Tuesday, August 10, 2010

Chrysler works to get healthy

DETROIT — Chrysler is stanching its losses, seeing increased demand for its cars and trucks and preparing for a major product rollout 14 months after emerging from bankruptcy protection.
But the automaker is far from healthy, and its CEO says Chrysler has more tough work ahead as it tries to make a profit and pay off government loans.

Chrysler Group LLC narrowed its second-quarter loss to $172 million, a $25 million improvement from the first quarter, it said Monday. Revenues climbed 8.2 percent to $10.5 billion. U.S. market share is rising. The company, which was in Chapter 11 for most of the second quarter last year, has made steady progress since being taken over by Italian automaker Fiat SpA in June 2009.

But there's a catch. Many of its sales — Chrysler won't say exactly how many — were to rental-car, government and corporate fleets, which are less profitable than sales to individual buyers. Chrysler has struggled getting individual buyers into its showrooms because of an aging lineup.

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Chrysler CEO Sergio Marchionne said that will change when 11 new or revamped cars come to market between now and the end of the year.

Among them are new versions of the Chrysler 300 and Sebring sedans, revamped minivans and a new Dodge crossover. Chrysler also hopes to lure buyers with the U.S. debut of the Fiat 500, a European mini-car that will compete in the niche occupied by the Mini.

Those models "lay the groundwork for a significant increase in performance in 2011," Marchionne said in a conference call with media and analysts.

Jeep Cherokee gives lift

Chrysler already got a boost from the 2011 Jeep Grand Cherokee, which came out in June and is the first new vehicle released since Fiat took over.

The Jeep has a more fuel-efficient engine and a new suspension system that can rise 10 inches for off-road driving. Reviews have been positive, and sales surged 54 percent in July. Marchionne said Chrysler already has 70,000 orders for the Jeep and may add another shift to the factory that makes it.

"It's the first tangible proof that the work we've been doing here privately for the last 14 months is beginning to bear fruit," Marchionne said.

George Magliano, an auto analyst with IHS-Global Insight, said Chrysler's results were stronger than anticipated, and the company is moving in the right direction. But he's concerned about Chrysler's level of fleet sales and its relatively high incentive spending. A lot rests on the cars and trucks coming to market this fall, he said.

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