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An Improved Chrysler Is About to be Tested

Give Chrysler CEO Sergio Marchionne and his management team credit. The patient is no longer on it's death bed. In fact, if you look at Chrysler's second quarter financial results you see a nice improvement.

Sure, the company is still losing money ($172 Million), but that's an improvement over the first quarter and it once again posted an operating profit ($183 Million). Meanwhile, it's cash position jumped to $7.8 Billion. Thanks to an improving auto market and higher volumes, Chrysler is doing better.

Sergio Marchionne
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Sergio Marchionne

But don't be fooled. These numbers show a company that has been stabilized. As Marchionne himself will point out, the American automaker still has a long ways to go. Which is why the second half of this year will be critical to the Chrysler turnaround.

Between now and the end of the year Chrysler will roll out 15 new and refreshed models, to join the revamped Jeep Grand Cherokee. These are the horses Chrysler needs to ride if its sales (and profits) are going to improve.

If Chrysler does as as well with these new models as it has done so far with the Grand Cherokee, then the second half will be the inflection point people have been waiting for.

The Grand Cherokee is a dramatic improvement over the old model, and the early reception has been solid. Now the company needs to get the same reaction from the Jeep Compass, Jeep Patriot, Dodge Caliber and Jeep Wrangler refreshments. But that's just the start, before the end of the year, we'll see a new Dodge Durango and the first versions of the Fiat 500 will start rolling into dealerships. That's a lot of new product in a short period of time.

But in many ways, the new models can't come soon enough. Have you visited a Chrysler dealership in the last six months? These guys are starved for new products. In the last three years they've been trying to win over buyers with big incentives, and little else. So as Ford and General Motors dealers have had a steady supply of new models to attract customers, Chrysler dealers have had to sit and wait.

So while it's encouraging to see Chrysler improving its balance sheet, lets keep it in perspective. Until now, the challenge for Chrysler has been stemming the losses and setting the stage for a comeback.

Starting later this month and then through the end of the year, we'll see whether Chrysler has the goods to once again show American buyers they should keep the smallest of the big three on their shopping list.

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