Chrysler reported a $172 million net loss for its second quarter on Monday as the smallest of Detroit’s automakers continues to struggle against foreign competition and its more-successful rivals.

However, net revenue did increase 9.7% in the quarter amid some higher fleet purchases by governments, rental car companies and other agencies.

Chrysler’s net loss was primarily because of net interest the automaker had to pay on U.S. government loans. Without the interest payment, Chrysler would have earned $183 million, an improvement of $40 million from the quarter before.

“The second quarter operating profit confirms that Chrysler Group is on track to achieve its goals, yet an extraordinary amount of work still lies ahead,” said Sergio Marchionne, CEO of Chrysler Group, in a statement. ““2010 is seen as a year of transition and stabilization.”

The company reduced some of its debt and achieved positive cash flow of $474 million, bringing its total cash on hand to $7.84 billion versus $7.37 billion the quarter before.

Chrysler did post a modest vehicle sales increase in the quarter, but the rise was primarily because of bulk fleet sales which typically are of a lower profit margin than retail-based models.
Retail did not fare well, posting a sales decrease from a year ago as the company’s competitors Ford (NYSE:F) and General Motors saw those segments rise.

Chrysler kept its full-year guidance of breakeven results but said the guidance would probably be upwardly revised after the company reports third-quarter results.