(June 15, 2010) Chrysler is generating the cash needed to rebuild its product portfolio as sales continue to gain momentum, CEO Sergio Marchionne told employees last week.

Marchionne, in an e-mail to employees on the one-year anniversary of Chrysler's emergence from bankruptcy, said the company's alliance with Fiat is "taking root" by cutting costs and expanding revenue from outside of North America, Reuters news service reports.

Chrysler emerged from a U.S. government-sponsored bankruptcy on June 10, 2009, under management control of Fiat, which has a 20 percent stake in the U.S. automaker. In return, Fiat is providing Chrysler with fuel-efficient engines and technology.

"We are generating the cash needed to build our brands and invest in products," Marchionne said in the memo, a copy of which Reuters obtained.

"Our sales are building momentum, with substantial year-over-year increases in the past two months," he said.

Whether Chrysler has the cash to revamp its aging lineup dominated by trucks and SUVs has been the question surrounding Marchionne's ambitious five-year turnaround plan for Chrysler.

Chrysler is counting on a new generation of smaller, Fiat-based autos and fuel-efficient vehicles to revitalize its lineup.

Its U.S. sales for the first five months of this year were up 8 percent over the same period last year. Its May sales were up 33 percent from the same month last year.

Chrysler surprised analysts with a $143 million, first-quarter, operating profit driven by cost-cutting and higher sales volume.

"There is still a very long road ahead in our drive to rebuild our business and to deliver on our promises to repay the American and Canadian taxpayers who gave us a second chance," Marchionne said.