width=398Chrysler Group LLC posted 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 IPO next year, saw U.S. sales growth of 12 percent in the first half of the year, lagging the industry's nearly 17 percent growth.

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

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

Chrysler's rival General Motors Co GM.UL, which was also restructured in a government-funded bankruptcy, is preparing for an IPO possibly later in 2010.

GM will report second-quarter results on Thursday and is expected to show a profit. Ford Motor Co posted a $2.6 billion second-quarter profit.

Chrysler said it still expected to at least break even on an operating basis in 2010, but it was likely to raise that outlook 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 where the White House-appointed autos task force had expected at this point.

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

The No. 3 U.S. automaker said its net loss narrowed to $172 million in the second quarter from $197 million in the first quarter. The year-earlier quarter included only a few weeks of the operations of the new Chrysler.

Revenue rose 8 percent to $10.5 billion in the second quarter from the first three months of 2010. Operating profit rose $40 million from the first quarter to $183 million.

The increase in the operating profit for the second quarter came mainly from increased production and was partly offset by higher incentives and costs related to the roll-out of the new Jeep Grand Cherokee.

The Grand Cherokee is the first new product released by the new Chrysler, which had slashed investment in new products under former owners Daimler AG and investment fund Cerberus Capital Management CBS.UL.

That move, intended to save cash during the downturn in U.S. auto sales that began in 2008, left Chrysler in a weakened position against its competition in an industry that relies on refreshed and new models to drive showroom traffic.

The No. 3 U.S. automaker said it had $7.8 billion in cash at the end of the second quarter and total available liquidity stood at more than $10 billion when including an available $2.3 billion in government loans.

Chrysler's current financial forecast is for 2010 net revenue of $40 billion to $45 billion. It expects to burn about $1 billion in cash during the year.

(Additional reporting by Bernie Woodall