- Associated Press - Monday, August 9, 2010

DETROIT (AP) — A year after emerging from bankruptcy protection, Chrysler is stanching its losses and seeing demand for its cars and trucks rise. But it’s far from healthy, and its CEO says the company has more tough work ahead.

Chrysler Group LLC said Monday that growing car and truck sales helped it narrow its second-quarter loss to $172 million, compared with a first-quarter loss of $197 million.

The United States and Canada are Chrysler’s primary markets, and both have seen higher demand for cars and trucks since a recession-driven slump last year.

Chrysler’s revenues rose 8.2 percent to $10.5 billion compared with the first quarter, largely because of a jump in sales. But many of those sales were to rental-car, government and corporate fleets, which are less profitable than sales to individual buyers.

Chrysler was in bankruptcy protection for much of the second quarter last year. Since leaving Chapter 11 last June, it has been run by Italian automaker Fiat SpA.

Chrysler got a boost in the past few months with the release of the 2011 Jeep Grand Cherokee, the first new vehicle Chrysler has released since Fiat took over. It plans more than a dozen new and refreshed car and trucks in the latter half of 2010. They include a revamped Chrysler 300 sedan and the U.S. debut of the Fiat 500 minicar, a small car Chrysler hopes will catch on with Americans.

Chrysler’s U.S. market share has climbed to 9.4 percent, but that’s still below the 12.9 percent in the second quarter of 2007, the last time the company reported second-quarter results.

Chrysler posted an operating profit of $183 million in the March through June period, up 28 percent higher from the first quarter.

“Chrysler Group is on track to achieve its goals, yet an extraordinary amount of work still lies ahead,” Chrysler CEO Sergio Marchionne said in a prepared statement. He called 2010 “a year of transition and stabilization.”

There is some weakness behind Chrysler’s numbers. According to data obtained by the Associated Press, a large percentage of its U.S. sales are going to low-profit rental-car companies and government and commercial fleets.

It was the only major automaker to see a drop in retail sales — or non-fleet sales to individual buyers — in the first six months of the year. Retail sales rose 11 percent on average for the industry, but Chrysler’s dropped 21 percent.

Chrysler also has a stigma, in some buyers’ minds, because it accepted $15.5 billion in bailout money from the U.S. and Canadian governments. Chrysler, which already has paid off $3.9 billion in government debt, has said it expects to fully repay its government by 2014.

Rival General Motors Co. may end up paying off its own government loans faster. GM, which took $50 billion in aid, reported a first-quarter profit of $865 million and is expected to post a second-quarter profit later this week. It plans to file paperwork soon for an initial public offering that would pay off much of its government debt.

Mr. Marchionne has said Chrysler could have an IPO as soon as next year to pay off some of its debt.

Chrysler’s other chief U.S. rival, Ford Motor Co., didn’t take government aid and recently reported a $2.6 billion quarterly profit, its fifth straight.

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