Chrysler posts quarterly loss as sales lag

Chrysler Group LLC reported a quarterly net loss on Monday, underscoring the pressure on the smallest U.S. automaker from a slack economy and an aging product line-up.

The automaker, which plans an initial public offering next year, said U.S. sales grew 12 percent in the first half of the year, lagging the industry's slower-than-expected growth of nearly 17 percent.

Chief Executive Sergio Marchionne said Chrysler had an "extraordinary amount of work" remaining in its turnaround, but its restructuring was on track.

The automaker, which emerged from a U.S.-government supported bankruptcy in June 2009 under the management control of Italy's Fiat SpA (FIA.MI), said it could raise its financial outlook later this year.

"The real key to Chrysler's long-term viability remains growth in its retail sales," said Charles Moore, managing director at Conway MacKenzie, which provides crisis management and turnaround advice to companies. "That's not going to be based on one quarter or two quarters."

Moore said it will take the next 24 months to see whether the Chrysler product plan is extensive enough to attract new customers.

Chrysler rival General Motors Co GM.UL, which also restructured in a government-funded bankruptcy, is preparing for an IPO possibly later this year.

GM is due to report second-quarter results on Thursday and is expected to show a profit. Ford Motor Co (F.N) posted a $2.6 billion second-quarter profit.

Chrysler said it still expects to at least break even on an operating basis in 2010. It said it was highly likely it would raise its profit and cash-flow projections when it announces third-quarter results.

Ron Bloom, the U.S. Treasury official overseeing the government's investment in the auto sector, said last week that Chrysler was ahead of what the White House-appointed autos task force had expected at this point.

Officials previously said the Obama administration was divided over whether Chrysler could be successfully turned around but gave it a bailout to save jobs and prevent a cascade of failures among auto parts suppliers.

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