Nov. 14 (Bloomberg) -- Lee Iacocca, credited with turning around near-bankrupt Chrysler Corp. in the 1980s, said the newly private U.S. carmaker is ``on the right path'' with owner Cerberus Capital Management LP.

``They've got real problems yet. It's not solved, but it's looking up,'' Iacocca, 83, said in an interview late yesterday from his Los Angeles home. Under Robert Nardelli, the current chairman, Chrysler ``is on the right path for sure,'' he said.

Chrysler LLC, the third-largest U.S. automaker, last month secured a four-year contract with union employees that creates a trust to take over the company's retiree health-care obligations in exchange for an $8.8 billion contribution and trims entry- level wages for new workers. The company, passed in the U.S. by Toyota Motor Corp. last year, also is cutting factory jobs and poor-selling models from its lineup to become more competitive.

Cerberus acquired 80.1 percent of Chrysler from former parent Daimler AG in August, investing $7.4 billion. Chrysler's U.S. sales fell 3.5 percent this year through Oct. 31.

Iacocca retired from Chrysler in 1993. His comments came after he endorsed New Mexico Governor Bill Richardson, a Democrat, in the 2008 U.S. presidential campaign. Both Iacocca and Richardson said the U.S. needs a universal health-care system to help automakers and other companies.

Chrysler, General Motors Corp. and Ford Motor Co. ``need assistance on health care. Health costs are what's killing them,'' Iacocca said.

Plug-Ins

U.S. automakers also need to develop plug-in hybrid vehicles to boost fuel economy and reduce carbon dioxide emissions, he said.

``Plug-in hybrids: that's the wave of the future, not hydrogen,'' Iacocca said.

Proposed plug-in models would use advanced lithium-ion batteries recharged at household outlets to provide extended electric motor driving range before an engine powered by gasoline or other fuel engages.

Toyota this month began testing prototype plug-in Prius hybrids at the University of California's Irvine and Berkeley campuses. GM has said it wants to sell a version of its Volt plug-in with at least 40 miles (64 kilometers) of battery-only range by as early as 2010.

To contact the reporters on this story: Alan Ohnsman in Tokyo at aohnsman@bloomberg.net; Peter Cook in Washington at pcook6@bloomberg.net

Last Updated: November 13, 2007 23:38 EST