Chrysler Group LLC, the U.S. automaker majority owned by Fiat SpA, reported third-quarter net income of $212 million and boosted its 2011 profit forecast.

The profit compares with a net loss of $84 million during the same July-to-September period last year, the Auburn Hills, Michigan-based automaker said today in a statement. The average estimate of three analysts surveyed by Bloomberg was for net income of $211 million.

Chrysler raised the forecast for its first annual profit to about $600 million from its previous projection for this year of $200 million to $500 million, excluding costs associated with paying back U.S. and Canadian government loans. A lineup of redesigned or refreshed vehicles, including the Jeep Grand Cherokee sport-utility vehicle, Chrysler 300 sedan and Dodge Journey SUV, are helping drive the automaker’s growth.

“This house continues to be fully focused on financial performance and making outstanding cars and trucks by fully leveraging its alliance with Fiat,”Sergio Marchionne, chief executive officer of both automakers, said in the statement.

The majority of Chrysler’s revenue comes from U.S. sales, which rose 26 percent during the third quarter compared with the same period last year, according to researcher Autodata Corp. Industry sales rose 5 percent during the third quarter. Chrysler’s U.S. sales increased 23 percent to 1 million this year through September, boosting market share by 1.1 percentage points to 10.6 percent, according to Autodata.

“Their share performance in the third quarter of 2011 was out of the box,” Warren Browne, vice president of business development at AutomotiveCompass LLC, said in an e-mail. “Their Achilles’ heel: Developing a much more credible position in the passenger-car business. The next generation with Fiat should help this.”

Marchionne pulled back on customer discounts by reducing incentive spending 6.4 percent to $3,434 on average per vehicle, according to Autodata. The industry average was $2,618 during the third quarter.

Consumer Reports said Oct. 25 that the three Chrysler brands it rated improved in the Yonkers, New York-based publication’s annual auto reliability survey. The Jeep brand, boosted by the new Grand Cherokee SUV, was the highest-ranked U.S. brand, finishing No. 13 out of 28.

Chrysler’s ability to sell more cars with less money spent on incentives is “a dream scenario for any automaker,” said Jesse Toprak, an industry analyst with TrueCar.com, a website that tracks automotive sales.

“Chrysler now has a better understanding of matching true consumer demand with their supply,” said Toprak, who is based in Santa Monica, California.

Third-quarter net revenue rose 19 percent to $13.1 billion. Third-quarter modified operating profit, a measure that excludes items such as taxes, interest and pension-related costs, more than doubled to $483 million, the company said.

While Chrysler’s sales are rising at a faster rate than the U.S. market, the global pace is missing Marchionne’s target for the year. Chrysler’s worldwide sales rose 21 percent to 1.38 million through the third quarter, trailing the 32 percent increase Marchionne sought for 2011.

Marchionne merged senior leadership of Chrysler and Fiat in the third quarter to create an executive council that oversees both companies. The “group executive council” of 22 managers includes the CEO, Fiat said in a July 28 statement.

Chrysler had $9.45 billion in cash on hand at the end of September, down from $10.2 billion at the end of June, according to the statement. Chrysler also revised its 2011 forecast for free cash flow to $1.2 billion from $1 billion.

The United Auto Workers yesterday ratified a new four-year labor contract with Chrysler. The agreement pays Chrysler’s 26,000 U.S. union workers a $3,500 signing bonus, half of which is contingent on meeting financial targets. The accord also raises entry-level worker pay without giving higher-paid senior workers a wage increase.

Fitch Ratings lowered Fiat’s credit rating one level on Oct. 18, citing concerns that the combination with Chrysler will increase financial risk for the Italian automaker. Fitch rates Fiat at BB, two levels below investment grade. Moody’s Investors Service and Standard & Poor’s both have a negative outlook on their ratings of the Turin, Italy-based automaker.

Fiat said today that earnings before interest, taxes and one-time items, which the company calls trading profit, rose to 851 million euros ($1.21 billion) from 256 million euros a year earlier. Profit beat the 696 million-euro average estimate of eight analysts in the quarter, the first in which Chrysler’s results were consolidated.

Marchionne has struggled so far in bringing the Fiat brand back to the U.S. after a near 30-year absence. Laura Soave, head of the Fiat brand in the U.S., said in August that Chrysler probably won’t hit its sales goal of 50,000 Fiat 500 small cars in North America. Chrysler’s rollout was hampered by a slower- than-expected opening of new Fiat stores.

Fiat rose 4.5 percent to 5.10 euros at the close of Milan trading. The shares climbed as much as 7.2 percent earlier.

Fiat is moving to raise its ownership stake in Chrysler to 58.5 percent this year after paying back U.S. and Canadian loans and buying out the taxpayers’ shares.

Without spending any cash, Fiat gained 20 percent ownership of Chrysler through the U.S. automaker’s 2009 bankruptcy reorganization. By exercising purchase options at a cost of $1.97 billion and meeting certain performance milestones, Fiat has obtained 53.5 percent of Chrysler on a fully diluted basis.

Marchionne has said he expects to meet the third and final milestone, tied to Chrysler assembling a 40 mpg vehicle in the U.S., by the end of the year, granting it an additional 5 percent stake.

The Detroit-based UAW’s retiree health-care trust is Chrysler’s other owner.