With Chrysler’s new owners Cerberus Capital Management making the hard and fast decisions, the carmaker is now on track to return to profitability. Even with the worsening U.S. economy and fluctuating exchange rates and commodity prices, CEO Bob Nardelli is confident Chrysler will be profitable within the next couple of years despite predictions the market will remain sour.

Analysts expect U.S. auto sales to fall to 15.5 million cars this year, down from 16.1 million last year, but despite his Nardelli told reporters from the Financial Times that Chrysler is “on the appropriate slope to deliver to its investors.”

Chrysler lost more than $1 billion in 2006 and its 2007 result is predicted to be a $1.6 billion loss. To turn around its fortunes Chrysler is investing heavily in improving its products. It’s already announced that it plans to bring innovations to market as soon as they’re available instead of waiting for model updates, and management will be spending $3 billion on new engines, transmissions and axles over the next couple of years to create more fuel efficient drivetrains. The first big-ticket items will be a new dual-clutch transmission and the Phoenix V6 engine. Vehicles equipped with ultra-clean BLUETEC diesel engines are also in the pipeline as are several hybrid vehicles.

Chrysler is also forming strategic alliances with a number of carmakers including Nissan and China’s Chery Auto, which supply Chrysler with whole vehicles to help expand its lineup.

At this week’s New York Auto Show Chrysler revealed its full Dodge Challenger lineup, a new halo model that will bring crowds to showrooms.

2009 Dodge Challenger lineup