidance is

effective for periods beginning after December 15, 2010 for public entities. We will comply with this guidance in connection with our goodwill impairment
testing during 2011.

In October 2009, the FASB issued accounting guidance that amends the accounting for multiple-element arrangements. It
addresses how to separate deliverables and measure and allocate consideration to one or more units of accounting. The overall consideration is allocated to each deliverable by establishing a selling price for each deliverable based on the following
hierarchy of evidence: (i) vendor-specific objective evidence, (ii) other third party evidence or (iii) an estimate of the selling price of each deliverable in the arrangement. Both internal and external factors are used to determine
the selling price of each deliverable and revenue is recognized for each deliverable in accordance with our revenue recognition policies. This guidance is effective for revenue arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010. We adopted this guidance prospectively on January 1, 2011, and it did not have a material effect on our condensed consolidated financial statements.

Note 3. Interest Expense

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



|                                                                                                        |  |                              |     |   |      |   |     |  
|------------------------------------------------------------------------------------------------------- |  | ---------------------------- | --- | - | ---- | - | --- | -
|                                                                                                        |  | Three Months Ended March 31, |    
|                                                                                                        |  | 2011                         |     |   | 2010 |  
|Financial interest expense:                                                                             |  |                              |     |   |      |   |     |  
|Related parties (see Note 14)                                                                           |  | $                            | 232 |   |      | $ | 229 |  
|Other                                                                                                   |  |                              | 76  |   |      |   | 51  |  
|Interest accretion, primarily related to debt discounts, debt issuance costs and fair value adjustments |  |                              | 58  |   |      |   | 56  |  
|Payable-in-kind interest  related party (see Note 14)                                                  |  |                              | 17  |   |      |   | 17  |  
|Capitalized interest related to capital expenditures                                                    |  |                              | (35 | ) |      |   | (42 | )
|                                                                                                        |  |                              |     |   |      |   |     |  
|Total                                                                                                   |  | $                            | 348 |   |      | $ | 311 |  
|                                                                                                        |  |                              |     |   |      |   |     |  

In addition to the interest amounts included in Interest Expense in the accompanying Condensed Consolidated Statements of
Operations, we recorded financial interest expense related to Gold Key Lease financing activities of $10 million and $21 million in Cost of Sales for the three months ended March 31, 2011 and 2010, respectively. Gold Key Lease financial
interest expense includes the effects of interest rate swaps. We also recorded $5 million and $6 million of net interest accretion related to Gold Key Lease financing activities in Cost of Sales in the accompanying Condensed Consolidated Statements
of Operations for the three months ended March 31, 2011 and 2010, respectively.



9



---

##### Table of Contents

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):



|                                           |  |                |       |  |                   |   |       | 
|------------------------------------------ |  | -------------- | ----- |  | ----------------- | - | ----- | 
|                                           |  | March 31, 2011 |       |  | December 31, 2010 |  
|Finished products, including service parts |  | $              | 2,447 |  |                   | $ | 2,163 | 
|Work in process                            |  |                | 1,428 |  |                   |   | 1,355 | 
|Raw materials and manufacturing supplies   |  |                | 153   |  |                   |   | 129   | 
|                                           |  |                |       |  |                   |   |       | 
|Total                                      |  | $              | 4,028 |  |                   | $ | 3,647 | 
|                                           |  |                |       |  |                   |   |       | 

Note 5. Other Intangible Assets

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



|                                              |  |                             |       |                |                         |   |     |                     |     |   |       |   |       | 
|--------------------------------------------- |  | --------------------------- | ----- | -------------- | ----------------------- | - | --- | ------------------- | --- | - | ----- | - | ----- | 
|                                              |  | Range ofUseful Lives(years) |       | March 31, 2011 |                        
|                                              |  | GrossCarrying  Amount       |       |                | AccumulatedAmortization |   |     | NetIntangibleAssets |    
|Brand names                                   |  | Indefinite                  |       | $              | 2,210                   |   |     | $                   | -   |   |       | $ | 2,210 | 
|Dealer networks                               |  | 20                          |       |                | 393                     |   |     |                     | 36  |   |       |   | 357   | 
|Fiat contributed intellectual property rights |  | 10                          |       |                | 320                     |   |     |                     | 58  |   |       |   | 262   | 
|Other intellectual property rights            |  | 1 - 12                      |       |                | 253                     |   |     |                     | 7   |   |       |   | 246   | 
|Patented and unpatented technology            |  | 4 - 10                      |       |                | 208                     |   |     |                     | 61  |   |       |   | 147   | 
|Favorable operating lease contracts           |  | 1 - 17                      |       |                | 214                     |   |     |                     | 172 |   |       |   | 42    | 
|Software and other                            |  | 1 - 8                       |       |                | 285                     |   |     |                     | 81  |   |       |   | 204   | 
|                                              |  |                             |       |                |                         |   |     |                     |     |   |       |   |       | 
|Total                                         |  | $                           | 3,883 |                |                         | $ | 415 |                     |     | $ | 3,468 |  
|                                              |  |                             |       |                |                         |   |     |                     |     |   |       |   |       | 



|                                              |  |                             |                       |                   |       |                         |     |   |                     |   |       |   |       | 
|--------------------------------------------- |  | --------------------------- | --------------------- | ----------------- | ----- | ----------------------- | --- | - | ------------------- | - | ----- | - | ----- | 
|                                              |  | Range ofUseful Lives(years) |                       | December 31, 2010 |      
|                                              |  |                             | GrossCarrying  Amount |                   |       | AccumulatedAmortization |     |   | NetIntangibleAssets |  
|Brand names                                   |  | Indefinite                  |                       | $                 | 2,210 |                         |     | $ | -                   |   |       | $ | 2,210 | 
|Dealer networks                               |  | 20                          |                       |                   | 392   |                         |     |   | 31                  |   |       |   | 361   | 
|Fiat contributed intellectual property rights |  | 10                          |                       |                   | 320   |                         |     |   | 50                  |   |       |   | 270   | 
|Other intellectual property rights            |  | 1 - 12                      |                       |                   | 252   |                         |     |   | 4                   |   |       |   | 248   | 
|Patented and unpatented technology            |  | 4 - 10                      |                       |                   | 208   |                         |     |   | 53                  |   |       |   | 155   | 
|Favorable operating lease contracts           |  | 1 - 17                      |                       |                   | 209   |                         |     |   | 158                 |   |       |   | 51    | 
|Software and other                            |  | 1 - 8                       |                       |                   | 277   |                         |     |   | 68                  |   |       |   | 209   | 
|                                              |  |                             |                       |                   |       |                         |     |   |                     |   |       |   |       | 
|Total                                         |  | $                           | 3,868                 |                   |       | $                       | 364 |   |                     | $ | 3,504 |  
|                                              |  |                             |                       |                   |       |                         |     |   |                     |   |       |   |       | 



10



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 5. Other Intangible Assets  Continued



The following presents 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):



|                                                                              |  |                             |                                           |  |                              |   |    |      |  |   |    | 
|----------------------------------------------------------------------------- |  | --------------------------- | ----------------------------------------- |  | ---------------------------- | - | -- | ---- |  | - | -- | 
|                                                                              |  |                             |                                           |  | Three Months Ended March 31, |  
|                                                                              |  | Financial Statement Caption |                                           |  | 2011                         |   |    | 2010 | 
|Favorable operating lease contracts                                           |  |                             | Revenues, Net                             |  |                              | $ | 9  |      |  | $ | 25 | 
|Patented and unpatented technology, intellectual property, software and other |  |                             | Cost of Sales                             |  |                              |   | 32 |      |  |   | 28 | 
|Dealer networks and other                                                     |  |                             | Selling, Administrativeand Other Expenses |  |                              |   | 6  |      |  |   | 2  | 
|                                                                              |  |                             |                                           |  |                              |   |    |      |  |   |    | 
|                                                                              |  |                             | Total                                     |  |                              | $ | 47 |      |  | $ | 55 | 
|                                                                              |  |                             |                                           |  |                              |   |    |      |  |   |    | 

Based on the gross carrying amount of other intangible assets as of March 31, 2011, the estimated future amortization
expense for the next five years is as follows (in millions of dollars):



|                  |  |   |     | 
|----------------- |  | - | --- | 
|Remainder of 2011 |  | $ | 121 | 
|2012              |  |   | 149 | 
|2013              |  |   | 146 | 
|2014              |  |   | 136 | 
|2015              |  |   | 123 | 

Note
6. Prepaid Expenses and Other Assets

The components of prepaid expenses and other assets were as follows (in millions of
dollars):



|                                                 |  |                |       |  |                   |   |     |       |  |   |         |  |  |               |       |  |       |   |     |  |  |   |       | 
|------------------------------------------------ |  | -------------- | ----- |  | ----------------- | - | --- | ----- |  | - | ------- |  |  | ------------- | ----- |  | ----- | - | --- |  |  | - | ----- | 
|                                                 |  | March 31, 2011 |       |  | December 31, 2010 |  
|                                                 |  | Current        |       |  | Non-  Current     |   |     | Total |  |   | Current |  |  | Non-  Current |       |  | Total |  
|Amounts due from related parties (see Note 14)   |  | $              | 288   |  |                   | $ | -   |       |  | $ | 288     |  |  | $             | 241   |  |       | $ | -   |  |  | $ | 241   | 
|Pension receivable - Daimler (see Note 13)       |  |                | 199   |  |                   |   | -   |       |  |   | 199     |  |  |               | 198   |  |       |   | -   |  |  |   | 198   | 
|Tax indemnity recoverable - Daimler (see Note 9) |  |                | 68    |  |                   |   | -   |       |  |   | 68      |  |  |               | 1,112 |  |       |   | -   |  |  |   | 1,112 | 
|Other                                            |  |                | 750   |  |                   |   | 345 |       |  |   | 1,095   |  |  |               | 622   |  |       |   | 352 |  |  |   | 974   | 
|                                                 |  |                |       |  |                   |   |     |       |  |   |         |  |  |               |       |  |       |   |     |  |  |   |       | 
|Total                                            |  | $              | 1,305 |  |                   | $ | 345 |       |  | $ | 1,650   |  |  | $             | 2,173 |  |       | $ | 352 |  |  | $ | 2,525 | 
|                                                 |  |                |       |  |                   |   |     |       |  |   |         |  |  |               |       |  |       |   |     |  |  |   |       | 



11



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements



Note 7. Accrued Expenses and Other
Liabilities

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



|                                                                      |  |                |       |  |                   |   |       |       |  |   |         |  |  |               |       |  |       |   |       |  |  |   |        | 
|--------------------------------------------------------------------- |  | -------------- | ----- |  | ----------------- | - | ----- | ----- |  | - | ------- |  |  | ------------- | ----- |  | ----- | - | ----- |  |  | - | ------ | 
|                                                                      |  | March 31, 2011 |       |  | December 31, 2010 |  
|                                                                      |  | Current        |       |  | Non-  Current     |   |       | Total |  |   | Current |  |  | Non-  Current |       |  | Total |  
|Pension and postretirement benefits                                   |  | $              | 238   |  |                   | $ | 6,378 |       |  | $ | 6,616   |  |  | $             | 237   |  |       | $ | 6,442 |  |  | $ | 6,679  | 
|Product warranty costs                                                |  |                | 1,228 |  |                   |   | 2,074 |       |  |   | 3,302   |  |  |               | 1,187 |  |       |   | 1,984 |  |  |   | 3,171  | 
|Sales incentives                                                      |  |                | 2,459 |  |                   |   | -     |       |  |   | 2,459   |  |  |               | 2,130 |  |       |   | -     |  |  |   | 2,130  | 
|Personnel costs                                                       |  |                | 529   |  |                   |   | 438   |       |  |   | 967     |  |  |               | 572   |  |       |   | 431   |  |  |   | 1,003  | 
|Income and other taxes (see Note 9)                                   |  |                | 357   |  |                   |   | 157   |       |  |   | 514     |  |  |               | 933   |  |       |   | 153   |  |  |   | 1,086  | 
|Vehicle residual value guarantees, excluding Gold Key Lease financing |  |                | 380   |  |                   |   | -     |       |  |   | 380     |  |  |               | 401   |  |       |   | -     |  |  |   | 401    | 
|Accrued interest (1)                                                  |  |                | 370   |  |                   |   | -     |       |  |   | 370     |  |  |               | 235   |  |       |   | -     |  |  |   | 235    | 
|Workers compensation                                                 |  |                | 87    |  |                   |   | 223   |       |  |   | 310     |  |  |               | 85    |  |       |   | 224   |  |  |   | 309    | 
|Amounts due to related parties (see Note 14) (2)                      |  |                | 230   |  |                   |   | -     |       |  |   | 230     |  |  |               | 30    |  |       |   | -     |  |  |   | 30     | 
|Restructuring actions (see Note 15)                                   |  |                | 226   |  |                   |   | -     |       |  |   | 226     |  |  |               | 239   |  |       |   | -     |  |  |   | 239    | 
|Other                                                                 |  |                | 1,666 |  |                   |   | 728   |       |  |   | 2,394   |  |  |               | 1,545 |  |       |   | 727   |  |  |   | 2,272  | 
|                                                                      |  |                |       |  |                   |   |       |       |  |   |         |  |  |               |       |  |       |   |       |  |  |   |        | 
|Total                                                                 |  | $              | 7,770 |  |                   | $ | 9,998 |       |  | $ | 17,768  |  |  | $             | 7,594 |  |       | $ | 9,961 |  |  | $ | 17,555 | 
|                                                                      |  |                |       |  |                   |   |       |       |  |   |         |  |  |               |       |  |       |   |       |  |  |   |        | 



| | (1) | Includes $322 million and $215 million of accrued interest due to related parties as of March 31, 2011 and December 31, 2010, respectively. Refer to Note
14, Other Transactions with Related Parties, for additional information.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Excludes amounts due to related parties for interest which are separately discussed in (1) above.
| | --- | -------------------------------------------------------------------------------------------------

We issue various types of contractual 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 policy coverage, recall actions and 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. The changes in accrued product warranty costs (excluding deferred revenue from separately-priced extended warranty and maintenance
contracts, as well as supplier recoveries) were as follows (in millions of dollars):



|                                                      |  |                              |       |   |      |   |       |  
|----------------------------------------------------- |  | ---------------------------- | ----- | - | ---- | - | ----- | -
|                                                      |  | Three Months Ended March 31, |      
|                                                      |  | 2011                         |       |   | 2010 |  
|Balance at beginning of period                        |  | $                            | 3,171 |   |      | $ | 3,176 |  
|Provision for current period warranties               |  |                              | 374   |   |      |   | 326   |  
|Adjustments to pre-existing warranties                |  |                              | 77    |   |      |   | (6    | )
|Net warranty settlements                              |  |                              | (346  | ) |      |   | (353  | )
|Interest accretion, translation and other adjustments |  |                              | 26    |   |      |   | 4     |  
|                                                      |  |                              |       |   |      |   |       |  
|Balance at end of period                              |  | $                            | 3,302 |   |      | $ | 3,147 |  
|                                                      |  |                              |       |   |      |   |       |  

During the three months ended March 31, 2011 and 2010, we recognized recoveries from suppliers related to warranty
claims of $28 million and $24 million, respectively, which are excluded from the change in warranty costs above.



12



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 7. Accrued Expenses and Other Liabilities  Continued



We also offer customers the opportunity to purchase separately-priced extended warranty and service contracts. In addition, in 2011, we began selling
vehicles with a service contract included in the sales price of the vehicle. The service contract and vehicle qualify as separate units of accounting in accordance with the accounting guidance for multiple-element arrangements. Refer to Note 2,
Basis of Presentation and Recent Accounting Pronouncements, for additional information on these 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 into 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):



|                                                       |  |                              |     |   |      |   |      |  
|------------------------------------------------------ |  | ---------------------------- | --- | - | ---- | - | ---- | -
|                                                       |  | Three Months Ended March 31, |    
|                                                       |  | 2011                         |     |   | 2010 |  
|Balance at beginning of period                         |  | $                            | 829 |   |      | $ | 779  |  
|Deferred revenues for current period service contracts |  |                              | 107 |   |      |   | 96   |  
|Earned revenues in current period                      |  |                              | (95 | ) |      |   | (112 | )
|Interest accretion, translation and other adjustments  |  |                              | 3   |   |      |   | 21   |  
|                                                       |  |                              |     |   |      |   |      |  
|Balance at end of period                               |  | $                            | 844 |   |      | $ | 784  |  
|                                                       |  |                              |     |   |      |   |      |  



13



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements





Note 8. Financial Liabilities

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



|                                                          |  |                 |       |       |           |   |       |               |  |   |       | 
|--------------------------------------------------------- |  | --------------- | ----- | ----- | --------- | - | ----- | ------------- |  | - | ----- | 
|                                                          |  | March 31, 2011  |      
|                                                          |  | InterestRate    |       |       | FaceValue |   |       | CarryingValue | 
|Financial Liabilities Payable Within One Year:            |  |                 |       |       |           |   |       |               |  |   |       | 
|                                                          |  | Effective       |       |       |           |   |       |               | 
|U.S. Treasury first lien credit facility - Tranche B (1)  |  |                 | 7.22  | %(2)  |           | $ | 2,080 | (8)           |  | $ | 2,077 | 
|Export Development Canada credit facility - Tranche X (1) |  |                 | 20.57 | %(3)  |           |   | 500   |               |  |   | 453   | 
|Canadian Health Care Trust Note - Tranche D               |  |                 | 5.50  | %(4)  |           |   | 26    |               |  |   | 26    | 
|                                                          |  |                 |      
|Other:                                                    |  | WeightedAverage |       |       |           |   |       |               | 
|Asset-backed notes payable - Gold Key Lease               |  |                 | 3.11  | %(5)  |           |   | 66    |               |  |   | 66    | 
|Liabilities from capital leases                           |  |                 | 11.66 | %     |           |   | 32    |               |  |   | 23    | 
|Other financial obligations                               |  |                 | 10.54 | %     |           |   | 86    |               |  |   | 75    | 
|                                                          |  |                 |       |       |           |   |       |               |  |   |       | 
|Total other financial liabilities                         |  |                 |       | 184   |           |   |       | 164           | 
|                                                          |  |                 |       |       |           |   |       |               |  |   |       | 
|Total financial liabilities payable within one year       |  |                 | $     | 2,790 |           |   | $     | 2,720         | 
|                                                          |  |                 |       |       |           |   |       |               |  |   |       | 



|                                                   |  |          |           |  |                 |  |       |           |  |  |                 |        |  |   |       |     |  |   |       | 
|-------------------------------------------------- |  | -------- | --------- |  | --------------- |  | ----- | --------- |  |  | --------------- | ------ |  | - | ----- | --- |  | - | ----- | 
|                                                   |  | Maturity |           |  | InterestRate    |  |       | FaceValue |  |  | Carrying  Value |       
|Financial Liabilities Payable After One Year:      |  |          |           |  |                 |  |       |           |  |  |                 |        |  |   |       |     |  |   |       | 
|                                                   |  |          |           |  |                
|                                                   |  |          |           |  | Effective       |  |       |           |  |  |                 |        |  |   |      
|VEBA Trust Note                                    |  |          | 7/15/2023 |  |                 |  | 11.71 | %         |  |  |                 |        |  | $ | 4,710 |     |  | $ | 4,029 | 
|U.S. Treasury first lien credit facilities:        |  |          |           |  |                 |  |       |           |  |  |                 |        |  |   |       |     |  |   |       | 
|Tranche C (1)                                      |  |          | 6/10/2017 |  |                 |  | 12.16 | %(6)      |  |  |                 |        |  |   | 3,679 | (8) |  |   | 3,578 | 
|Zero coupon note (1)                               |  |          | 6/10/2017 |  |                 |  | 14.33 | %(7)      |  |  |                 |        |  |   | 100   |     |  |   | 65    | 
|                                                   |  |          |           |  |                 |  |       |           |  |  |                 |        |  |   |       |     |  |   |       | 
|Total U.S. Treasury first lien credit facilities   |  |          |           |  |                 |  |       | 3,779     |  |  |                 | 3,643  | 
|                                                   |  |          |           |  |                 |  |       |           |  |  |                 |        |  |   |       |     |  |   |       | 
|Export Development Canada credit facilities:       |  |          |           |  |                 |  |       |           |  |  |                 |        |  |   |       |     |  |   |       | 
|Tranche X (1)                                      |  |          | 6/10/2017 |  |                 |  | 20.57 | %(3)      |  |  |                 |        |  |   | 828   |     |  |   | 489   | 
|Tranche X-2 (1)                                    |  |          | 6/10/2017 |  |                 |  | 7.00  | %(3)      |  |  |                 |        |  |   | 407   |     |  |   | 407   | 
|                                                   |  |          |           |  |                 |  |       |           |  |  |                 |        |  |   |       |     |  |   |       | 
|Total Export Development Canada credit facilities  |  |          |           |  |                 |  |       | 1,235     |  |  |                 | 896    | 
|                                                   |  |          |           |  |                 |  |       |           |  |  |                 |        |  |   |       |     |  |   |       | 
|Canadian Health Care Trust Notes:                  |  |          |           |  |                 |  |       |           |  |  |                 |        |  |   |       |     |  |   |       | 
|Tranche A                                          |  |          | 6/30/2017 |  |                 |  | 7.98  | %(9)      |  |  |                 |        |  |   | 444   |     |  |   | 481   | 
|Tranche B                                          |  |          | 6/30/2024 |  |                 |  | 9.21  | %(9)      |  |  |                 |        |  |   | 444   |     |  |   | 457   | 
|Tranche C                                          |  |          | 6/30/2024 |  |                 |  | 9.68  | %(10
)    |  |  |                 |        |  |   | 99    |     |  |   | 82    | 
|Tranche D                                          |  |          | 6/30/2012 |  |                 |  | 5.50  | %(4
)     |  |  |                 |        |  |   | 26    |     |  |   | 24    | 
|                                                   |  |          |           |  |                 |  |       |           |  |  |                 |        |  |   |       |     |  |   |       | 
|Total Canadian Health Care Trust Notes             |  |          |           |  |                 |  |       | 1,013     |  |  |                 | 1,044  | 
|                                                   |  |          |           |  |                 |  |       |           |  |  |                 |        |  |   |       |     |  |   |       | 
|Mexican development banks credit facility          |  |          | 7/19/2025 |  |                 |  | 9.65  | %(11)     |  |  |                 |        |  |   | 429   |     |  |   | 429   | 
|                                                   |  |          |           |  |                
|Other:                                             |  |          |           |  | WeightedAverage |  |       |           |  |  |                 |        |  |   |      
|Gold Key Lease credit facility                     |  |          | 2012      |  |                 |  | 6.89  | %         |  |  |                 |        |  |   | 83    |     |  |   | 80    | 
|Asset-backed notes payable - Gold Key Lease        |  |          | 2012      |  |                 |  | 3.04  | %(5)      |  |  |                 |        |  |   | 45    |     |  |   | 45    | 
|Liabilities from capital leases                    |  |          | 2012-2020 |  |                 |  | 14.01 | %         |  |  |                 |        |  |   | 239   |     |  |   | 187   | 
|Other financial obligations                        |  |          | 2013-2024 |  |                 |  | 12.61 | %         |  |  |                 |        |  |   | 405   |     |  |   | 372   | 
|                                                   |  |          |           |  |                 |  |       |           |  |  |                 |        |  |   |       |     |  |   |       | 
|Total other financial liabilities                  |  |          |           |  |                 |  |       | 772       |  |  |                 | 684    | 
|                                                   |  |          |           |  |                 |  |       |           |  |  |                 |        |  |   |       |     |  |   |       | 
|Total financial liabilities payable after one year |  |          |           |  |                 |  |       | 11,938    |  |  |                 | 10,725 | 
|                                                   |  |          |           |  |                 |  |       |           |  |  |                 |        |  |   |       |     |  |   |       | 
|Total                                              |  |          |           |  |                 |  | $     | 14,728    |  |  | $               | 13,445 | 
|                                                   |  |          |           |  |                 |  |       |           |  |  |                 |        |  |   |       |     |  |   |       | 



14



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 8. Financial Liabilities  Continued





|                                                          |  |                   |       |       |               |   |       |                   |  |   |       | 
|--------------------------------------------------------- |  | ----------------- | ----- | ----- | ------------- | - | ----- | ----------------- |  | - | ----- | 
|                                                          |  | December 31, 2010 |      
|                                                          |  | Interest    Rate  |       |       | Face    Value |   |       | Carrying    Value | 
|Financial Liabilities Payable Within One Year:            |  |                   |       |       |               |   |       |                   |  |   |       | 
|                                                          |  | Effective         |       |       |               |   |       |                   | 
|U.S. Treasury first lien credit facility - Tranche B (1)  |  |                   | 7.22  | %(2)  |               | $ | 2,080 | (8)               |  | $ | 2,076 | 
|Export Development Canada credit facility - Tranche X (1) |  |                   | 20.57 | %(3)  |               |   | 500   |                   |  |   | 439   | 
|Canadian Health Care Trust Note - Tranche D               |  |                   | 5.50  | %(4)  |               |   | 25    |                   |  |   | 25    | 
|                                                          |  |                   |      
|Other:                                                    |  | WeightedAverage   |       |       |               |   |       |                   | 
|Asset-backed notes payable - Gold Key Lease               |  |                   | 3.64  | %(5)  |               |   | 132   |                   |  |   | 130   | 
|Liabilities from capital leases                           |  |                   | 11.63 | %     |               |   | 31    |                   |  |   | 23    | 
|Other financial obligations                               |  |                   | 10.50 | %     |               |   | 76    |                   |  |   | 65    | 
|                                                          |  |                   |       |       |               |   |       |                   |  |   |       | 
|Total other financial liabilities                         |  |                   |       | 239   |               |   |       | 218               | 
|                                                          |  |                   |       |       |               |   |       |                   |  |   |       | 
|Total financial liabilities payable within one year       |  |                   | $     | 2,844 |               |   | $     | 2,758             | 
|                                                          |  |                   |       |       |               |   |       |                   |  |   |       | 



|                                                   |  |          |           |        |                 |  |       |               |  |   |                   |     |  |   |       | 
|-------------------------------------------------- |  | -------- | --------- | ------ | --------------- |  | ----- | ------------- |  | - | ----------------- | --- |  | - | ----- | 
|                                                   |  | Maturity |           |        | InterestRate    |  |       | Face    Value |  |   | Carrying    Value |    
|Financial Liabilities Payable After One Year:      |  |          |           |        |                 |  |       |               |  |   |                   |     |  |   |       | 
|                                                   |  |          |           |       
|                                                   |  |          |           |        | Effective       |  |       |               |  |   |                   |    
|VEBA Trust Note                                    |  |          | 7/15/2023 |        |                 |  | 11.71 | %             |  | $ | 4,710             |     |  | $ | 4,018 | 
|U.S. Treasury first lien credit facilities:        |  |          |           |        |                 |  |       |               |  |   |                   |     |  |   |       | 
|Tranche C (1)                                      |  |          | 6/10/2017 |        |                 |  | 12.16 | %(6)          |  |   | 3,662             | (8) |  |   | 3,557 | 
|Zero coupon note (1)                               |  |          | 6/10/2017 |        |                 |  | 14.33 | %(7)          |  |   | 100               |     |  |   | 63    | 
|                                                   |  |          |           |        |                 |  |       |               |  |   |                   |     |  |   |       | 
|Total U.S. Treasury first lien credit facilities   |  |          |           | 3,762  |                 |  |       | 3,620         | 
|                                                   |  |          |           |        |                 |  |       |               |  |   |                   |     |  |   |       | 
|Export Development Canada credit facilities:       |  |          |           |        |                 |  |       |               |  |   |                   |     |  |   |       | 
|Tranche X (1)                                      |  |          | 6/10/2017 |        |                 |  | 20.57 | %(3)          |  |   | 791               |     |  |   | 453   | 
|Tranche X-2 (1)                                    |  |          | 6/10/2017 |        |                 |  | 7.00  | %(3)          |  |   | 395               |     |  |   | 395   | 
|                                                   |  |          |           |        |                 |  |       |               |  |   |                   |     |  |   |       | 
|Total Export Development Canada credit facilities  |  |          |           | 1,186  |                 |  |       | 848           | 
|                                                   |  |          |           |        |                 |  |       |               |  |   |                   |     |  |   |       | 
|Canadian Health Care Trust Notes:                  |  |          |           |        |                 |  |       |               |  |   |                   |     |  |   |       | 
|Tranche A                                          |  |          | 6/30/2017 |        |                 |  | 7.98  | %(9)          |  |   | 432               |     |  |   | 470   | 
|Tranche B                                          |  |          | 6/30/2024 |        |                 |  | 9.21  | %(9)          |  |   | 432               |     |  |   | 445   | 
|Tranche C                                          |  |          | 6/30/2024 |        |                 |  | 9.68  | %(10)         |  |   | 97                |     |  |   | 79    | 
|Tranche D                                          |  |          | 6/30/2012 |        |                 |  | 5.50  | %(4)          |  |   | 25                |     |  |   | 23    | 
|                                                   |  |          |           |        |                 |  |       |               |  |   |                   |     |  |   |       | 
|Total Canadian Health Care Trust Notes             |  |          |           | 986    |                 |  |       | 1,017         | 
|                                                   |  |          |           |        |                 |  |       |               |  |   |                   |     |  |   |       | 
|Mexican development banks credit facility          |  |          | 7/19/2025 |        |                 |  | 9.65  | %(11)         |  |   | 416               |     |  |   | 416   | 
|                                                   |  |          |           |       
|Other:                                             |  |          |           |        | WeightedAverage |  |       |               |  |   |                   |    
|Gold Key Lease credit facility                     |  |          | 2012      |        |                 |  | 6.21  | %             |  |   | 443               |     |  |   | 438   | 
|Asset-backed notes payable - Gold Key Lease        |  |          | 2012      |        |                 |  | 3.05  | %(5)          |  |   | 43                |     |  |   | 43    | 
|Liabilities from capital leases                    |  |          | 2012-2020 |        |                 |  | 13.99 | %             |  |   | 246               |     |  |   | 190   | 
|Other financial obligations                        |  |          | 2012-2024 |        |                 |  | 12.60 | %             |  |   | 418               |     |  |   | 383   | 
|                                                   |  |          |           |        |                 |  |       |               |  |   |                   |     |  |   |       | 
|Total other financial liabilities                  |  |          |           | 1,150  |                 |  |       | 1,054         | 
|                                                   |  |          |           |        |                 |  |       |               |  |   |                   |     |  |   |       | 
|Total financial liabilities payable after one year |  |          |           | 12,210 |                 |  |       | 10,973        | 
|                                                   |  |          |           |        |                 |  |       |               |  |   |                   |     |  |   |       | 
|Total                                              |  |          | $         | 15,054 |                 |  | $     | 13,731        | 
|                                                   |  |          |           |        |                 |  |       |               |  |   |                   |     |  |   |       | 



15



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 8. Financial Liabilities  Continued





| | (1) | Collectively, these loans are referred to as Government Loans (see Note 14).
| | --- | ------------------------------------------------------------------------------

| | (2) | Loans bear interest at a three month LIBOR + 5.00 percent subject to a 2.00 percent floor and a quarterly reset on LIBOR. Stated interest rate as of
March 31, 2011 and December 31, 2010 was 7.00 percent.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Loans bear interest at a three month Canadian Dealer Offered Rate (CDOR) + 5.00 percent subject to a 2.00 percent floor and a quarterly reset on
CDOR. Stated interest rate as of March 31, 2011 and December 31, 2010 was 7.00 percent.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | Canadian Health Care Trust Note - Tranche D is non-interest bearing.
| | --- | --------------------------------------------------------------------

| | (5) | The weighted-average interest rates include the effects of interest rate swap agreements.
| | --- | -----------------------------------------------------------------------------------------

| | (6) | Loans bear interest at a three month LIBOR + 7.91 percent subject to a 2.00 percent floor and a quarterly reset on LIBOR. Stated interest rate as of
March 31, 2011 and December 31, 2010 was 9.91 percent plus $17 million per quarter of capitalized Payable-In-Kind (PIK) interest.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (7) | Zero coupon note shall not bear interest until the Ally MTA (as defined and discussed in Note 10) expiration date (May 2013) or the date the Ally MTA is terminated
by all parties. Upon the termination, the note shall bear interest at LIBOR + 7.91 percent subject to a 2.00 percent floor on LIBOR.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (8) | Includes capitalized PIK interest.
| | --- | ----------------------------------

| | (9) | Loan bears interest at a stated rate of 9.00 percent.
| | --- | -----------------------------------------------------

| | (10) | Loan bears interest at a stated rate of 7.50 percent.
| | ---- | -----------------------------------------------------

| | (11) | 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 on TIIE.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of March 31, 2011, the carrying amounts of our financial obligations were $1,283 million
less than the face value, of which: (i) $633 million relates to discounts resulting from the allocation of fair value in connection with the 363 Transaction and the initial capitalization of the Company, (ii) $681 million relates to the discount on
the senior unsecured note (VEBA Trust Note) recognized in connection with the VEBA Settlement Agreement offset by, (iii) $31 million relating to the net premium on the Canadian Health Care Trust (HCT) Notes recognized in
connection with the Canadian HCT Settlement Agreement. These amounts will be accreted as an adjustment to interest expense over the remaining period to maturity. Refer to our Form 10 for further discussion of the allocation of fair value in
connection with the 363 Transaction, the VEBA Settlement Agreement and the Canadian HCT Settlement Agreement. Refer to Note 17, Subsequent Events, for additional information regarding our intent to pursue a refinancing of our U.S. Treasury
first lien credit agreement and Export Development Canada (EDC) credit agreement.

As of March 31, 2011, aggregate annual
contractual maturities of financial liabilities (excluding the net discount from face value of $1,283 million) were as follows (in millions of dollars):



|                    |  |   |        |    
|------------------- |  | - | ------ | ---
|Remainder of 2011   |  | $ | 2,748  | (1)
|2012                |  |   | 301    | (1)
|2013                |  |   | 432    |    
|2014                |  |   | 436    |    
|2015                |  |   | 469    |    
|2016 and thereafter |  |   | 10,342 |    
|                    |  |   |        |    
|Total               |  | $ | 14,728 |    
|                    |  |   |        |    



| | (1) | Included in the annual contractual maturities is $53 million and $141 million due in the remainder of 2011 and 2012, respectively, related to Gold Key Lease
obligations. These obligations are primarily repaid out of collections from the related operating leases and, as a result, they may be repaid prior to their contractual maturity.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



16



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements





Note 9. 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 three months ended March 31, 2011.

Chrysler Canada Inc. (Chrysler Canada) was
assessed additional taxes for the years 1996 through August 3, 2007 by the Canada Revenue Agency (CRA) and the Provincial Tax Authorities (together, the Canadian Tax Authorities) related to transfer pricing adjustments.
During December 2010, the Canadian Tax Authorities issued the final reassessment (the Final Reassessment) on the Canadian transfer pricing matter, which was accepted by both Daimler AG (Daimler) and us. Refer to our Form 10
for further discussion of the Canadian transfer pricing matter.

During the three months ended March 31, 2011, the Canadian Tax
Authorities applied $48 million of payments previously made by us against the amount owing under the Final Reassessment, which increased the amounts owed to us by Daimler related to this matter. During the three months ended March 31, 2011, we
received reimbursements from Daimler of $374 million related to payments previously made by us which had been previously applied against the Final Reassessment. In addition, Daimler made payments of $660 million to the Canadian Tax Authorities
related to this matter during the first quarter of 2011. As of March 31, 2011 and December 31, 2010, our tax indemnity recoverable associated with this matter was $68 million and $1.1 billion, respectively, and is included in Prepaid
Expenses and Other Assets in the accompanying Condensed Consolidated Balance Sheets. The associated obligation of $68 million and $765 million as of March 31, 2011 and December 31, 2010, respectively, is included in Accrued Expenses and
Other Liabilities in the accompanying Condensed Consolidated Balance Sheets. The $765 million obligation at December 31, 2010 was net of $337 million of payments that had been previously applied by the Canadian Tax Authorities against the Final
Reassessment. We anticipate the remainder of the amounts due to the Canadian Tax Authorities under the Final Reassessment and $11 million due to us will be paid by Daimler prior to the end of 2011.

In addition, the $500 million CRA tax lien and the $700 million Ontario government tax lien against our Canadian manufacturing facilities and related
assets, granted while the dispute was pending, were discharged during the three months ended March 31, 2011.

As a result of the above
settlements associated with the Canadian transfer pricing matter, our unrecognized tax benefits decreased during the three months ended March 31, 2011. The following is a reconciliation of our unrecognized tax benefits (in millions of dollars):



|                                              |  |                                  |      |  
|--------------------------------------------- |  | -------------------------------- | ---- | -
|                                              |  | Three Months EndedMarch 31, 2011 |     
|Unrecognized tax benefits beginning of period |  | $                                | 949  |  
|Settlements                                   |  |                                  | (779 | )
|Exchange rate differences                     |  |                                  | 2    |  
|                                              |  |                                  |      |  
|Unrecognized tax benefits at end of period    |  | $                                | 172  |  
|                                              |  |                                  |      |  

Our practice is to recognize interest and penalties on uncertain tax positions in income tax expense. Accrued interest on
uncertain tax positions was $27 million and $681 million at March 31, 2011 and December 31, 2010, respectively. Accrued interest decreased by $654 million during the three months ended March 31, 2011, which



17



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 9. Income Taxes  Continued



consisted of a $641 million decrease attributable to settlements, a $15 million decrease attributable to reductions in interest assessments and a $2 million increase attributable to exchange rate
differences, with a corresponding decrease to the tax indemnity recoverable.

Note 10. 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 March 31, 2011. 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.

More than 80 purported class action lawsuits alleging violations of antitrust law
were filed on various dates in 2003 against several motor vehicle manufacturers, including Chrysler Canada, as well as the National Automobile Dealers Association and the Canadian Automobile Dealers Association. Some complaints were filed in federal
courts in various states and others were filed in state courts. The complaints allege that the defendants conspired to prevent the sale to U.S. consumers of vehicles sold by dealers in Canada in order to maintain new car prices at artificially high
levels in the U.S. The complaints seek injunctive relief and treble damages on behalf of each person who bought or leased a new vehicle in the U.S. since January 1, 2001. The federal court actions were consolidated in the U.S. District Court
for the District of Maine and, in July 2009, the District Court granted the defendants motion for summary judgment. Chrysler Canada remains a defendant in four of the pending state court actions. In addition, Chrysler Canada is a defendant in
a purported class action filed in the Ontario Superior Court of Justice in September 2007 that claims that a similar alleged conspiracy was preventing lower-cost U.S. vehicles from being sold to Canadians.

In December 2009, the U.S. Congress passed legislation allowing 789 automotive dealers, whose dealership franchise agreements were rejected by Old Carco
in connection with the 363 Transaction, to commence binding arbitration to determine whether or not the rejected dealerships should be added to our dealer network. The legislation provides that a prevailing dealer is entitled to a letter of intent
for a franchise agreement with us which



18



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 10. Commitments, Contingencies and Concentrations  Continued

Litigation  Continued



will require the rejected dealer to satisfy certain customary criteria. It does not provide for payment of monetary damages. Approximately 400 of those rejected dealers filed for arbitration,
which proceedings have now concluded with most arbitrations having been either withdrawn, settled or decided in our favor. Litigation is pending in several federal and state courts with 15 dealers that prevailed in arbitration regarding the terms of
their letters of intent and/or whether federal law preempts the state law rights of existing dealers to block us from granting a franchise to a rejected dealer for a location within a certain proximity to an existing dealer.

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 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 7, 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 $476 million at March 31, 2011 and represents amounts held on deposit or otherwise pledged to secure our obligations under various commercial agreements guaranteed by Daimler ($263 million), foreign
exchange and commodity hedge contracts ($94 million), as well as standby letters of credit and other agreements ($119 million). In January 2011, $167 million of collateral associated with the Gold Key Lease portfolio was released and was used to
repay an equivalent amount outstanding on the Gold Key Lease credit facility.



19



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 10. Commitments, Contingencies and Concentrations  Continued



Concentrations - Suppliers

Although we have not experienced any significant loss of production as a result of materials or parts shortages, 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.

Supply of raw materials, parts and components may also be disrupted or interrupted by natural disasters such as the recent earthquake and tsunami
affecting Japan, the effects of which we are continuing to proactively assess. Based on our ongoing discussion with our suppliers as a result of those events in Japan, we are aware of a limited number of shortages of materials and parts, and we are
taking steps to mitigate the impact of these shortages, including accessing alternative sources of supply and managing our production schedules. We will continue to work with our suppliers to monitor potential shortages and to mitigate the effects
of any emerging shortages on our production volumes and revenues.

Other Matters

Ally MTA

We are 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 Transitions LLC (USDART). The Ally MTA provides for a risk sharing
arrangement, in which USDART will reimburse Ally for a majority of certain qualifying losses on loans with third party Chrysler dealerships issued prior to November 21, 2009. As of March 31, 2011 and December 31, 2010, $96 million of
a previous advance to USDART was available to fund these qualifying loan losses and is included in Advances to Related Parties and Other Financial Assets in the accompanying Condensed Consolidated Balance Sheets. The unused portion of this advance
will be transferred to us upon conclusion of the Ally MTA, which will terminate no earlier than 2013 unless all parties mutually agree to terminate the contract at an earlier date. In addition, as of March 31, 2011 and December 31, 2010,
$4 million is included in Prepaid Expenses and Other Assets in the accompanying Condensed Consolidated Balance Sheets and represents qualifying loan losses incurred by Ally to date, which will reduce our indebtedness under our U.S. Treasury first
lien credit facilities at the conclusion of the Ally MTA.

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., Canada and Mexico in accordance with its usual and customary lending standards. We subsidize interest rates or cash payments required at the inception of the financing arrangement, as
a customer incentive, a practice known as subvention. Our agreement with Ally is not exclusive. Ally provides consumer and dealer financing to other manufacturers and our dealers and retail customers obtain financing, including some
subvented financing, from other financing sources. Under the agreement, however, we must 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 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.



20



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 10. Commitments, Contingencies and Concentrations  Continued

Other Matters  Continued



Ally Auto Finance Operating Agreement and Repurchase Obligations  Continued

As of March 31, 2011, the maximum potential amount of future payments required to be made to Ally under this guarantee is approximately $6.1 billion and is based on the aggregate repurchase value of
eligible vehicles financed by Ally in our U.S. dealer stock. If vehicles are required to be repurchased under this arrangement, the total exposure would be reduced to the extent the vehicles are able to be resold to another dealer. The fair value of
the guarantee was less than $1 million at March 31, 2011, 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 extends through April 30, 2013, with
automatic one-year renewals unless either party elects not to renew.

Other Guarantees

As of March 31, 2011, we had additional guaranteed obligations of others with maximum exposures of $25 million, of which $12 million has been
accrued.



21



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements



Note 11. Fair Value Measurements

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



|                            |  |                   |        |  |         |   |     |         |  |   |       |  |  |   |        | 
|--------------------------- |  | ----------------- | ------ |  | ------- | - | --- | ------- |  | - | ----- |  |  | - | ------ | 
|                            |  | March 31, 2011    |       
|                            |  | Level 1           |        |  | Level 2 |   |     | Level 3 |  |   | Total | 
|Assets:                     |  |                   |        |  |         |   |     |         |  |   |       |  |  |   |        | 
|Cash and cash equivalents   |  | $                 | 9,877  |  |         | $ | -   |         |  | $ | -     |  |  | $ | 9,877  | 
|Restricted cash             |  |                   | 476    |  |         |   | -   |         |  |   | -     |  |  |   | 476    | 
|Derivatives:                |  |                   |        |  |         |   |     |         |  |   |       |  |  |   |        | 
|Commodity swaps             |  |                   | -      |  |         |   | 41  |         |  |   | 25    |  |  |   | 66     | 
|                            |  |                   |        |  |         |   |     |         |  |   |       |  |  |   |        | 
|Total                       |  | $                 | 10,353 |  |         | $ | 41  |         |  | $ | 25    |  |  | $ | 10,419 | 
|                            |  |                   |        |  |         |   |     |         |  |   |       |  |  |   |        | 
|Liabilities:                |  |                   |        |  |         |   |     |         |  |   |       |  |  |   |        | 
|Derivatives:                |  |                   |        |  |         |   |     |         |  |   |       |  |  |   |        | 
|Currency forwards and swaps |  | $                 | -      |  |         | $ | 130 |         |  | $ | -     |  |  | $ | 130    | 
|Commodity swaps             |  |                   | -      |  |         |   | 3   |         |  |   | 2     |  |  |   | 5      | 
|                            |  |                   |        |  |         |   |     |         |  |   |       |  |  |   |        | 
|Total                       |  | $                 | -      |  |         | $ | 133 |         |  | $ | 2     |  |  | $ | 135    | 
|                            |  |                   |        |  |         |   |     |         |  |   |       |  |  |   |        | 
|                            | 
|                            |  | December 31, 2010 |       
|                            |  | Level 1           |        |  | Level 2 |   |     | Level 3 |  |   | Total | 
|Assets:                     |  |                   |        |  |         |   |     |         |  |   |       |  |  |   |        | 
|Cash and cash equivalents   |  | $                 | 7,347  |  |         | $ | -   |         |  | $ | -     |  |  | $ | 7,347  | 
|Restricted cash             |  |                   | 671    |  |         |   | -   |         |  |   | -     |  |  |   | 671    | 
|Derivatives:                |  |                   |        |  |         |   |     |         |  |   |       |  |  |   |        | 
|Commodity swaps             |  |                   | -      |  |         |   | 54  |         |  |   | 44    |  |  |   | 98     | 
|                            |  |                   |        |  |         |   |     |         |  |   |       |  |  |   |        | 
|Total                       |  | $                 | 8,018  |  |         | $ | 54  |         |  | $ | 44    |  |  | $ | 8,116  | 
|                            |  |                   |        |  |         |   |     |         |  |   |       |  |  |   |        | 
|Liabilities:                |  |                   |        |  |         |   |     |         |  |   |       |  |  |   |        | 
|Derivatives:                |  |                   |        |  |         |   |     |         |  |   |       |  |  |   |        | 
|Currency forwards and swaps |  | $                 | -      |  |         | $ | 78  |         |  | $ | -     |  |  | $ | 78     | 
|Commodity swaps             |  |                   | -      |  |         |   | 6   |         |  |   | 2     |  |  |   | 8      | 
|Interest rate swaps         |  |                   | -      |  |         |   | -   |         |  |   | 1     |  |  |   | 1      | 
|                            |  |                   |        |  |         |   |     |         |  |   |       |  |  |   |        | 
|Total                       |  | $                 | -      |  |         | $ | 84  |         |  | $ | 3     |  |  | $ | 87     | 
|                            |  |                   |        |  |         |   |     |         |  |   |       |  |  |   |        | 

During the three months ended March 31, 2011, 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.



22



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 11. Fair Value Measurements  Continued



We enter into over-the-counter interest rate swaps to mitigate interest rate risk exposures. We estimate the fair value of our interest rate swaps using third-party industry standard valuation models.
These models project future cash flows and discount the future amounts to a present value using market-based expectations for interest rates and the contractual terms of the derivative instruments, which are less observable. We have classified these
interest rate swaps as Level 3 within the fair value hierarchy.

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 12, 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 March 31, |    
|                                                                           |  | 2011                         |     |   | 2010 |  
|Derivatives Assets (Liabilities):                                          |  |                              |     |   |      |   |     |  
|Balance at beginning of the period                                         |  | $                            | 41  |   |      | $ | (28 | )
|Total realized and unrealized gains (losses):                              |  |                              |     |   |      |   |     |  
|Included in Net Income (Loss)                                              |  |                              | 4   |   |      |   | 13  |  
|Included in Other Comprehensive Loss                                       |  |                              | (7  | ) |      |   | 5   |  
|Purchases, issuances and settlements, net                                  |  |                              | (15 | ) |      |   | (2  | )
|Transfers into Level 3                                                     |  |                              | -   |   |      |   | -   |  
|Transfers out of Level 3                                                   |  |                              | -   |   |      |   | -   |  
|                                                                           |  |                              |     |   |      |   |     |  
|Fair value at end of the period                                            |  | $                            | 23  |   |      | $ | (12 | )
|                                                                           |  |                              |     |   |      |   |     |  
|Changes in unrealized losses relating to instruments
held at end of period |  | $                            | 1   |   |      | $ | 16  |  
|                                                                           |  |                              |     |   |      |   |     |  

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



|                                                                                                         |  |                |        |  |                   |   |        |                |  |   |            |  |  |   |        | 
|-------------------------------------------------------------------------------------------------------- |  | -------------- | ------ |  | ----------------- | - | ------ | -------------- |  | - | ---------- |  |  | - | ------ | 
|                                                                                                         |  | March 31, 2011 |        |  | December 31, 2010 |  
|                                                                                                         |  | CarryingAmount |        |  | Fair Value        |   |        | CarryingAmount |  |   | Fair Value | 
|Cash and cash equivalents                                                                                |  | $              | 9,877  |  |                   | $ | 9,877  |                |  | $ | 7,347      |  |  | $ | 7,347  | 
|Restricted cash                                                                                          |  |                | 476    |  |                   |   | 476    |                |  |   | 671        |  |  |   | 671    | 
|Financial assets                                                                                         |  |                | 214    |  |                   |   | 214    |                |  |   | 219        |  |  |   | 219    | 
|Financial liabilities                                                                                    |  |                | 13,445 |  |                   |   | 14,788 |                |  |   | 13,731     |  |  |   | 15,458 | 
|Derivatives:                                                                                             |  |                |        |  |                   |   |        |                |  |   |            |  |  |   |        | 
|Included in Prepaid Expenses and Other Assets and Advances to Related Parties and Other Financial Assets |  |                | 66     |  |                   |   | 66     |                |  |   | 98         |  |  |   | 98     | 
|Included in Accrued Expenses and Other Liabilities                                                       |  |                | 135    |  |                   |   | 135    |                |  |   | 87         |  |  |   | 87     | 

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.



23



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 11. Fair Value Measurements  Continued



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 assets

The fair values of financial assets were determined using either quoted market prices or valuation models that use observable market data.

Financial liabilities

The fair values of financial liabilities are estimated by
discounting future cash flows using market interest rates, adjusted for the non-performance risk associated with the financial liability over the remaining term or using quoted market prices where available.

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 12. 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 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 March 31, 2011 and December 31, 2010, 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 March 31, 2011 and
December 31, 2010 was approximately $66 million and $98 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 exchange and commodity hedge contracts require us to post collateral when derivative
instruments are in a liability position. The majority of these contracts also required us to post collateral at the inception of the trade. In December 2010 and the first quarter of 2011, the majority of our agreements were renegotiated to no
longer require us to post collateral at the inception of the



24



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 12. Derivative Financial Instruments and Risk Management  Continued



trade. During the three months ended March 31, 2011 and the year ended December 31, 2010, this resulted in the release of $61 million and $17 million, respectively, of collateral
previously classified as restricted cash. 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 March 31, 2011 and December 31, 2010,
which represent our maximum potential exposure, were $135 million and $86 million, respectively. As of March 31, 2011 and December 31, 2010, we posted $94 million and $116 million, respectively, as collateral for foreign exchange and
commodity hedge contracts that were outstanding at the respective period ends. 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 $5 million due to the counterparties as of March 31, 2011. No additional settlement liability would have
been due to the counterparties as of December 31, 2010.

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 interest rates, 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 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. 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 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 period 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.



25



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 12. Derivative Financial Instruments and Risk Management  Continued

Cash Flow Hedges  Continued



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



|                            |  |                 |       |  |                     |   |    |                          |  |   |      |  
|--------------------------- |  | --------------- | ----- |  | ------------------- | - | -- | ------------------------ |  | - | ---- | -
|                            |  | March 31, 2011  |      
|                            |  | NotionalAmounts |       |  | DerivativeAssets(1) |   |    | DerivativeLiabilities(2) | 
|Commodity swaps             |  | $               | 182   |  |                     | $ | 25 |                          |  | $ | (4   | )
|Currency forwards and swaps |  |                 | 2,975 |  |                     |   | -  |                          |  |   | (128 | )
|                            |  |                 |       |  |                     |   |    |                          |  |   |      |  
|Total                       |  | $               | 3,157 |  |                     | $ | 25 |                          |  | $ | (132 | )
|                            |  |                 |       |  |                     |   |    |                          |  |   |      |  



|                            |  |                   |       |  |                     |   |    |                          |  |   |     |  
|--------------------------- |  | ----------------- | ----- |  | ------------------- | - | -- | ------------------------ |  | - | --- | -
|                            |  | December 31, 2010 |      
|                            |  | NotionalAmounts   |       |  | DerivativeAssets(1) |   |    | DerivativeLiabilities(2) | 
|Commodity swaps             |  | $                 | 205   |  |                     | $ | 44 |                          |  | $ | (6  | )
|Currency forwards and swaps |  |                   | 2,454 |  |                     |   | -  |                          |  |   | (72 | )
|                            |  |                   |       |  |                     |   |    |                          |  |   |     |  
|Total                       |  | $                 | 2,659 |  |                     | $ | 44 |                          |  | $ | (78 | )
|                            |  |                   |       |  |                     |   |    |                          |  |   |     |  



| | (1) | The related derivative instruments are recognized in the accompanying Condensed Consolidated Balance Sheets in Prepaid Expenses and Other Assets.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------

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

The following summarizes the gains (losses) recorded in Other Comprehensive Income (Loss) (OCI) and
reclassified from AOCI to income (in millions of dollars):



|                            |  |                              |      |   |                                            |   |     |                            |  |   |                                            |   |  |   |    |  
|--------------------------- |  | ---------------------------- | ---- | - | ------------------------------------------ | - | --- | -------------------------- |  | - | ------------------------------------------ | - |  | - | -- | -
|                            |  | Three Months Ended March 31, |     
|                            |  | 2011                         |      |   | 2010                                       |  
|                            |  | Gain (Loss)Recorded in OCI   |      |   | Gain (Loss)Reclassified fromAOCI to
Income |   |     | Gain (Loss)Recorded in OCI |  |   | Gain (Loss)Reclassified fromAOCI to Income |  
|Commodity swaps             |  | $                            | (5   | ) |                                            | $ | -   |                            |  | $ | 3                                          |   |  | $ | -  |  
|Currency forwards and swaps |  |                              | (95  | ) |                                            |   | (61 | )                          |  |   | (19                                        | ) |  |   | (8 | )
|                            |  |                              |      |   |                                            |   |     |                            |  |   |                                            |   |  |   |    |  
|Total                       |  | $                            | (100 | ) |                                            | $ | (61 | )                          |  | $ | (16                                        | ) |  | $ | (8 | )
|                            |  |                              |      |   |                                            |   |     |                            |  |   |                                            |   |  |   |    |  

We expect to reclassify existing net losses of $99 million from AOCI to income within the next 12 months.

Derivatives Not Designated as Hedges

We have elected not to apply hedge accounting to certain derivative instruments. 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.



26



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 12. 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):



|                            |  |                 |     |  |                     |   |    |                          |  |   |    |  
|--------------------------- |  | --------------- | --- |  | ------------------- | - | -- | ------------------------ |  | - | -- | -
|                            |  | March 31, 2011  |    
|                            |  | NotionalAmounts |     |  | DerivativeAssets(1) |   |    | DerivativeLiabilities(2) | 
|Commodity swaps             |  | $               | 260 |  |                     | $ | 41 |                          |  | $ | (1 | )
|Currency forwards and swaps |  |                 | 62  |  |                     |   | -  |                          |  |   | (2 | )
|Interest rate swaps         |  |                 | 113 |  |                     |   | -  |                          |  |   | -  |  
|                            |  |                 |     |  |                     |   |    |                          |  |   |    |  
|Total                       |  | $               | 435 |  |                     | $ | 41 |                          |  | $ | (3 | )
|                            |  |                 |     |  |                     |   |    |                          |  |   |    |  



|                            |  |                   |     |  |                     |   |    |                          |  |   |    |  
|--------------------------- |  | ----------------- | --- |  | ------------------- | - | -- | ------------------------ |  | - | -- | -
|                            |  | December 31, 2010 |    
|                            |  | NotionalAmounts   |     |  | DerivativeAssets(1) |   |    | DerivativeLiabilities(2) | 
|Commodity swaps             |  | $                 | 212 |  |                     | $ | 54 |                          |  | $ | (2 | )
|Currency forwards and swaps |  |                   | 145 |  |                     |   | -  |                          |  |   | (6 | )
|Interest rate swaps         |  |                   | 254 |  |                     |   | -  |                          |  |   | (1 | )
|                            |  |                   |     |  |                     |   |    |                          |  |   |    |  
|Total                       |  | $                 | 611 |  |                     | $ | 54 |                          |  | $ | (9 | )
|                            |  |                   |     |  |                     |   |    |                          |  |   |    |  



| | (1) | The related derivative instruments are recognized in the accompanying Condensed Consolidated Balance Sheets in Prepaid Expenses and Other Assets.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------

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

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):



|                            |  |                            |    |                              |    |   |                 |   |    |  
|--------------------------- |  | -------------------------- | -- | ---------------------------- | -- | - | --------------- | - | -- | -
|                            |  |                            |    | Three Months Ended March 31, |   
|                            |  | FinancialStatement Caption |    | 2011Gain (Loss)              |    |   | 2010Gain (Loss) |  
|Currency forwards and swaps |  | Revenues, Net              |    | $                            | (6 | ) |                 | $ | 9  |  
|Commodity swaps             |  | Cost of Sales              |    |                              | 22 |   |                 |   | (2 | )
|Interest rate swaps         |  | Cost of Sales              |    |                              | 1  |   |                 |   | 11 |  
|                            |  |                            |    |                              |    |   |                 |   |    |  
|Total                       |  | $                          | 17 |                              |    | $ | 18              |  
|                            |  |                            |    |                              |    |   |                 |   |    |  

Note 13. 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.



27



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 13. 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.

Benefit Expense

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



|                                      |  |                              |      |   |      |   |    |                 |  |   |      |   |  |   |    |  
|------------------------------------- |  | ---------------------------- | ---- | - | ---- | - | -- | --------------- |  | - | ---- | - |  | - | -- | -
|                                      |  | Three Months Ended March 31, |     
|                                      |  | 2011                         |      |   | 2010 |  
|                                      |  | PensionBenefits              |      |   | OPEB |   |    | PensionBenefits |  |   | OPEB |  
|Service cost                          |  | $                            | 67   |   |      | $ | 5  |                 |  | $ | 61   |   |  | $ | 9  |  
|Interest cost                         |  |                              | 380  |   |      |   | 34 |                 |  |   | 374  |   |  |   | 47 |  
|Expected return on plan assets        |  |                              | (454 | ) |      |   | -  |                 |  |   | (435 | ) |  |   | (1 | )
|Amortization of unrecognized loss     |  |                              | -    |   |      |   | 3  |                 |  |   | -    |   |  |   | 1  |  
|Amortization of prior service cost    |  |                              | -    |   |      |   | -  |                 |  |   | -    |   |  |   | -  |  
|                                      |  |                              |      |   |      |   |    |                 |  |   |      |   |  |   |    |  
|Net periodic benefit (income) expense |  | $                            | (7   | ) |      | $ | 42 |                 |  | $ | -    |   |  | $ | 56 |  
|                                      |  |                              |      |   |      |   |    |                 |  |   |      |   |  |   |    |  

Contributions and Payments

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 $400 million has been received. The final $200 million installment is due to us in June 2011. The carrying value of the receivable at March 31, 2011 was $199 million and is included in Prepaid Expenses and Other Assets in
the accompanying Condensed Consolidated Balance Sheets.

During the three months ended March 31, 2011, employer contributions to our
funded pension plans amounted to $42 million. Employer contributions to our funded pension plans are expected to be approximately $296 million for the remainder of 2011. Of the employer contributions, $200 million will be made to the U.S. plans upon
receipt of the Daimler receivable noted above and $96 million is anticipated to be made in cash to satisfy minimum funding requirements for our plans in Canada. During the three months ended March 31, 2011, employer contributions to our
unfunded pension and OPEB plans amounted to $3 million and $76 million, respectively. Employer contributions to our unfunded pension and OPEB plans are expected to be $9 million and $166 million, respectively for the remainder of 2011, which
represents the expected benefit payments to participants.

Note 14. 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.

VEBA Trust

As of March 31, 2011, the VEBA Trust had a 63.5 percent ownership interest in the Company. Interest expense on the VEBA Trust
Note totaled $105 million and $102 million for the three months ended March 31, 2011 and 2010, respectively.



28



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 14. Other Transactions with Related Parties  Continued



Fiat

As of March 31, 2011,
Fiat had a 25.0 percent ownership interest in the Company, of which 20.0 percent was obtained in connection with the 363 Transaction in exchange for rights to intellectual property and 5.0 percent was obtained in January 2011 upon our achievement of
the Technology Event, one of three Class B Events outlined in our Amended and Restated Limited Liability Company Operating Agreement (LLC Operating Agreement). The Technology Event was achieved as a result of us delivering an irrevocable
commitment letter to the U.S. Treasury stating that we had received the appropriate governmental approvals to begin commercial production of our Fully Integrated Robotised Engine in our Dundee, Michigan facility. Fiats ownership interest will
increase by an additional 10 percent, in 5 percent increments, upon our achievement of the remaining two Class B Events: (i) development and regulatory approval of a 40-mile per gallon vehicle based on Fiat technology to be produced in the U.S.
(the Ecological Event) and (ii) certain metrics relating to revenue and expansion of sales outside of North America (the Non-NAFTA Distribution Event).

If we do not achieve these Class B Events, Fiat may exercise an option to purchase ownership interests to replace those that were contingent upon the Class B Events. This option may not be exercised prior
to January 1, 2013 unless the Government Loans have been repaid in full and terminated. Separately, Fiat holds an option to acquire an incremental 16 percent ownership interest in the Company; however, this option may not be exercised prior to
January 1, 2013 unless the Government Loans have been repaid in full and terminated. After January 1, 2013, Fiat may exercise this option only if the aggregate principal amount of our Government Loans falls below $4.0 billion. Prior to the full
repayment of the Government Loans, Fiats ownership interest cannot exceed 49.9 percent.

Refer to Note 17, Subsequent Events, for
additional information regarding events that have occurred subsequent to March 31, 2011 related to the Class B Events and Fiats option to acquire an incremental 16 percent ownership interest in the Company.

Pursuant to our master industrial agreement with Fiat, we established an industrial alliance in which we collaborate with Fiat on 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 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. The 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. We have also entered into
other transactions with Fiat, including the purchase of goods and services in the ordinary course of business.

During 2010, we executed
agreements with Fiat which govern the integration of the operations of our European distribution and dealer network into Fiats distribution organization. In 2010, Fiat assumed the management of our distribution and sales operations in select
European countries, pending Fiats appointment as our general distributor in Europe in June 2011. Once appointed, Fiat will distribute our vehicles and service parts in Europe through a network of newly selected dealers.



29



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 14. Other Transactions with Related Parties  Continued

Fiat
 Continued



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



|                                                                  |  |                              |     |  |      |   |    | 
|----------------------------------------------------------------- |  | ---------------------------- | --- |  | ---- | - | -- | 
|                                                                  |  | Three Months Ended March 31, |    
|                                                                  |  | 2011                         |     |  | 2010 |  
|Sales of vehicles, vehicle parts and/or services provided to Fiat |  | $                            | 201 |  |      | $ | 9  | 
|Purchases of vehicles, vehicle parts and/or services from Fiat    |  |                              | 144 |  |      |   | 34 | 
|Purchases capitalized in property, plant and equipment, net       |  |                              | 39  |  |      |   | 19 | 

During the three months ended
March 31, 2011 and 2010, we received reimbursements from Fiat of $17 million and $11 million, respectively, for certain engineering and development activities performed under our product and platform sharing development alliance with Fiat.

During the three months ended March 31, 2011, royalty fees incurred for the intellectual property contributed were less than $1 million
and no royalty fees were paid during the three months ended March 31, 2010 because production utilizing the intellectual property did not begin until December 2010.

U.S. Treasury

As of March 31, 2011, the U.S. Treasury had a 9.2 percent
ownership interest in the Company. Related party transactions with the U.S. Treasury disclosed below are limited to activities related to individual contractual agreements and not statutory requirements, such as taxes.

In March 2010, we repaid the $123 million outstanding on a loan facility provided by the U.S. Treasury to Chrysler Receivable SPV, LLC related to the
Auto Supplier Support Program.

Interest expense on financial resources provided by the U.S. Treasury totaled $144 million for both the three
months ended March 31, 2011 and 2010, of which $17 million in each period was PIK interest and was capitalized as financial liabilities in accordance with the loan agreements. Refer to Note 8, Financial Liabilities, for additional
information.



30



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 14. Other Transactions with Related Parties  Continued



Related Party Summary

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



|                                                                                                         |  |                   |       |  |                        |   |     |              |  |   |       |  |  |       |    |  |  |   |        | 
|-------------------------------------------------------------------------------------------------------- |  | ----------------- | ----- |  | ---------------------- | - | --- | ------------ |  | - | ----- |  |  | ----- | -- |  |  | - | ------ | 
|                                                                                                         |  | March 31, 2011    |      
|                                                                                                         |  | VEBATrust         |       |  | Fiat andRelatedParties |   |     | U.S.Treasury |  |   | Other |  |  | Total |   
|Amounts due from related parties (included in Prepaid Expenses and Other Assets)                         |  | $                 | -     |  |                        | $ | 273 |              |  | $ | -     |  |  | $     | 15 |  |  | $ | 288    | 
|                                                                                                         |  |                   |       |  |                        |   |     |              |  |   |       |  |  |       |    |  |  |   |        | 
|Amounts due to related parties(included in Trade Liabilities and Accrued Expenses and Other Liabilities) |  | $                 | 320   |  |                        | $ | 205 |              |  | $ | 2     |  |  | $     | 21 |  |  | $ | 548    | 
|Financial liabilities to related parties(included in Financial Liabilities)                              |  |                   | 4,029 |  |                        |   | -   |              |  |   | 5,720 |  |  |       | -  |  |  |   | 9,749  | 
|                                                                                                         |  |                   |       |  |                        |   |     |              |  |   |       |  |  |       |    |  |  |   |        | 
|Total due to related parties                                                                             |  | $                 | 4,349 |  |                        | $ | 205 |              |  | $ | 5,722 |  |  | $     | 21 |  |  | $ | 10,297 | 
|                                                                                                         |  |                   |       |  |                        |   |     |              |  |   |       |  |  |       |    |  |  |   |        | 
|                                                                                                         | 
|                                                                                                         |  | December 31, 2010 |      
|                                                                                                         |  | VEBATrust         |       |  | Fiat andRelatedParties |   |     | U.S.Treasury |  |   | Other |  |  | Total |   
|Amounts due from related parties (included in Prepaid Expenses and Other Assets)                         |  | $                 | -     |  |                        | $ | 227 |              |  | $ | -     |  |  | $     | 14 |  |  | $ | 241    | 
|                                                                                                         |  |                   |       |  |                        |   |     |              |  |   |       |  |  |       |    |  |  |   |        | 
|Amounts due to related parties(included in Trade Liabilities and Accrued Expenses and Other Liabilities) |  | $                 | 214   |  |                        | $ | 100 |              |  | $ | 1     |  |  | $     | 7  |  |  | $ | 322    | 
|Financial liabilities to related parties(included in Financial Liabilities)                              |  |                   | 4,018 |  |                        |   | -   |              |  |   | 5,696 |  |  |       | -  |  |  |   | 9,714  | 
|                                                                                                         |  |                   |       |  |                        |   |     |              |  |   |       |  |  |       |    |  |  |   |        | 
|Total due to related parties                                                                             |  | $                 | 4,232 |  |                        | $ | 100 |              |  | $ | 5,697 |  |  | $     | 7  |  |  | $ | 10,036 | 
|                                                                                                         |  |                   |       |  |                        |   |     |              |  |   |       |  |  |       |    |  |  |   |        | 

Amounts included in Other above relate to balances with a related unconsolidated company as a result of
transactions in the ordinary course of business.

Note 15. Restructuring Actions

In connection with the 363 Transaction, we assumed certain liabilities related to specific restructuring actions commenced by Old Carco. These
liabilities represent 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 the 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 two years. The
remaining actions principally include the



31



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 15. Restructuring Actions  Continued



completion of the activities associated with the idling of three manufacturing facilities and the restructuring of our international distribution operations, the plans of which have been refined,
including the integration of the operations of our European distribution and dealer network into Fiats distribution organization. Refer to Note 14, Other Transactions with Related Parties,for additional information. Costs associated
with these remaining actions include, but are not limited to: employee severance, relocations, plant deactivations, contract cancellations and legal claims. 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.

During
the three months ended March 31, 2011 and 2010, we recorded charges of $14 million and $19 million, respectively, net of discounting. The charges related to costs associated with workforce reductions and plant deactivations for previously
announced restructuring initiatives.

During the three months ended March 31, 2011 and 2010, we made refinements to existing reserve
estimates resulting in a net reduction of $3 million and a net increase of $1 million, respectively. The adjustments related to changes in the expected workforce reduction costs as a result of managements adequacy reviews, which took into
consideration the actual acceptances and the composition of the remaining estimated costs.

Additional charges of approximately $30 million
related to employee relocations and plant deactivation costs, as well as interest accretion, are expected to be recognized in total during the remainder of 2011 and 2012. 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 $651 million, including $390 million related to employee termination benefits and $261 million of other costs.

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

In connection with these actions, we expect
to make payments of approximately $249 million and $3 million during the remainder of 2011 and 2012, respectively. Additional payments of approximately $4 million are expected to be funded through pension and other post-employment benefit plans
related to special retirement programs and other benefits.

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):



|                                                             |  |                              |     |   |       |   |     |       |  |   |                     |   |  |       |     |   |       |   |    |   |  |   |     |  
|------------------------------------------------------------ |  | ---------------------------- | --- | - | ----- | - | --- | ----- |  | - | ------------------- | - |  | ----- | --- | - | ----- | - | -- | - |  | - | --- | -
|                                                             |  | Three Months Ended March 31, |    
|                                                             |  | 2011                         |     |   | 2010  |  
|                                                             |  | WorkforceReductions          |     |   | Other |   |     | Total |  |   | WorkforceReductions |   |  | Other |     |   | Total |  
|Balance at beginning of period                               |  | $                            | 79  |   |       | $ | 160 |       |  | $ | 239                 |   |  | $     | 343 |   |       | $ | 38 |   |  | $ | 381 |  
|Charges                                                      |  |                              | 7   |   |       |   | 7   |       |  |   | 14                  |   |  |       | 13  |   |       |   | 6  |   |  |   | 19  |  
|Adjustments to reserve estimates                             |  |                              | (3  | ) |       |   | -   |       |  |   | (3                  | ) |  |       | 1   |   |       |   | -  |   |  |   | 1   |  
|Payments                                                     |  |                              | (18 | ) |       |   | (6  | )     |  |   | (24                 | ) |  |       | (37 | ) |       |   | (9 | ) |  |   | (46 | )
|Amounts recognized and transferred to employee benefit plans |  |                              | (1  | ) |       |   | -   |       |  |   | (1                  | ) |  |       | (3  | ) |       |   | -  |   |  |   | (3  | )
|Interest accretion                                           |  |                              | -   |   |       |   | -   |       |  |   | -                   |   |  |       | 1   |   |       |   | -  |   |  |   | 1   |  
|Other, including currency translation                        |  |                              | (1  | ) |       |   | 2   |       |  |   | 1                   |   |  |       | 4   |   |       |   | -  |   |  |   | 4   |  
|                                                             |  |                              |     |   |       |   |     |       |  |   |                     |   |  |       |     |   |       |   |    |   |  |   |     |  
|Balance at end of period                                     |  | $                            | 63  |   |       | $ | 163 |       |  | $ | 226                 |   |  | $     | 322 |   |       | $ | 35 |   |  | $ | 357 |  
|                                                             |  |                              |     |   |       |   |     |       |  |   |                     |   |  |       |     |   |       |   |    |   |  |   |     |  



32



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements



Note 16. Venezuelan Currency
Devaluation

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 (BCV) 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).

Prior to January 1, 2010, the official exchange rate was 2.15 bolivar fuerte (BsF) per USD. In January 2010, the Venezuelan
government devalued the BsF relative to the USD from the official rate of 2.15 BsF per USD to a dual-rated system regulated by the CADIVI. The dual-rate included (i) an essential rate of 2.60 BsF per USD for food, technology and other items,
such as our car kits, and (ii) a nonessential rate of 4.30 BsF per USD for all other transactions. As a result of this devaluation, we recorded a foreign currency translation loss of $20 million in the first quarter of 2010. On
December 30, 2010, a further devaluation of the BsF was announced, eliminating the essential rate of 2.60 BsF per USD and requiring all CADIVI-approved transactions, including transactions that were pending CADIVI approval prior to the
announcement, to occur at the previous nonessential rate of 4.30 BsF per USD. The new rate was declared effective as of January 1, 2011. The nonessential rate remained unchanged. However, as a result of the announced devaluation of the
essential rate on December 30, 2010, we remeasured all BsF denominated balances at that time. No additional events have occurred during the first quarter of 2011 which would further impact the BsF to USD exchange rate.

At March 31, 2011 and December 31, 2010, the net monetary assets of CdV denominated in BsF were 292 million ($68 million USD) and
348 million ($81 million USD), respectively, which included cash and cash equivalents denominated in BsF of 482 million ($112 million USD) and 651 million ($151 million USD), respectively.

Note 17. Subsequent Events

Fiat Ownership Interest

In April 2011, we delivered a notice to the U.S. Treasury
confirming that we had achieved the Non-NAFTA Distribution Event in our LLC Operating Agreement. As a result, Fiats ownership interest increased to 30.0 percent pursuant to our LLC Operating Agreement.

In April 2011, Fiat agreed with us and our other members that Fiat would increase its ownership interest in us by exercising in full its call option to
acquire an incremental 16 percent ownership interest in us pursuant to the terms of our LLC Operating Agreement. Fiat has agreed that it would acquire the additional ownership interest for a payment of $1,268 million, concurrently with the repayment
in full of our U.S. Treasury first lien credit agreement and EDC credit agreement, provided that these repayments are completed by June 30, 2011.

Upon the closing of this call option exercise, we will receive the entire exercise price in cash, increasing our contributed capital by the net proceeds of the option exercise, and will issue new
membership interests to Fiat, increasing Fiats aggregate fully-diluted ownership interest by 16 percent.

On May 2, 2011, we
announced that we intend to pursue a refinancing of our U.S. Treasury first lien credit agreement and EDC credit agreement, through a new senior secured term loan and revolving credit facility of up to $5 billion and an expected issuance of secured
debt securities. The net proceeds of these transactions, together with the proceeds from Fiats exercise of its call option and cash generated from our operations, will be used to fully repay our outstanding loans under the U.S. Treasury first
lien credit agreement and EDC credit agreement and to pay related fees and expenses. The terms and timing of these transactions remain subject to market conditions and agreement between the Company and prospective lenders and investors, and there
can be no assurance that we can complete these transactions on terms acceptable to us.



33



---

##### Table of Contents

CHRYSLER GROUP LLC AND CONSOLIDATED SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Note 17. Subsequent Events  Continued



TARP Covenants

In April 2011, we agreed with the U.S. Treasury that in the event
that the obligations under the U.S. Treasury loan agreement were repaid in full and the commitment under that agreement terminated, we would, in lieu of the vitality covenants, governance covenant and TARP covenants, agree to continue to comply with
the requirements of TARP as though the Company and its subsidiaries remained a TARP recipient receiving exceptional financial assistance through the date on which the U.S. Treasury sells the Class A Membership Interests it originally acquired
in connection with the 363 Transaction (the TARP Restricted Period). Specifically, we agreed to comply with the vitality covenant and covenants substantially similar to the TARP covenants during the TARP Restricted Period. Under this
agreement, we would no longer be bound by the restrictions on executive privileges and compensation established under the Emergency Economic Stabilization Act (EESA) as of the end of the TARP Restricted Period. The agreement expressly
confirms that these TARP and EESA restrictions will not be applicable to Fiat or any of its affiliates (other than Chrysler Group and its subsidiaries) in the event Fiat acquires a majority ownership in us.



34



---

##### Table of Contents

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 Registration Statement on Form 10, as amended (Form 10), filed with the Securities and Exchange Commission (SEC).

Selected Financial and Other Data

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



|                                                      |  |                              |        |  |                       |  |       |      |  |   |                       |   |  |  |       |   
|----------------------------------------------------- |  | ---------------------------- | ------ |  | --------------------- |  | ----- | ---- |  | - | --------------------- | - |  |  | ----- | --
|                                                      |  | Three Months Ended March 31, |       
|                                                      |  | 2011                         |        |  | Percentage ofRevenues |  |       | 2010 |  |   | Percentage ofRevenues |  
|                                                      |  | (in millions of dollars)     |       
|Condensed Consolidated Statements of Operations Data: |  |                              |        |  |                       |  |       |      |  |   |                       |   |  |  |       |   
|Revenues, net                                         |  | $                            | 13,124 |  |                       |  | 100.0 | %    |  | $ | 9,687                 |   |  |  | 100.0 | % 
|Gross margin                                          |  |                              | 2,047  |  |                       |  | 15.6  | %    |  |   | 1,357                 |   |  |  | 14.0  | % 
|Selling, administrative and other expenses            |  |                              | 1,185  |  |                       |  | 9.0   | %    |  |   | 909                   |   |  |  | 9.4   | % 
|Research and development expenses                     |  |                              | 354    |  |                       |  | 2.7   | %    |  |   | 294                   |   |  |  | 3.0   | % 
|Interest expense                                      |  |                              | 348    |  |                       |  | 2.7   | %    |  |   | 311                   |   |  |  | 3.2   | % 
|Net income (loss)                                     |  |                              | 116    |  |                       |  | 0.9   | %    |  |   | (197                  | ) |  |  | (2.0  | )%



|                                                          |  |                              |        |   |                   |   |        |  
|--------------------------------------------------------- |  | ---------------------------- | ------ | - | ----------------- | - | ------ | -
|                                                          |  | March 31, 2011               |        |   | December 31, 2010 |  
|                                                          |  | (in millions of dollars)     |       
|Condensed Consolidated Balance Sheets Data at Period End: |  |                              |        |  
|Cash and cash equivalents                                 |  | $                            | 9,877  |   |                   | $ | 7,347  |  
|Restricted cash                                           |  |                              | 476    |   |                   |   | 671    |  
|Total assets                                              |  |                              | 37,601 |   |                   |   | 35,449 |  
|Current maturities of financial liabilities               |  |                              | 2,720  |   |                   |   | 2,758  |  
|Long-term financial liabilities                           |  |                              | 10,725 |   |                   |   | 10,973 |  
|Members Deficit                                          |  |                              | (4,427 | ) |                   |   | (4,489 | )
|                                                          | 
|                                                          |  | Three Months Ended March 31, |       
|                                                          |  | 2011                         |        |   | 2010              |  
|                                                          |  | (in millions of dollars)     |       
|Condensed Consolidated Statements of Cash Flows Data:     |  |                              |        |  
|Cash flows provided by (used in):                         |  |                              |        |  
|Operating activities                                      |  | $                            | 3,117  |   |                   | $ | 2,386  |  
|Investing activities                                      |  |                              | (154   | ) |                   |   | (262   | )
|Financing activities                                      |  |                              | (452   | ) |                   |   | (623   | )
|                                                          |  |                             
|Other Financial Information:                              |  |                              |        |   |                   |   |        |  
|Depreciation and amortization expense                     |  | $                            | 701    |   |                   | $ | 732    |  
|Capital expenditures                                      |  |                              | 559    |   |                   |   | 580    |  
|                                                          |  |                             
|Other Statistical Information:                            |  |                              |        |   |                   |   |        |  
|Net worldwide factory shipments (in thousands)(1)         |  |                              | 478    |   |                   |   | 367    |  
|Worldwide vehicle sales (in thousands)(2)                 |  |                              | 394    |   |                   |   | 334    |  
|U.S. dealer inventory at period end (in thousands)        |  |                              | 302    |   |                   |   | 208    |  
|                                                          |  |                             
|Number of employees at period end                         |  |                              | 53,396 |   |                   |   | 48,482 |  



| | (1) | Represents vehicle sales to our dealers, distributors and fleet customers. 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.
| | --- | ---------------------------------------------------------------------------------------------



| | (3) | Our calculation is based on J.D. Power & Associates data as adjusted by us to reflect a constant Q1 2011 sales model mix.
| | --- | -------------------------------------------------------------------------------------------------------------------------



35



---

##### Table of Contents

Overview of our Operations

Chrysler Group is a Delaware limited liability company formed on April 28, 2009 with membership interests held by the United Auto Workers Retiree Medical Benefits Trust (VEBA
Trust), Fiat, the United States Department of the Treasury (U.S. Treasury) and Canada CH Investment Corporation (Canada CH). Throughout this report, we refer to the economic and voting rights associated with our
membership interests as ownership interests.

We generate revenue, income and cash primarily from our sales of Chrysler, Jeep, Dodge and Ram
vehicles, and Mopar service parts and automotive accessories to dealers and distributors for sale to retail and fleet customers. The majority of our operations, employees, independent dealers and vehicle sales are in North America, principally in
the United States. Approximately 10 percent of our vehicle sales are outside North America, mostly in South America, Asia Pacific and Europe. We also generate revenue, 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, including Fiat.

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. The availability
of financing on reasonable terms is a significant factor influencing our vehicle sales and revenues.

We have an industrial alliance with Fiat
that provides for collaboration in a number of areas, including product platform sharing and development, global distribution, procurement, information technology infrastructure and process improvement. In December 2010, we began production of the
Fiat 500 and became the exclusive distributor of Fiat brand vehicles and service parts in North America in 2011. In 2010, Fiat assumed the management of our distribution and sales operations in select European countries, pending Fiats
appointment as our general distributor in Europe in June 2011.

Fiat Ownership Interest

In January 2011, we delivered an irrevocable commitment letter to the U.S. Treasury stating that we had received the appropriate governmental approvals to
begin commercial production of our Fully Integrated Robotised Engine in our Dundee, Michigan facility, which represented our achievement of the first of the three Class B Events as outlined in our Amended and Restated Limited Liability Company
Operating Agreement (LLC Operating Agreement). In April 2011, we achieved our second Class B Event and delivered a notice to the U.S. Treasury confirming that we had achieved the Non-NAFTA Distribution Event as outlined in our LLC
Operating Agreement. As a result of the achievement of these Class B Events, Fiats ownership interest increased from 20.0 percent to 30.0 percent, in increments of 5 percent.

In April 2011, Fiat agreed with us and our other members that Fiat would increase its ownership interest in us by exercising in full its call option to acquire an incremental 16 percent ownership interest
in us pursuant to the terms of our LLC Operating Agreement. Fiat has agreed that it would acquire the incremental ownership interest for a payment of $1,268 million, concurrently with and subject to the repayment in full of our U.S. Treasury first
lien credit agreement and Export Development Canada (EDC) credit agreement, provided that these repayments are completed by June 30, 2011. Refer to Liquidity and Capital Resources, Liquidity Overview, for additional
information regarding our intent to pursue a refinancing of our U.S. Treasury first lien credit agreement and EDC credit agreement.

Upon the
closing of this call option exercise, we will receive the entire exercise price in cash, increasing our contributed capital by the net proceeds of the option exercise, and will issue new membership interests to Fiat, increasing Fiats aggregate
fully-diluted ownership interest by 16 percent.



36



---

##### Table of Contents

Vehicle Sales

The following table summarizes our new vehicle sales by geographic market:



|                    |  |                              |     |  |            |  |       |                       |  |  |               |  |  |          |     |  |                       |  |       |  |  |  |       | 
|------------------- |  | ---------------------------- | --- |  | ---------- |  | ----- | --------------------- |  |  | ------------- |  |  | -------- | --- |  | --------------------- |  | ----- |  |  |  | ----- | 
|                    |  | Three Months Ended March 31, |    
|                    |  | 2011(1)(2)                   |     |  | 2010(1)(2) | 
|                    |  | (vehicles in thousands)      |    
|                    |  | ChryslerGroup                |     |  | Industry   |  |       | Percentage ofIndustry |  |  | ChryslerGroup |  |  | Industry |     |  | Percentage ofIndustry | 
|U. S.               |  |                              | 287 |  |            |  | 3,112 |                       |  |  | 9.2%          |  |  |          | 235 |  |                       |  | 2,588 |  |  |  | 9.1%  | 
|Canada              |  |                              | 50  |  |            |  | 340   |                       |  |  | 14.7%         |  |  |          | 45  |  |                       |  | 332   |  |  |  | 13.7% | 
|Mexico              |  |                              | 20  |  |            |  | 218   |                       |  |  | 9.3%          |  |  |          | 19  |  |                       |  | 194   |  |  |  | 9.7%  | 
|                    |  |                              |     |  |            |  |       |                       |  |  |               |  |  |          |     |  |                       |  |       |  |  |  |       | 
|Total North America |  |                              | 357 |  |            |  | 3,670 |                       |  |  | 9.7%          |  |  |          | 299 |  |                       |  | 3,114 |  |  |  | 9.6%  | 
|                    |  |                              |     |  |            |  |       |                       |  |  |               |  |  |          |     |  |                       |  |       |  |  |  |       | 
|Rest of World       |  |                              | 37  |  |            |  |       |                       |  |  |               |  |  |          | 35  |  |                       |  |       |  |  |  |       | 
|                    |  |                              |     |  |            |  |       |                       |  |  |               |  |  |          |     |  |                       |  |       |  |  |  |       | 
|Total Worldwide     |  |                              | 394 |  |            |  |       |                       |  |  |               |  |  |          | 334 |  |                       |  |       |  |  |  |       | 
|                    |  |                              |     |  |            |  |       |                       |  |  |               |  |  |          |     |  |                       |  |       |  |  |  |       | 



| | (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.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following
table summarizes the total U.S. industry sales of new motor vehicles of domestic and foreign models and our relative competitive position:



|                        |  |                              |     |  |            |  |       |                       |  |  |               |  |  |          |     |  |                       |  |       |  |  |  |       | 
|----------------------- |  | ---------------------------- | --- |  | ---------- |  | ----- | --------------------- |  |  | ------------- |  |  | -------- | --- |  | --------------------- |  | ----- |  |  |  | ----- | 
|                        |  | Three Months Ended March 31, |    
|                        |  | 2011(1)(2)                   |     |  | 2010(1)(2) | 
|                        |  | (vehicles in thousands)      |    
|                        |  | ChryslerGroup                |     |  | Industry   |  |       | Percentage ofIndustry |  |  | ChryslerGroup |  |  | Industry |     |  | Percentage ofIndustry | 
|Cars                    |  |                              |     |  |            |  |       |                       |  |  |               |  |  |          |     |  |                       |  |       |  |  |  |       | 
|Small                   |  |                              | 10  |  |            |  | 584   |                       |  |  | 1.7%          |  |  |          | 8   |  |                       |  | 450   |  |  |  | 1.7%  | 
|Mid-size                |  |                              | 23  |  |            |  | 574   |                       |  |  | 4.0%          |  |  |          | 18  |  |                       |  | 491   |  |  |  | 3.6%  | 
|Full-size               |  |                              | 20  |  |            |  | 204   |                       |  |  | 9.6%          |  |  |          | 29  |  |                       |  | 198   |  |  |  | 14.5% | 
|Sport                   |  |                              | 11  |  |            |  | 134   |                       |  |  | 8.0%          |  |  |          | 10  |  |                       |  | 137   |  |  |  | 7.1%  | 
|                        |  |                              |     |  |            |  |       |                       |  |  |               |  |  |          |     |  |                       |  |       |  |  |  |       | 
|Total Cars              |  |                              | 64  |  |            |  | 1,496 |                       |  |  | 4.3%          |  |  |          | 65  |  |                       |  | 1,276 |  |  |  | 5.0%  | 
|                        |  |                              |     |  |            | 
|Minivans                |  |                              | 52  |  |            |  | 120   |                       |  |  | 43.1%         |  |  |          | 46  |  |                       |  | 96    |  |  |  | 47.7% | 
|Utility Vehicles        |  |                              | 115 |  |            |  | 984   |                       |  |  | 11.7%         |  |  |          | 83  |  |                       |  | 802   |  |  |  | 10.4% | 
|Pick-up Trucks          |  |                              | 54  |  |            |  | 392   |                       |  |  | 13.8%         |  |  |          | 39  |  |                       |  | 320   |  |  |  | 12.3% | 
|Van & Medium-Duty Truck |  |                              | 2   |  |            |  | 120   |                       |  |  | 2.2%          |  |  |          | 2   |  |                       |  | 94    |  |  |  | 2.1%  | 
|                        |  |                              |     |  |            |  |       |                       |  |  |               |  |  |          |     |  |                       |  |       |  |  |  |       | 
|Total Vehicles          |  |                              | 287 |  |            |  | 3,112 |                       |  |  | 9.2%          |  |  |          | 235 |  |                       |  | 2,588 |  |  |  | 9.1%  | 
|                        |  |                              |     |  |            |  |       |                       |  |  |               |  |  |          |     |  |                       |  |       |  |  |  |       | 



| | (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.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cyclical
Nature of Business

As is typical in the automotive industry, our vehicle sales are highly sensitive to general economic conditions,
availability of financing for dealers and retail customers and other external factors, including fuel prices, and as a



37



---

##### Table of Contents

result may vary substantially from quarter to quarter. Retail customers tend to delay the purchase of a new vehicle when disposable income and consumer confidence are low. In addition, our
vehicle production volume 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. These model year changeovers occur
throughout the year consistent with our product plan. Plant shutdowns, whether associated with model year changeovers or other factors, can have an 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 and fleet 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 customers. 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 (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 March 31, |     |   | Increase(Decrease) | 
|                                           |  | 2011                         |     |   | 2010               |  |    
|                                           |  | (units in thousands)         |     |   |                    | 
|Retail                                     |  |                              | 375 |   |                    |  | 265 |   |  |  | 110 |  
|Fleet                                      |  |                              | 110 |   |                    |  | 115 |   |  |  | (5  | )
|                                           |  |                              |     |   |                    |  |     |   |  |  |     |  
|Worldwide Factory Shipments                |  |                              | 485 |   |                    |  | 380 |   |  |  | 105 |  
|Adjust for GDP activity during the period: |  |                              |     |   |                    |  |     |   |  |  |     |  
|Less: Vehicles shipped                     |  |                              | (25 | ) |                    |  | (21 | ) |  |  | (4  | )
|Plus: Vehicles auctioned                   |  |                              | 18  |   |                    |  | 8   |   |  |  | 10  |  
|                                           |  |                              |     |   |                    |  |     |   |  |  |     |  
|Net Worldwide Factory Shipments            |  |                              | 478 |   |                    |  | 367 |   |  |  | 111 |  
|                                           |  |                              |     |   |                    |  |     |   |  |  |     |  

Consolidated Results

The following is a discussion of the results of operations for the three months ended March 31, 2011 as compared to the three months ended March 31, 2010. The discussion of certain expense 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 March 31, 2011 compared to the comparable period in 2010.

Revenues, Net



|              |  |                              |        |  |                    |   |       |  |  |   |               |  
|------------- |  | ---------------------------- | ------ |  | ------------------ | - | ----- |  |  | - | ------------- | -
|              |  | Three Months Ended March 31, |        |  | Increase(Decrease) |  
|              |  | 2011                         |        |  | 2010               |   |      
|              |  | (in millions of dollars)     |        |  |                    |  
|Revenues, net |  | $                            | 13,124 |  |                    | $ | 9,687 |  |  | $ | 3,437    35.5 | %



38



---

##### Table of Contents

Revenues for the three months ended March 31, 2011 increased $3,437 million as compared to the same
period in 2010 primarily due to an increase in our net worldwide factory shipments from 367 thousand vehicles for the three months ended March 31, 2010 to 478 thousand vehicles for the three months ended March 31, 2011, which
accounted for approximately $2.7 billion of the revenue increase. The increase in our net worldwide factory shipments was primarily driven by consumer demand for our 16 all new or significantly refreshed vehicles, for which production launched
during 2010. Typically our vehicles are available for retail purchase two to three months following production launch. In addition, the increase in our shipments was driven by the overall recovery of the U.S. automotive market from the first quarter
of 2010 to the first quarter of 2011, as U.S. automotive vehicle sales increased by 20 percent. Approximately $500 million of the revenue increase was attributable to more favorable pricing of our 2011 and 2012 model year vehicles as compared to the
prior model year and reduced reliance on incentives.

Cost of Sales



|              |  |                              |        |  |                        |  |      |      |  |   |                        |  |  |  |      |   |  |   |               |  
|------------- |  | ---------------------------- | ------ |  | ---------------------- |  | ---- | ---- |  | - | ---------------------- |  |  |  | ---- | - |  | - | ------------- | -
|              |  | Three Months Ended March 31, |        |  | Increase(Decrease)     | 
|              |  | 2011                         |        |  | Percentageof 
Revenues |  |      | 2010 |  |   | Percentageof 
Revenues |  | 
|              |  | (in millions of dollars)     |        |  |                        | 
|Cost of sales |  | $                            | 11,077 |  |                        |  | 84.4 | %    |  | $ | 8,330                  |  |  |  | 86.0 | % |  | $ | 2,747    33.0 | %
|Gross margin  |  | $                            | 2,047  |  |                        |  | 15.6 | %    |  | $ | 1,357                  |  |  |  | 14.0 | % |  | $ | 690    50.8   | %

Fluctuations in our cost of sales are
driven primarily by the number of vehicles we produce and sell. The cost of materials and components make up a majority of our cost of sales, approximately 70 percent in each period. 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 interest, depreciation and amortization expense related to the Gold
Key Lease portfolio and depreciation expense related to our GDP vehicles.

Cost of sales for the three months ended March 31, 2011 increased
$2,747 million as compared to the same period in 2010 primarily due to higher production volumes and an increase in vehicle shipments, which accounted for approximately $2.1 billion of the increase. In addition, approximately $300 million of the
increase in cost of sales was due to additional costs associated with enhanced features and content in our 2011 and 2012 model year vehicles. For the three months ended March 31, 2011, price increases for certain raw materials, particularly
steel, had a negative impact on our cost of sales of approximately $135 million, however we were able to offset this increase with cost savings, principally from commercial renegotiations and technical efficiencies. Our exposure to increases in
steel prices during the three months ended March 31, 2011 was limited because we purchased approximately two-thirds of our steel pursuant to fixed-price contracts. These contracts are scheduled to expire in mid-2011, however we are currently
negotiating new fixed-price contracts with steel suppliers.

Selling, Administrative and Other Expenses



|                                           |  |                              |       |  |                        |  |     |      |  |   |                        |  |  |  |     |   |  |   |             |  
|------------------------------------------ |  | ---------------------------- | ----- |  | ---------------------- |  | --- | ---- |  | - | ---------------------- |  |  |  | --- | - |  | - | ----------- | -
|                                           |  | Three Months Ended March 31, |       |  | Increase(Decrease)     | 
|                                           |  | 2011                         |       |  | Percentageof 
Revenues |  |     | 2010 |  |   | Percentageof 
Revenues |  | 
|                                           |  | (in millions of dollars)     |       |  |                        | 
|Selling, administrative and other expenses |  | $                            | 1,185 |  |                        |  | 9.0 | %    |  | $ | 909                    |  |  |  | 9.4 | % |  | $ | 276    30.4 | %

Selling, administrative and other expenses
include personnel, advertising, warehousing and other costs. The increase in selling, administrative and other expenses during the three months ended March 31, 2011 as compared to the three months ended March 31, 2010 was primarily
due to a $225 million increase in advertising



39



---

##### Table of Contents

expenses period over period. The increase was principally due to the retail launch of 11 new vehicles, which began arriving in dealerships during the first quarter of 2011. Typically,
significant advertising expense is incurred in the initial months that new vehicles are available to customers in the dealerships. The increase in advertising expense is also due to increased spending on brand-focused advertising campaigns in
our efforts to continue to build brand awareness.

Research and Development Expenses



|                                  |  |                              |     |  |                        |  |     |      |  |   |                        |  |  |  |     |   |  |   |            |  
|--------------------------------- |  | ---------------------------- | --- |  | ---------------------- |  | --- | ---- |  | - | ---------------------- |  |  |  | --- | - |  | - | ---------- | -
|                                  |  | Three Months Ended March 31, |     |  | Increase(Decrease)     | 
|                                  |  | 2011                         |     |  | Percentageof 
Revenues |  |     | 2010 |  |   | Percentageof 
Revenues |  | 
|                                  |  | (in millions of dollars)     |     |  |                        | 
|Research and development expenses |  | $                            | 354 |  |                        |  | 2.7 | %    |  | $ | 294                    |  |  |  | 3.0 | % |  | $ | 60    20.4 | %

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, including 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. The increase in research and
development expenses for the three months ended March 31, 2011 as compared to the same period in 2010 was primarily due to increased costs incurred related to joint development programs with Fiat associated with the Compact U.S. Wide
(CUSW) platform, Fiat 500 and various engine and other programs, as well as future mid cycle actions related to our current vehicle portfolio. To support these efforts, we increased our engineering, research and development
headcount by approximately 20 percent from March 31, 2010 to March 31, 2011, while also increasing our temporary contract workers to meet specialized needs.

Interest Expense



|                 |  |                              |     |  |                    |   |     |  |  |   |            |  
|---------------- |  | ---------------------------- | --- |  | ------------------ | - | --- |  |  | - | ---------- | -
|                 |  | Three Months Ended March 31, |     |  | Increase(Decrease) |  
|                 |  | 2011                         |     |  | 2010               |   |    
|                 |  | (in millions of dollars)     |     |  |                    |  
|Interest expense |  | $                            | 348 |  |                    | $ | 311 |  |  | $ | 37    11.9 | %

Interest expense for the three months
ended March 31, 2011 consisted of $308 million of financial interest expense, of which $127 million, $105 million, $28 million and $22 million was associated with our debt obligations to the U.S. Treasury, VEBA Trust, EDC and Canadian Health
Care Trust, respectively. This financial interest expense was partially offset by $35 million of capitalized interest related to certain assets under construction. In addition, interest expense for the three months ended March 31, 2011 included
$58 million of non-cash interest accretion, primarily related to debt discounts, debt issuance costs and fair value adjustments related to obligations assumed in our transaction with Old Carco LLC (Old Carco) in June 2009. Interest
expense for the three months ended March 31, 2011 also included $17 million of payable-in-kind interest associated with the U.S. Treasury Tranche C credit facility.

Interest expense for the three months ended March 31, 2010 consisted of $280 million of financial interest expense, of which $127 million, $102 million and $25 million was associated with our debt
obligations to the U.S. Treasury, VEBA Trust and EDC, respectively. This financial interest expense was partially offset by $42 million of capitalized interest related to certain assets under construction. In addition, interest expense for the three
months ended March 31, 2010 included $56 million of non-cash interest accretion, primarily related to debt discounts, debt issuance costs and fair value adjustments related to obligations assumed in our transaction with Old Carco in June 2009.
Interest expense for the three months ended March 31, 2010 also included $17 million of payable-in-kind interest associated with the U.S. Treasury Tranche C credit facility.



40



---

##### Table of Contents

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) interest and principal payments to the U.S. Treasury and EDC
(including principal repayments totaling $2.5 billion due in December 2011, which we may repay pursuant to our plans to refinance these arrangements as discussed below); (iii) certain payments under the VEBA Trust Note and the Canadian Health
Care Trust Notes; (iv) pension and OPEB payments and (v) payments on capital leases and other financial obligations.

Refer to
Contractual Obligations, for additional information regarding short-term and long-term payments due under our significant contractual obligations and commitments as of March 31, 2011.

Liquidity needs are met primarily through cash generated from operations, including the sale of vehicles and parts to dealers, distributors and other
customers worldwide. In addition, undrawn credit facilities are available as detailed under the caption  Total Available Liquiditybelow. Finally, 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.

As we announced on May 2, 2011, we intend to pursue a refinancing of our U.S. Treasury first lien credit agreement and EDC
credit agreement, through a new senior secured term loan and revolving credit facility of up to $5 billion and an expected issuance of secured debt securities. The net proceeds of these transactions, together with the proceeds from Fiats
exercise of its call option and cash generated from our operations, will be used to fully repay our outstanding loans under the U.S. Treasury first lien credit agreement and EDC credit agreement and terminate outstanding lending commitments under
those facilities, and to pay related fees and expenses. The terms and timing of these transactions remain subject to market conditions and agreement between the Company and prospective lenders and investors, and there can be no assurance that we can
complete these transactions on terms acceptable to us.

The Department of Energy (DOE) is operating a program in which it may
provide up to $25.0 billion in low cost loans to eligible applicants for the costs of re-equipping, expanding, and establishing manufacturing facilities in the U.S. to produce advanced technology vehicles and components for these vehicles. We have
pending with the DOE, a consolidated application for a loan under Section 136 of the Energy Independence and Security Act of 2007 (Section 136 Loans) and are currently seeking $3.5 billion in loans to support certain of our advanced
technology vehicle and component programs. We estimate that we have incurred approximately $1 billion of DOE loan eligible expenditures to date. We are in discussions with the DOE regarding the terms of a potential loan. We will also need to reach
an agreement with the DOE, as well as our current and/or potential lenders with respect to collateral and other matters. There can be no assurance that we will qualify for any remaining Section 136 Loans, receive the amount we are currently
requesting, or be able to successfully negotiate terms acceptable to us, the DOE and our other lenders.

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 in Item 1A. Risk Factors in our Form 10, as amended.



41



---

##### Table of Contents

Total Available Liquidity

At March 31, 2011, our total available liquidity was $12,147 million, including funds available to be borrowed under the U.S. Treasury and EDC credit facilities of $2,270 million. We may access these
funds subject to conditions in the applicable loan agreement, and may use the proceeds for general corporate and/or working capital purposes. 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 table summarizes our total available liquidity:



|                                   |  |                          |        |  |                   |   |       | 
|---------------------------------- |  | ------------------------ | ------ |  | ----------------- | - | ----- | 
|                                   |  | March 31, 2011           |        |  | December 31, 2010 |  
|                                   |  | (in millions of dollars) |       
|Cash and cash equivalents(1)       |  | $                        | 9,877  |  |                   | $ | 7,347 | 
|U.S. Treasury Loan availability(2) |  |                          | 1,716  |  |                   |   | 1,716 | 
|EDC Loan availability              |  |                          | 554    |  |                   |   | 554   | 
|                                   |  |                          |        |  |                   |   |       | 
|Total Available Liquidity          |  | $                        | 12,147 |  |                   | $ | 9,617 | 
|                                   |  |                          |        |  |                   |   |       | 



| | (1) | The foreign subsidiaries, for which we have elected to permanently reinvest earnings outside of the U.S., held $2.2 billion and $1.4 billion, of cash and cash
equivalents as of March 31, 2011 and December 31, 2010, 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, in the future if we determine 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) | Excludes $350 million as of both March 31, 2011 and December 31, 2010, which may be drawn only to fund payments to the U.S. Dealer Automotive Receivables
Transitions LLC (USDART). For a discussion of USDART, refer to Note 10, Commitments, Contingencies and Concentrations, of our accompanying condensed consolidated financial statements.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The increase of $2,530 million in total available liquidity from December 31, 2010 to March 31, 2011, reflects net cash provided from operating
activities of $3,117 million, net cash used in investing activities of $154 million and net cash used in financing activities of $452 million. A significant portion of the change in our total available liquidity is attributable to cash generated
from our operations.

Restricted Cash

At March 31, 2011, we had restricted cash, which includes cash equivalents, of $476 million, including $263 million held on deposit or otherwise pledged to secure our obligations under various
commercial agreements guaranteed by Daimler, $94 million as collateral for foreign exchange and commodity hedge contracts and $119 million for standby letters of credit and other contractual agreements. In January 2011, $167 million of collateral
associated with the Gold Key Lease portfolio was released and was used to repay an equivalent amount outstanding on the Gold Key Lease credit facility.

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 payment 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 would likely be a corresponding positive impact on our cash flow and liquidity. On the other hand, during periods in which vehicle sales decline, there would likely be a
corresponding negative impact on our cash flow and liquidity.



42



---

##### Table of Contents

Cash Flows

Operating Activities. For the three months ended March 31, 2011, we had cash inflows from operating activities of $3,117 million primarily due to: (i) net income of $116 million with
an add back of $763 million in 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 $2,015
million increase in trade liabilities primarily due to increased production, which is consistent with the increase in our worldwide factory shipments in response to consumer demand following the introduction of our new and significantly refreshed
vehicles; and (iii) $374 million in collections from Daimler related to the tax indemnity recoverable.

For the three months ended
March 31, 2010, we had cash inflows from operating activities of $2,386 million primarily due to: (i) net loss of $197 million with an add back of $796 million in depreciation and amortization expense (including amortization and accretion of
debt discounts, debt issuance costs, fair market value adjustments and favorable and unfavorable lease contracts), and (ii) an increase in trade liabilities of $1,263 million primarily due to increased production levels, in order to meet consumer
demand and maintain appropriate U.S. dealer inventory levels.

Investing Activities. For the three months ended March 31, 2011, we
had cash outflows from investing activities of $154 million primarily due to capital expenditures of $559 million. This was partially offset by $199 million of proceeds from disposals of equipment on operating leases. In addition, restricted
cash decreased by $192 million, primarily due to the release of $167 million of collateral which was used to pay down an equivalent amount outstanding on the Gold Key Lease credit facility.

For the three months ended March 31, 2010, we had cash outflows from investing activities of $262 million primarily due to capital expenditures of $580 million, partially offset by $325 million of
proceeds from disposals of equipment on operating leases.

Financing Activities. For the three months ended March 31, 2011, we had
cash outflows from financing activities of $452 million primarily due to repayments of Gold Key Lease obligations of $434 million (Gold Key Lease program proceeds used to fund these payments are included in operating and investing activities).

For the three months ended March 31, 2010, we had cash outflows from financing activities of $623 million primarily due to repayments of
Gold Key Lease financing obligations of $478 million and the repayment of the Chrysler Receivables SPV LLC loan of $123 million.

Net
Industrial Debt and Free Cash Flow

Our Net Industrial Debt decreased by $2,396 million from $5,773 million at December 31, 2010 to
$3,377 million at March 31, 2011. This change was primarily due to a $2,530 million increase in cash and cash equivalents (see Cash Flows above for more detail of cash changes); partially offset by a $134 million increase in Gross
Industrial Debt from December 31, 2010 to March 31, 2011, which was primarily due to amortization of debt discounts and fluctuations in foreign currency exchange rates.

Free Cash Flow for the three months ended March 31, 2011 and 2010 totaled $2,526 million and $1,648 million, respectively, principally due to cash generated from our operations.

For further discussion of Gross and Net Industrial Debt and Free Cash Flow refer to Non-GAAP Financial Measures below.

Tax Indemnity Recoverable

During the
three months ended March 31, 2011, we received $374 million in reimbursements from Daimler related to a tax settlement agreement associated with the Canadian transfer pricing matter.

For further discussion of the tax indemnity recoverable, refer to Note 9, Income Taxes, of our accompanying condensed consolidated financial statements.



43



---

##### Table of Contents

Defined Benefit Pension Plan and OPEB Contributions

In connection with our transaction with Old Carco 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 annual installments, of which $400 million has been received. The final $200 million installment is due to us in June 2011. The carrying value of the receivable at March 31, 2011
was $199 million.

During the three months ended March 31, 2011, employer contributions to our funded pension plans amounted to $42
million. Employer contributions to our funded pension plans are expected to be approximately $296 million for the remainder of 2011. Of the employer contributions, $200 million will be made to the U.S. plans upon receipt of the Daimler receivable
noted above and $96 million is anticipated to be made in cash to satisfy minimum funding requirements for our plans in Canada. During the three months ended March 31, 2011, employer contributions to our unfunded pension and OPEB plans amounted
to $3 million and $76 million, respectively. Employer contributions to our unfunded pension and OPEB plans are expected to be $9 million and $166 million, respectively, for the remainder of 2011, which represents 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.

Non-GAAP Financial Measures

We monitor our operations through the use of several non-GAAP financial measures: Modified Operating Profit (Loss); Modified Earnings
Before Interest, Taxes, Depreciation and Amortization (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 assessment of 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 (U.S. GAAP). These measures should not be used as a substitute for any U.S. GAAP
financial measures.

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 a vehicle lease portfolio we refer to as Gold Key Lease), (iii) add back all pension, OPEB and other employee benefit costs 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.

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



44



---

##### Table of Contents

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. We also use performance targets based on Modified EBITDA as a factor in our incentive compensation
calculations.

The reconciliation of net income (loss) to Modified Operating Profit and Modified EBITDA is set forth below:



|                                                                        |  |                              |       |   |      |   |      |  
|----------------------------------------------------------------------- |  | ---------------------------- | ----- | - | ---- | - | ---- | -
|                                                                        |  | Three Months Ended March 31, |      
|                                                                        |  | 2011                         |       |   | 2010 |  
|                                                                        |  | (in millions of dollars)     |      
|Net income (loss)                                                       |  | $                            | 116   |   |      | $ | (197 | )
|Plus:                                                                   |  |                              |       |   |      |   |      |  
|Income tax expense                                                      |  |                              | 44    |   |      |   | 35   |  
|Net interest expense                                                    |  |                              | 337   |   |      |   | 295  |  
|Pension, OPEB and other employee benefit costs other than service costs |  |                              | (37   | ) |      |   | (14  | )
|Restructuring expenses, net                                             |  |                              | 11    |   |      |   | 21   |  
|Other financial expense, net                                            |  |                              | 6     |   |      |   | 3    |  
|                                                                        |  |                              |       |   |      |   |      |  
|Modified Operating Profit                                               |  |                              | 477   |   |      |   | 143  |  
|                                                                        |  |                              |       |   |      |   |      |  
|Plus:                                                                   |  |                              |       |   |      |   |      |  
|Depreciation and amortization expense                                   |  |                              | 701   |   |      |   | 732  |  
|Less:                                                                   |  |                              |       |   |      |   |      |  
|Depreciation and amortization expense for vehicles held for lease       |  |                              | (7    | ) |      |   | (88  | )
|                                                                        |  |                              |       |   |      |   |      |  
|Modified EBITDA                                                         |  | $                            | 1,171 |   |      | $ | 787  |  
|                                                                        |  |                              |       |   |      |   |      |  

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 are primarily satisfied out of collections from the
underlying securitized assets and out of collections from operating leases, in addition to the proceeds from the sale of leased 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:



|                                      |  |                          |        |  |                          |   |        | 
|------------------------------------- |  | ------------------------ | ------ |  | ------------------------ | - | ------ | 
|                                      |  | March 31,        2011    |        |  | December 31,        2010 |  
|                                      |  | (in millions of dollars) |       
|Financial liabilities(1)              |  | $                        | 13,445 |  |                          | $ | 13,731 | 
|Less: Gold Key Lease obligations      |  |                          |        |  |                          |   |        | 
|Short-term asset-backed notes payable |  |                          | 66     |  |                          |   | 130    | 
|Long-term asset-backed notes payable  |  |                          | 45     |  |                          |   | 43     | 
|Gold Key Lease credit facility        |  |                          | 80     |  |                          |   | 438    | 
|                                      |  |                          |        |  |                          |   |        | 
|Gross industrial debt                 |  | $                        | 13,254 |  |                          | $ | 13,120 | 
|Less: cash and cash equivalents       |  |                          | 9,877  |  |                          |   | 7,347  | 
|                                      |  |                          |        |  |                          |   |        | 
|Net Industrial Debt                   |  | $                        | 3,377  |  |                          | $ | 5,773  | 
|                                      |  |                          |        |  |                          |   |        | 



| | (1) | Refer to Note 8, Financial Liabilities, of our accompanying condensed consolidated financial statements for additional information regarding our financial
liabilities.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



45



---

##### Table of Contents

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 financing.
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 cash available for discretionary activities, as certain debt obligations
and capital lease payments must be funded out of Free Cash Flow. 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 entire 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:



|                                                   |  |                              |       |   |      |   |       |  
|-------------------------------------------------- |  | ---------------------------- | ----- | - | ---- | - | ----- | -
|                                                   |  | Three Months Ended March 31, |      
|                                                   |  | 2011                         |       |   | 2010 |  
|                                                   |  | (in millions of dollars)     |      
|Net cash provided by operating activities          |  | $                            | 3,117 |   |      | $ | 2,386 |  
|Net cash used in investing activities              |  |                              | (154  | ) |      |   | (262  | )
|Investing activities excluded from Free Cash Flow: |  |                              |       |   |      |   |       |  
|Change in loans and note receivables               |  |                              | (3    | ) |      |   | 2     |  
|Financing activities included in Free Cash Flow:   |  |                              |       |   |      |   |       |  
|Repayments of Gold Key Lease financing             |  |                              | (434  | ) |      |   | (478  | )
|                                                   |  |                              |       |   |      |   |       |  
|Free Cash Flow                                     |  | $                            | 2,526 |   |      | $ | 1,648 |  
|                                                   |  |                              |       |   |      |   |       |  

Off-Balance Sheet Arrangements and Guarantees Provided to Third Parties

We have entered into various off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, results of operations or liquidity. These include variable interest entities (VIEs) and guarantees. As of March 31, 2011, we had guaranteed obligations of others with maximum unrecorded exposures of $13 million, primarily
related to guarantees for dealership loans and floor plan financing. For a discussion of our guarantees refer to Note 10, Commitments, Contingencies and Concentrations, of our accompanying condensed consolidated financial statements.



46



---

##### Table of Contents

Contractual Obligations

The following table summarizes our payments due under our significant contractual obligations and commitments as of March 31, 2011:



|                                                      |  |                          |       |  |           |   |       |           |  |   |                    |  |  |   |        |  |  |   |        | 
|----------------------------------------------------- |  | ------------------------ | ----- |  | --------- | - | ----- | --------- |  | - | ------------------ |  |  | - | ------ |  |  | - | ------ | 
|                                                      |  | Payments Due by Period   |       |  | Total     |  
|                                                      |  | Remainder of2011         |       |  | 2012-2013 |   |       | 2014-2015 |  |   | 2016 andthereafter |  | 
|                                                      |  | (in millions of dollars) |      
|Long term financial liabilities(1)                    |  | $                        | 2,671 |  |           | $ | 623   |           |  | $ | 849                |  |  | $ | 10,203 |  |  | $ | 14,346 | 
|Long term asset-backed notes payable - Gold Key Lease |  |                          | 52    |  |           |   | 59    |           |  |   | -                  |  |  |   | -      |  |  |   | 111    | 
|Interest on long term financial liabilities(2)        |  |                          | 875   |  |           |   | 2,072 |           |  |   | 2,084              |  |  |   | 3,163  |  |  |   | 8,194  | 
|Capital lease obligations                             |  |                          | 25    |  |           |   | 51    |           |  |   | 56                 |  |  |   | 139    |  |  |   | 271    | 
|Operating lease commitments                           |  |                          | 119   |  |           |   | 222   |           |  |   | 150                |  |  |   | 253    |  |  |   | 744    | 
|Unconditional purchase obligations                    |  |                          | 322   |  |           |   | 608   |           |  |   | 188                |  |  |   | -      |  |  |   | 1,118  | 
|Other long term liabilities:                          |  |                          |       |  |           |   |       |           |  |   |                    |  |  |   |        |  |  |   |        | 
|Pension contribution requirements(3)                  |  |                          | 296   |  |           |   | -     |           |  |   | -                  |  |  |   | -      |  |  |   | 296    | 
|                                                      |  |                          |       |  |           |   |       |           |  |   |                    |  |  |   |        |  |  |   |        | 
|Total                                                 |  | $                        | 4,360 |  |           | $ | 3,635 |           |  | $ | 3,327              |  |  | $ | 13,758 |  |  | $ | 25,080 | 
|                                                      |  |                          |       |  |           |   |       |           |  |   |                    |  |  |   |        |  |  |   |        | 



| | (1) | The amounts above exclude unamortized debt discounts and fair value adjustments of $1,283 million.
| | --- | --------------------------------------------------------------------------------------------------



| | (2) | Amounts include interest payments based on contractual terms and current interest rates on our debt and capital lease obligations. Interest payments based on
variable rates included in the table above were determined using the current interest rate in effect at March 31, 2011.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Pension contribution requirements are based on an estimate of our minimum funding requirements pursuant to the Employee Retirement Income Security Act
(ERISA) regulations. We expect required contributions to be approximately $296 million for the remainder of 2011. We may elect to make contributions in excess of the minimum funding requirements in response to investment performance and
changes in interest rates, to achieve funding levels required by our defined benefit plan arrangements, or when we believe that it is financially advantageous to do so and based on our other capital requirements. Our minimum funding requirements
after 2011 will depend on several factors, including investment performance and interest rates. Therefore, the table above excludes payments beyond 2011, since we cannot predict with reasonable reliability the timing and amounts of future minimum
funding requirements. Excluded from the table above are payments of $9 million and $166 million due in 2011 with respect to our unfunded pension and postretirement benefit plans, respectively, which represent the expected benefit payments to
participants as costs are incurred.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The table above excludes unrecognized tax benefits on uncertain tax positions of $172
million at March 31, 2011, since we cannot predict with reasonable reliability the timing of cash settlements with the respective taxing authorities. Refer to Note 9, Income Taxes, of our accompanying condensed consolidated financial
statements for additional information.

The table above also excludes payments for product warranty costs. We issue various types of
contractual product warranties under which we generally guarantee the performance of products delivered for a certain period or term. We also periodically initiate voluntary service and recall actions to address various customer satisfaction, safety
and emissions issues related to vehicles we sell. 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. 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. As of March 31, 2011, our product warranty reserves were $3,302
million.

For additional information regarding long term financial liabilities and employee retirement and other benefits, see Note 8,
Financial Liabilities and Note 13, Employee Retirement and Other Benefits, respectively, of our accompanying condensed consolidated financial statements.



47



---

##### Table of Contents

Ally Repurchase Obligation

Under the Ally agreement, we are required to repurchase Ally-financed 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 that have an original invoice date that is more than one year prior to the repurchase date.

As of
March 31, 2011, the maximum potential amount of future payments required to be made to Ally under this repurchase obligation is approximately $6.1 billion and is based on the aggregate repurchase value of all eligible vehicles financed by Ally
in our U.S. dealer stock. If vehicles are required to be repurchased under this arrangement, the total exposure would be reduced to the extent the vehicles are able to be resold to another dealer. The fair value of the repurchase obligation was less
than $1 million at March 31, 2011, 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. This estimate reflects our actual experience. The Ally agreement extends through April 30, 2013, with automatic one-year renewals unless either party elects not to renew.

Refer to Note 10, Commitments, Contingencies and Concentrations, of our accompanying condensed consolidated financial statements for additional information on guarantees we have provided.

Employees

The
following table summarizes the number of our hourly and salaried employees at the respective period ends:



|          |  |                |        |  |                   |  |        | 
|--------- |  | -------------- | ------ |  | ----------------- |  | ------ | 
|Employees |  | March 31, 2011 |        |  | December 31, 2010 | 
|Hourly.   |  |                | 38,933 |  |                   |  | 37,917 | 
|Salaried  |  |                | 14,463 |  |                   |  | 13,706 | 
|          |  |                |        |  |                   |  |        | 
|Total     |  |                | 53,396 |  |                   |  | 51,623 | 
|          |  |                |        |  |                   |  |        | 

In the U.S. and Canada, most of our hourly employees and approximately one-quarter of our salaried employees are represented
by unions under collective bargaining agreements. The United Automobile Aerospace and Agriculture Implement Workers of America (UAW) and the National Automobile Aerospace, Transportation and General Workers Union of Canada
(CAW), represent substantially all of these employees in the U.S. and Canada, respectively.

Our collective bargaining agreements
with the UAW and the CAW expire in September 2011 and September 2012, respectively. Our UAW collective bargaining agreement includes a no-strike provision through 2015. In connection with the renewal of our agreement with the UAW, we are
subject to binding arbitration. Under the arbitration process, if we do not reach agreement with the UAW by September 14, 2011, the arbitrator will set hourly wages and benefits that are at a level comparable to those paid by other
manufacturers in the U.S., including transplant automotive manufacturers.

Recent Accounting Pronouncements

In December 2010, the Financial Accounting Standards Board (FASB) issued an update to the guidance on the

two-step goodwill impairment testing process for reporting units with zero or negative carrying amounts. For

those reporting units, an entity is required to perform the second step of the goodwill impairment test if

qualitative factors indicate that it is more likely than not that a goodwill impairment exists. This guidance is

effective for periods beginning after December 15, 2010 for public entities. We will comply with this guidance in

connection with our goodwill impairment testing during 2011.



48



---

##### Table of Contents

In October 2009, the FASB issued accounting guidance that amends the accounting for multiple-element
arrangements. It addresses how to separate deliverables and measure and allocate consideration to one or more units of accounting. The overall consideration is allocated to each deliverable by establishing a selling price for each deliverable based
on the following hierarchy of evidence: (i) vendor-specific objective evidence, (ii) other third party evidence or (iii) an estimate of the selling price of each deliverable in the arrangement. Both internal and external factors are used to
determine the selling price of each deliverable and revenue is recognized for each deliverable in accordance with our revenue recognition policies. This guidance is effective for revenue arrangements entered into or materially modified in fiscal
years beginning on or after June 15, 2010. We adopted this guidance prospectively on January 1, 2011, and it did not have a material effect on our condensed consolidated financial statements.

Critical Accounting Estimates

The 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, see Item 2. Financial Information  Critical
Accounting Estimatesincluded in our Form 10. There have been no significant changes in our critical accounting estimates during the three months ended March 31, 2011.

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, 2010. Refer to Item 2Financial InformationQuantitative and Qualitative Disclosures about
Market Risk in our Form 10.

Item 4. Controls and Procedures

We have evaluated, under the supervision and with the participation of the Companys management, including our Chief Executive Officer, Chief
Operating Officer and President (CEO) and our Senior Vice President and Chief Financial Officer (CFO), the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) of
the Securities Exchange Act of 1934, as amended (Exchange Act), as of March 31, 2011. Our management, including our CEO and CFO, have concluded that our 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 CEO and CFO to allow timely decisions regarding required disclosures.

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 air bags, 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.

Our material legal proceedings are described in our Form 10, as amended, as well as in Note 10,
Commitments, Contingencies and Concentrations, of the accompanying condensed consolidated financial statements as of and for the three months ended March 31, 2011. There are no material developments and no additional legal proceedings to
report beyond those previously reported in our Form 10.



49



---

##### Table of Contents

Item 6. Exhibits



|              |  |                                                                                                                                                      
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | 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





* Filed herewith.

 Furnished herewith.



50



---

##### Table of Contents

SIGNATURES

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.



|                    |  |     |  |                          
|------------------- |  | --- |  | -------------------------
|Dated: May 13, 2011 |  |     |  | Chrysler Group LLC       
|                    |  |     |  | Registrant               
|                    |  |    
|                    |  | By: |  | /s/ Richard K. Palmer    
|                    |  |     |  | Richard K. Palmer        
|                    |  |     |  | Senior Vice President and
|                    |  |     |  | Chief Financial Officer  



51