As GM Readies IPO, Chrysler May Be Next

Chrysler believes it can go public next year. CEO Sergio Marchionne, who's also head of Fiat, told reporters that 2010 would be better than the company initially expected. GM has already hinted that an initial public offering (IPO) could come later this year.

In the first-quarter, Chrysler had operating profits of $143 million and revenue of $9.7 billion. But even with these improvements, Chrysler's market share in the U.S. is still well down from three years ago, and its sales rely heavily on fleets and rental car companies. The company's April share of domestic sales was only 9%.

"You cannot viably survive with fleet and rental sales over 50%," Jesse Toprak, vice-president of industry trends for TrueCar, a car pricing and sales service told CNNMoney. "The math just doesn't work."

Energized Rivals

Edmunds, a leading auto industry research firm, also says the loyalty of Chrysler owners is at the bottom of the domestic car industry. In the first quarter of last year, 28% of Chrysler owners bought a new Chrysler when they traded in their old car. That number dropped to 17% in the first quarter of this year. It will be a challenge for the company to find new buyers to replace that significant churn.

Chrysler is competing with a number of brands that have either regained their footing or are picking up market share compared to to last year. After a sharp drop to 12% of the domestic market in February due to recalls, Toyota's (TM) market share rebounded to 17% in April. Hyundai now has 8% of the U.S. market and could pass Chrysler this year.

While it may seem like the U.S. car market is doing well, that's not entirely true. After sales of over 16 million vehicles in the U.S. five years ago, the figure dropped to just above 10 million in 2009. Current estimates are that 2010 American sales will be less than 12 million. That's assuming that the economy doesn't slow down the rest of the year -- a prospect many economists say is becoming more likely because of Europe's economic troubles.

Domestic Disadvantage

Chrysler has one other significant disadvantage as it tries to reach sustained profitability: Its sales are almost entirely in the U.S. The world's largest and fastest-growing car market is China, and Chrysler has only a tiny presence there.

Chrysler management may be bragging that it can go public in 2011, but the prospects of that actually happening look slim.