Chrysler has been a near-wreck for so many years that the financial community is finding it hard to believe that the carmaker America's third largest is now more profitable than Mercedes, its upmarket German sister marque.

Admittedly, the profit margin at Chrysler, part of Germany's DaimlerChrysler, was still only 2.8 per cent in the third quarter of the year, and it beat Mercedes only because of a dismal performance at the luxury brand.

But Chrysler's achievements should not be knocked. The company, which would have been bankrupt if it did not have billions of dollars pumped into it from Daimler's Stuttgart HQ during the past three years, made a profit when both its larger Detroit competitors fell into the red in carmaking. 'We have become the fastest of the prey,' said Dieter Zetsche, chief executive of Chrysler, who sees the Japanese carmakers as predators. 'In 2007 we want to become one of the aggressors.'

The company has achieved the first phase of an aggressive restructuring plan under which tens of thousands of jobs went in high-cost US factories, almost all of its component production was outsourced and the quality of vehicles produced improved.

But the reason for the big jump in profitability up 74 per cent to operating profits of '321m ($408m) in the third quarter before restructuring charges is the success of its new vehicles.

The new 300 and 300C saloons and the Dodge Magnum estate are selling so well that Chrysler has had to put on a night shift at the Canadian factory that builds them. The cars are the best-selling Chrysler has had for a decade.

This has happened before. Chrysler was rescued in the early 1980s by the popularity of its K-cars and the 1983 introduction of the first minivans (people carriers), which remain some of its most profitable products.

'Chrysler's in its sweet spot at the moment,' says Keith Hayes, motor analyst at Goldman Sachs. 'Everything's going right.'

He points out that the company still has the sales effect of the new Jeep Grand Cherokee and the Dodge Dakota pick-up truck to come, as both have just been launched.

On top of that the company is promising to produce another 16 new vehicles in the next two years, helping renew a product line-up that had been allowed to age. However, rivals are doing the same. General Motors, the biggest of the 'prey' in Detroit, is also launching a series of new models, while Honda and Toyota are preparing to renew their attack. Mr Hayes believes the benefits of updating Chrysler's product range will peak in the middle of next year, and fears that a post-election slowdown in the US economy could hurt the company, which has almost no exports. But Mr Zetsche argues the changes go deep in the organisation, which will help make its turnround sustainable. 'Our processes have changed,' he said. 'We are a different company. Many things are now engrained in our culture: we are not satisfied with good any more.'

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