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Don't believe everything you hear about Chrysler's sorry state, says Sergio Marchionne.

Chrysler Group LLC, where the Italian-Canadian Fiat boss is chief executive officer, is said to be bleeding horrendous amounts of cash as sinking sales threaten to turn it into a niche auto maker. Its turnaround strategy - a mystery until Mr. Marchionne officially unveils it on Nov. 4 at Chrysler's headquarters in Auburn Hills, Mich. - is bound to be a slow, excruciating process due to a nearly bare product pipeline. The chances of Chrysler making money any time soon are about zero. A second bankruptcy is not out of the question.

Not so, Mr. Marchionne insisted in an interview this week at Fiat SpA's headquarters in Torino. "I'm back, I'm alive and I'm kicking," he said, referring to his view that Chrysler's revival is more real than theoretical in spite of the lack of vehicle development under Chrysler's previous owner, Cerberus Capital Management.

Chrysler is even headed for an initial public offering some time after 2010, Mr. Marchionne said.







Chrysler, he insisted, is already pulling itself out of the mud, only five months after Fiat took a 20-per-cent stake and full management control of the company. "I can see us making money in the next 24 months," he predicted. Any profit would be on an operating level (EBIT, or earnings before interest and taxes), not necessarily net profits.

The earnings will come, he said, "because we have decided not to flog inventory, because we're disciplined about production, because we're going to try not to discount the vehicles. If [discounts are]the only way I can sell them, I'd prefer not to produce them because I'm not making any money."

Chrysler's already depressed sales plummeted again in September. They were down 42 per cent over the same month a year earlier, giving it a mere 8.3 per cent of the U.S. auto market, down from 9.5 per cent at the beginning of the year, according to Autodata Corp.





Speaking to reporters last week in Auburn Hills, outside of Detroit, Mr. Marchionne attributed the sales downturn to the wind-down of the Cash for Clunkers program and reduced incentive spending. "We are not bleeding like people said we are," he said.







Some analysts expect a North American sales rebound. In a note published Wednesday, UBS's auto analysts noted that U.S. auto inventories are unusually low - Chrysler's sits at about 120,000 - and are poised to leap. "We continue to think restocking in the U.S. will be massive," the UBS analysts said. "We forecast a 55-per-cent sequential increase in production in the second half."

In Torino this week, Mr. Marchionne reiterated his vow not to pump Fiat's cash into Chrysler even though Fiat held up relatively well in the downturn, is gaining market share in Europe and is expected to pump out about €1-billion ($1.56-billion) in operating profits this year. "It doesn't need it," he said. Chrysler is "managing their resources well."

Chrysler is thought to have about $7-billion (U.S.) in cash, made up of U.S. and Canadian government bailout money and lines of credit.

Chrysler's product lineup, while thin, is not entirely empty. The all-new Jeep Grand Cherokee SUV, which was in development well before the Fiat takeover, is due to be launched in the spring. The new Chrysler 300 sedan will follow at the end of the year. Several existing Chrysler products will receive "mid-cycle" upgrades.

The hot-selling Fiat 500 subcompact, meanwhile, is to begin production somewhere in the NAFTA trade bloc late next year. The car, which will be branded as a Fiat, is widely expected to come out of Chrysler's assembly plant in Toluca, Mexico, though Mr. Marchionne would not confirm this.

The Nov. 4 event at Chrysler's headquarters will provide full details of Chrysler's five-year production, marketing and financial plan, including the extent of the collaboration with Fiat. While Fiat and Chrysler will remain separate companies, they are expected to reveal a full technological and design merger scenario.

Chrysler's IPO is inevitable because the United Auto Workers union, through its Voluntary Employee Beneficiary Association (VEBA), which owns 55 per cent of Chrysler, has no intention of being a long-term shareholder. VEBA took the non-voting stake in exchange for inheriting health care liabilities from the bankruptcy-bound car company. "It needs to float" on the stock market, Mr. Marchionne said. "VEBA needs to monetize that interest. That was the deal. We owe it to them."

Only the VEBA shares would be floated. Fiat's ownership, which will rise to 35 per cent or more under certain performance conditions, would not be affected by the IPO.

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