DETROIT — DaimlerChrysler AG officials warned yesterday that Auburn Hills, Mich.-based Chrysler Group is in the midst of a downturn, but they said the division's fortunes will improve late this year as eight new vehicles hit the market.

DaimlerChrysler as a whole reported net income of $2.3 billion for the second quarter, more than double what it made in the quarter last year. The improvement was attributed primarily to increased sales and profits at the Mercedes Car Group.

The Chrysler Group, though, struggled to make money in the second quarter with a $65 million operating profit, just one-tenth of what it made in the second quarter last year.

Executives said the Chrysler Group could lose as much as $600 million in the third quarter, which would be its first quarterly loss since the second quarter of 2003.

The Chrysler Group has eight new models, including a redesigned Chrysler Sebring and all-new Jeep Patriot compact SUV, coming out later this year. It is banking on these new vehicles to reduce its reliance on incentives.

"We believe they will stabilize, and more importantly, in the fourth quarter, we'll see them coming down based on the new launches," Chrysler Group Chief Executive Tom LaSorda said of incentives.

Chrysler Group officials said this year they do not expect significant employee reductions, but LaSorda said yesterday he would not rule out buyouts. "We're going to study all of our alternatives to reduce costs and generate revenue," he said.

The Chrysler Group was on a roll for the past two years, increasing sales and profits, but it has a history of dramatic financial swings.

Chrysler Group workers are hopeful that management has a plan to ensure the automaker does not slip further, said Dennis Proffitt, 50, a skilled tradesman at the Chrysler Group's Trenton Engine Plant.

"In my 30 years, I've seen a lot of things going up and down," Proffitt said. "We're always hoping things will be different the next time we go though another change."

DaimlerChrysler officials addressed the issue head-on in yesterday's earnings conference call.

"No doubt, we are definitely not happy about the forecast," said Dieter Zetsche, DaimlerChrysler's chairman.

But DaimlerChrysler executives said the Chrysler Group is well-positioned to bounce back.

In the short term, the Chrysler Group will cut production to bring down mounting inventories. It's also pushing for a healthcare deal with the UAW similar to those reached earlier this year by General Motors Corp. and Ford Motor Co. that shifts more costs to workers and retirees.

The Chrysler Group is probably in a lull, not a long-term financial slide, said Gary Ran, chairman and chief investment officer for Telemus Capital Partners LLC, a Southfield-based investment firm.

But the division needs its new vehicles to do well because current hits, such as the 300C and Charger, could be running out of steam, he said.

"If they don't sell some cars, you can't scale that business back fast enough to remain profitable," Ran said. "There is pressure on them to roll out new models."

Zetsche, who led the Chrysler Group from 2000 to 2005 before taking over the DaimlerChrysler chairmanship this year, said the Chrysler Group will rebound.

Proffitt, the Trenton Engine worker, said he has faith this downturn will be short-lived.

"If you have the product, you have the sales, and then you have the financial growth," Proffitt said.