Chrysler could raise its financial targets for 2010 in the second half of the year and aims for a public offering of its stock as quickly as possible, Chief Executive Sergio Marchionne said on Monday.

Chrysler, which surprised analysts with a first-quarter operating profit last month, is well ahead of its cash flow and earnings targets and there is a strengthening basis for the company launching a stock sale in a much shorter timeframe than most would expect, Marchionne said.

It is clear that if we continue to perform at this rate we're going to be in excess of the guidance that was provided in 2009, Marchionne said in a conference call to review Chrysler's first-quarter financial results.

We are not going to revise those numbers until the end of the third quarter. We want to see how well the second quarter performs, we want to see how well the Grand Cherokee performs in the marketplace, he said.

The Grand Cherokee, a crossover for Chrysler's Jeep brand, will launch in June and stands as the only all-new model that the automaker developed on its own and will have on the market during 2010.

Marchionne, who heads both Chrysler and Italy's Fiat SpA, also said that the No.3 U.S. automaker is working on a Fiat-designed subcompact car that could hit showrooms in the fourth quarter of 2011.

Chrysler is counting on a new generation of Fiat-based small cars and fuel-efficient vehicles, starting with the 500 small car in December, to revitalize its lineup starved of investment under previous owners Daimler AG (DAIGn.DE) and Cerberus Capital Management.

Returning the 85-year-old Chrysler to profitability could pave the way for Fiat to launch an initial public offering of the U.S. carmaker, which was down to its last dollars before some $14 billion in U.S. taxpayer funding. The U.S. Treasury has an 8 percent equity stake.

Chrysler, which emerged from a U.S. government-funded bankruptcy in June under management control of Fiat, posted a $143 million first-quarter operating profit propelled by big cost-cutting and higher U.S. retail sales and truck volumes.

The results provided the first full account of Chrysler's performance since it emerged from bankruptcy and underscored the behind-the-scenes work Chrysler has undertaken under Fiat, which acquired an initial 20 percent stake in Chrysler in return for providing Chrysler with its small car platforms. Fiat's stake can increase to 35 percent as it meets restructuring goals.

Marchionne said Chrysler's first-quarter results showed that previous financial projections for 2010, especially cash flow, were highly conservative.

Chrysler has forecast negative cash flow of $1 billion for 2010 and earnings before interest, tax, depreciation and amortization of between $2.5 billion to $2.7 billion. It expects to at least break even on an operating basis in 2010 and on a net level in 2011.

Marchionne said Chrysler was working to ready itself for both an initial offering of stock and to refinance a portion of its $12.7 billion in debt.

We'll do it as quickly as we can, Marchionne said of Chrysler's IPO plans, adding that the timing depends on the strength of the stock market and Chrysler's own performance.

Chrysler's net losses totaled nearly $4 billion since it emerged from bankruptcy, and the automaker faces an uphill battle in stabilizing U.S. sales while it races to revamp an aging lineup that has relied on less fuel-efficient trucks and SUVs.

Through the first four months of the year, Chrysler's U.S. sales rose 3 percent, lagging the 21 percent rise in industry sales.

Marchionne is counting on the Grand Cherokee, Chrysler's first all-new vehicle since bankruptcy and the first test of its revamped lineup and manufacturing system, to drive the automaker's sales through the second half of the year.

It's a big quarter for us, Marchionne said. The vehicle is scheduled to roll off the line at the Jefferson North assembly plant in Detroit this weekend.

(Reporting by Soyoung Kim and Kevin Krolicki; editing by Dave Zimmerman and Tim Dobbyn)