General Motors Co and Chrysler on Wednesday reported progress in their government-backed turnarounds, while the Obama administration still expects a loss on the taxpayer bailout of the industry although smaller than initially forecast.

GM Chief Executive Ed Whitacre announced at a plant in Kansas that the automaker had fully repaid U.S. and Canadian government loans extended as part of its bankruptcy last year, and said there was a real possibility of an initial public offering this year.

We are moving at GM and improving at a rapid pace, Whitacre said. This is the new pace of GM today. GM's ability to pay back the loans ahead of schedule is a sign that our plan is working.

GM completed the repayment of its loans from the U.S. and Canadian governments by paying the outstanding balances of $4.7 billion and $1.1 billion respectively.

Whitacre was scheduled to meet separately with Treasury Secretary Timothy Geithner and House Speaker Nancy Pelosi on Wednesday in Washington.

Meanwhile, Chrysler posted a $143 million operating profit in the first quarter and was on track to at least break even in 2010 on an operating basis with a stronger cash position.

Chrysler emerged from bankruptcy in June 2009 under the management control of Italy's Fiat SpA . An IPO also is envisioned for Chrysler, although not as soon as GM's.

The better-than-expected progress at GM and Chrysler have materially improved chances the U.S. government will sell its stake in the companies sooner than expected, top White House economic adviser Lawrence Summers said in statement.

In an accompanying government report, overall bailout investments in GM, Chrysler and financing arm GMAC by the Bush and Obama administrations will likely result in some loss.

However, the report added that the Treasury Department anticipates the shortfall to be much lower than forecast last year.

We're not out of the woods by any stretch of the imagination. We have seen improvement, White House spokesman Robert Gibbs said.

In addition to the nearly $7 billion in direct loans to GM, the U.S. Treasury extended $43 billion in bailout cash in 2009 -- for a total $50 billion investment.

The non-debt portion of help for GM was converted into equity during its bankruptcy and represents the 60 percent stake in the company owned by the government.

The potential loss on paper to taxpayers on GM alone was once thought to be as high as $30 billion, according to the White House budget office. The projected shortfall is now under $8 billion, according to market calculations.

Updated projections mainly revolve around an analysis of old GM bonds, which have a claim on new equity and today would be worth about $33 billion to the government, figures show.

Other gains include the $6.8 billion value of the loan repayment and roughly $2.2 billion in preferred stock held by the Treasury.

Chrysler owes the U.S. government nearly $7 billion in loans. Payments on principal are not due until 2011 and full repayment is not expected until 2014.

The rest of Chrysler's aid was converted to equity in the restructured company of which Treasury owns about 10 percent.

Summers said progress by automakers such as GM in repaying bailout funds was a bright spot for economic recovery, though the auto industry and economy have a long way to go to repair the damage from the recession.

The U.S. Treasury noted that the GM loan was repaid five years ahead of time.

We are encouraged that GM has repaid its debt well ahead of schedule and confident that the company is on a strong path to viability, Treasury Secretary Timothy Geithner said in a statement.

The repaying of the GM loans and the completion earlier in April of full accounting for its results since its emergence from bankruptcy in July 2009, were two key steps GM needed to make toward launching an IPO.

Canadian Industry Minister Tony Clement said the risk of job loss was too severe to ignore if the auto industry failed last year.

This was not a decision we took lightly, Clement told reporters.

We look forward to additional announcements ... when it comes to the equity share issue, which of course is not being addressed today, he added.

(Additional reporting by Carey Gillam in Kansas City, David Ljunggren in Ottawa, Tabassum Zakaria and Nancy Waitz in Washington; Editing by Maureen Bavdek and Carol Bishopric)