Chrysler Group LLC, the automaker controlled by Fiat SpA, may report its smallest quarterly loss since emerging from bankruptcy protection, helped by the biggest sales gains among U.S. automakers.

The automaker may report a third-quarter net loss of $129 million Nov. 8, based on the average estimate of four analysts surveyed by Bloomberg. That would be less than the company’s $172 million second-quarter loss and a sign Chrysler is strengthening almost 18 months after emerging from bankruptcy.

“Chrysler may prove to be one of 2011’s most surprising success stories,” Stuart Pearson, an industry analyst with Morgan Stanley, said in a note to investors on Nov. 3. He wrote that he expects a “solid if not spectacular quarter.”

The results for the three months through September will be better than for the first two quarters of the year, Chief Executive Officer Sergio Marchionne said in September, according to remarks posted on the company’s website.

Chrysler’s operating profit may have been $172 million, according to the average of four analysts’ estimates. That would be a 6 percent decline from $183 million in the second quarter.

“We already know that we will make more money in the third quarter than we have made in any quarter so far,” according to the text of Marchionne’s Sept. 14 speech to Chrysler dealers.

Chrysler, which had a $143 million operating profit in the first quarter, already has topped its forecast for as much as $200 million in operating profit for all of 2010.

“Chrysler might have continued to show a stronger cash flow generation than the business plan expectations,” Monica Bosio, an analyst with Banca IMI in Milan, wrote in a note Oct. 25.

During the third quarter, Chrysler sold 293,000 cars and trucks in the U.S., a 20 percent increase from the same period last year, according to Autodata Corp., a Woodcliff Lake, New Jersey-based researcher.

General Motors Co.’s U.S. sales in the quarter declined 5 percent, while Ford Motor Co.’s rose 7.9 percent, according to Autodata.

Ford reported a $1.69 billion profit for the third quarter. GM, which also went through a U.S. government-backed bankruptcy last year, reported preliminary net income of $1.9 billion to $2.1 billion Nov. 3 and said it will hold a conference call to discuss the results Nov. 10.

Chrysler may be becoming too reliant on fleet sales, said Jesse Toprak, vice president of industry trends at TrueCar.com, an automotive pricing website based in Santa Monica, California. The company’s sales to corporations, governments and rental car companies made up 37 percent of its U.S. volume during the third quarter, according to TrueCar.

Until the U.S. automaker’s relationship with Fiat can result in new products, Chrysler will be “highly dependent” on fleet and rental sales, Toprak said. The industry average during that period was 17 percent.

“Anytime you go over 25 percent in total fleet and rental sales that typically starts to diminish overall residual values and has a negative impact on brand image,” Toprak said.

While Chrysler’s reliance on fleet sales shrank from 41 percent in the second quarter, it is higher than the 20 percent level from a year ago, according to TrueCar.

Chrysler, which doesn’t release its mix of retail and fleet sales, has defended deliveries to those customers.

“They pay cash for their vehicles just like anyone else,” Fred Diaz, Chrysler’s lead sales executive, said during an interview on Oct. 22 in San Antonio.

Marchionne, who also is CEO of Fiat, said he objects to those who classify fleet sales as “dirty.”

New Vehicles

Chrysler is relying on fleet customers and lower incentives until the company can introduce new vehicles, said Jessica Caldwell, an analyst with Edmunds.com in Santa Monica, California.

“It seems like they are bridging to a point when they have the product to be more aggressive,” Caldwell said.

Purchasing data from the Los Angeles Department of Water & Power shows how fleet sales can mean lower prices for automakers. The utility purchased 400 of the 2009 Dodge Avenger SXT sedans last year at an average price of $14,868.69, according to the city-owned power provider. The average transaction price of that model for retail customers was $19,684 a year ago, according to Edmunds.

Marchionne has reduced U.S. consumer discounts, with incentive spending falling 21 percent from a year earlier to $3,125 per vehicle during the quarter. Chrysler’s retail business has improved with the introduction the redesigned Jeep Grand Cherokee, Caldwell said.

“It’s good to have a vehicle that’s out there selling in the market, over 10,000 units, and is not really dependent on incentives,” Caldwell said. Last month, U.S. dealers sold 12,721 Grand Cherokees.

The average transaction price of a Chrysler vehicle during the third quarter was $29,350, 6.4 percent more than last year, according to Edmunds.

The U.S. accounted for 73 percent of the company’s global sales, which rose 17 percent from a year earlier to 401,067, according to the company.

Chrysler Group LLC, which is considering refinancing loans from the U.S. and Canadian governments, is looking “at a variety of capital sources,” CEO Sergio Marchionne said.

Marchionne, who also is CEO of Fiat SpA, has said interest on the $7.4 billion U.S. and Canadian government loans has kept Chrysler from earning a profit this year, reported Bloomberg.

“We’re on good track to eventually get rid of this problem,” Marchionne told reporters today in Rome.

Chrysler has contacted banks about borrowing money before a possible initial public offering next year, two people familiar with the effort said last month. Marchionne previously said Chrysler’s board is looking to refinance the government loans as it considers the company’s proper debt level.

The Auburn Hills, Michigan-based automaker has said its effective interest rate on money borrowed from the U.S. government is as high as 14 percent and as high as 20 percent on the Canadian loans.

“We’re working on solutions that are designed to provide stability in the capital structure of Chrysler in the medium to long term,” Marchionne said today. “It’s a relatively complex discussion.”

Chrysler could lower its interest payments by $400 million by refinancing the debt, Stuart Pearson, an analyst with Morgan Stanley, said in a note to investors on Nov. 3.

“We believe refinancing in the capital markets may be possible for Chrysler by mid-2011, by which time it should have a 12-month track record of profitability and cash generation,” Pearson wrote.

Chrysler is scheduled to release third-quarter results on Nov. 8. The company’s second-quarter net loss narrowed to $172 million from $197 million in the first three months of the year. Chrysler ended the second quarter with $7.84 billion in cash.

The U.S. automaker needs to keep a minimum cash balance of about $3 billion for working capital, Moody’s Investors Service said in a November 2009 note.

Chrysler Group LLC, the U.S. automaker run by Fiat SpA, has contacted banks about borrowing money before a possible initial public offering next year, two people familiar with the effort told Bloomberg.

Chrysler owes the U.S. and Canadian governments $7.4 billion and Chief Executive Officer Sergio Marchionne has said interest on that debt has kept the automaker from earning a profit in the first half of this year. Fiat, which he also runs, can’t have a majority stake until Chrysler has repaid the money borrowed as part of last year’s bankruptcy and reorganization.

The third-largest U.S. automaker’s board is looking to refinance U.S. and Canadian government loans as it considers the proper debt level for the company, Marchionne said last week. The company approached banks about valuation and loans in recent months, said the people, who asked not to be identified because the discussions were private.

“What he wants to do clearly is refinance it and take advantage of the extraordinarily low level of interest rates,” Joseph Phillippi, principal of AutoTrends Inc., a consulting firm based in Short Hills, N.J., said in a telephone interview. “Getting the company’s financial footing in a much stronger position is clearly going to benefit him.”

Chrysler, based in Auburn Hills, Mich., has said its effective interest on the money borrowed from the U.S. government is as high as 14 percent and as high as 20 percent on the Canadian loans.

Chrysler Group LLC is recalling 26,397 vehicles, saying a malfunction with the power steering pressure hose may cause steering fluid to leak over a hot engine and cause a fire, Reuters reported.

The affected vehicles include the 2011 Dodge Ram, the 2010 Chrysler Sebring, Chrysler 300, Dodge Charger, Dodge Avenger, Dodge Challenger and Dodge Journey, according to a letter dated Oct. 18 posted on the National Highway Traffic Safety Administration website.

A spokesman for Chrysler, the U.S. automaker controlled by Fiat SpA (FIA.MI), did not immediately comment. The company said in the letter that it was not aware of any injuries or accidents related to this issue.

Chrysler notified U.S. safety regulators of the problem earlier this month. The supplier of the hose is YH America South Carolina LLC.

AUBURN HILLS, Mich. — Chrysler Group LLC is notifying dealers that have been chosen to sell the Fiat brand in the United States, including three from Metro Detroit, reported The Detroit News.

Golling Chrysler Jeep Dodge Ram in Bloomfield Hills; Carl Galeana’s Van Dyke Dodge in Warren and his dealership in Fort Myers, Florida; and David Fischer’s Novi location of the Suburban Collection initially will be the only ones authorized to sell the Italian brand in Michigan.

Chrysler, which partnered with Fiat SpA when it emerged from bankruptcy in 2009, first wants about 165 locations in 119 metro markets as the only product they will have to sell is the tiny Fiat 500 hatchback. The car will be unveiled to the public in November at the L.A. auto show.

But, by the end of 2012, when there are more versions of the 500 as well as additional and larger Fiat models, the plan is to increase the number of dealerships to 200 locations, which could include another Michigan franchise.

Those dealers would also be in line to add the Alfa Romeo brand when it returns to the U.S. market in 2012.

The three Detroit-area dealers have been notified they are part of the original rollout and will prepare their facilities and get ready to take orders for the tiny car that goes on sale in December. A marketing launch is planned for March when production and volumes will have ramped up. So far, Chrysler is still producing pilot versions of the car at its Toluca, Mexico plant, which will soon be followed by models authorized for sale.

The majority of dealers are being notified today. The rest, many of whom had incomplete proposals, will be named by year’s end.

“We have carefully considered each of these dealer proposals looking for the best locations and the most creative plans,” said Peter Grady, Chrysler vice president of network development and fleet operations.

“We are thrilled with their level of interest in securing the Fiat franchise and in the innovative proposals they have submitted. We’re excited to be at the point where we now can start appointing our Fiat dealer network,” Grady said.

About 400 dealers gathered in Detroit on Aug. 30 to learn more about the plans for the Fiat brand and what the automaker requires from its franchises in terms of facilities, staff, training, marketing, inventory and parts. Interested dealers had until Sept. 22 to submit a proposal.

Chrysler says it also will look at proposals from dealers outside the Chrysler network who have expressed interest in a Fiat dealership. They are unsolicited proposals that are being considered, said spokesman Ralph Kisiel. The automaker is not seeking additional proposals.

“We are looking for a customer experience that is as unique and personalized as the Fiat 500 itself,” said Laura Soave, head of Fiat Brand North America. “Some of the proposals are extremely creative, and in many cases, not only met but exceeded our expectation.”

Dealers must have a separate sales area to sell the Fiat 500 but can initially use Chrysler service bays.

The franchises are located in cities with strong, small-car registrations and potential small-car sales growth over the next five years. They represent 37 states and Puerto Rico.

Detroit is the only city in Michigan. Florida, New York and California have the most cities slated to get Fiat dealers.

Projected Fiat volumes are small. Chrysler will build about 120,000 500s annually, and half that for South America. The 500 will be followed by a 500 convertible next year, and electric and performance Abarth versions in 2012.

The Italian automaker stopped selling Fiats here in 1983 and ceased mainstream Alfa Romeo sales in 1995. Sales continue of the more exotic Ferrari and Maserati brands and the low-volume Alfa Romeo 8C sports car.

CLARKSTON, Mich. — For two decades, Chuck Fortinberry made a decent living selling Chryslers and Jeeps in this town 40 miles north of Detroit.

Then last year, as part of Chrysler Group LLC’s bankruptcy reorganization, Chrysler sent a letter informing him that his Clarkston Chrysler Jeep dealership was among 789 dealers the automaker was dropping.

Since then, Fortinberry has been on a journey to salvage something from his business and map out a new future. About 10 miles from his darkened dealership, Fortinberry has opened Ironton Rustic Furniture and Accessories, offering everything from tables and chairs to beds and couches, reported The Wall Street Journal.

“Selling Chryslers wasn’t just my job, this is what I was,” the 54-year-old Fortinberry said. “I was the Chrysler-Jeep dealer in Clarkston. I was the guy you went to when you needed jerseys for your baseball team. There was a lot I had to get through but I knew I had to move on.”

Across the country, hundreds of car dealers are facing the same challenge while struggling with the taxes and other costs of maintaining a large piece of commercial property. Selling the land isn’t an option for many of them, given the poor real-estate market

Last year, 1,603 dealerships closed their doors, most as a result of the Chrysler and General Motors Co. bankruptcies, according to Urban Science, a Detroit-based consulting firm. An additional 309 dealerships went dark in the first eight months of this year.

The closures leave about 18,170 dealerships in the U.S. employing 912,200 workers. More closings are now on tap after Ford Motor Co. last week said it wants to cut 175 of its Lincoln dealers within the next two years.

A dealership’s closure can have a big economic impact in a small town. The average dealership last year employed 49 people and had an annual payroll of $2.4 million, according to the National Automobile Dealers Association. The payroll for all U.S. dealerships last year was $43.5 billion, and represented almost 13 percent of the nation’s total retail-trade payroll, the association said.

Although there are no national studies, auto makers say many of the affected dealers who were already selling other brands have simply carried on by focusing on those remaining makes or by selling used cars.

Chrysler said as many as 85 percent of the 789 dealers it dropped are now selling other car brands. GM offered no estimate of how many of its 1,549 dealers set to lose their GM franchises Nov. 1 might stay in business by selling other brands.