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The Associated Press October 26, 2011, 4:21PM ET

Earnings Preview: Chrysler profit seen as sales up

Chrysler Group LLC reports third-quarter earnings on Friday and most likely will post its second quarterly profit since 2006. Sales in the U.S., by far Chrysler's largest market, rose during the quarter, and its average sale price also was up. Both are strong signs of a healthy profit.

WHAT TO WATCH FOR: Chrysler's revenue and earnings are likely to increase from a year earlier. Its sales rose 26 percent from July through September on strong performances from the revamped 200 midsize sedan and the new Jeep Grand Cherokee sport utility vehicle. The company also saw its average sale price rise 4.5 percent for the quarter to $30,387, according to the automotive website. Chrysler's share of the U.S. market increased to 11.6 percent last quarter, up from 9.7 percent a year ago.

In the first half of the year, Chrysler lost $254 million, but that was mainly due to a $551 million second-quarter accounting charge for refinancing government loans. The company posted its first quarterly net profit since 2006 in the first quarter, $116 million.

Chrysler and its financing arm needed $12.5 billion from U.S. taxpayers to survive as the 2009 recession hampered auto sales and brought the company to the brink of collapse. Of the original Chrysler bailout, $11.2 billion has been repaid. The U.S. Treasury Department says it won't recover the remaining $1.3 billion.

Chrysler still expects to earn $200 million to $500 million this year, excluding the debt repayment expense. It has predicted revenue of $55 billion for the year.

WHY IT MATTERS: The downsized Chrysler still employs 56,000 people worldwide, and its parts suppliers employ thousands more. The company wants to put together a string of profitable quarters to impress investors. It plans to sell stock to the public, perhaps sometime next year. Italian automaker Fiat SpA owns more than half the company, with the rest owned by a trust fund that pays health care bills for Chrysler retirees. Fiat also reports earnings on Friday.

EXPECTATIONS: Joe Phillippi, president of AutoTrends Consulting in Short Hills, N.J., and a former Wall Street analyst, said Chrysler should have a strong third quarter due to rising sales and prices, and because it didn't have any significant expenses for rolling out new products. Auto companies typically have higher expenses in the third quarter for research, manufacturing and marketing costs from unveiling cars and trucks for a new model year. But Chrysler rolled out new and revamped models in 2010 and the first half of the year.

"The second half should mark a significant turnaround in terms of the profits and losses," he said. "They should definitely fall within the range they forecast."

LAST YEAR: In the third quarter a year ago, Chrysler lost $84 million on revenue of $11 billion.

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