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Chrysler Goes Electric


Chrysler says it will have an electric car on the market for 2010 as it angles for its share of $25 billion in government-backed loans

Chrysler, which for months has been fending off chatter that it is only financially treading water until it can be sold to a foreign automaker, unveiled three electric vehicles on Tuesday, the first of which the company says will be offered to consumers in 2010.

Chrysler's announcement and unveiling comes a week after General Motors (GM) showed the production version of its Volt extended-range electric vehicle (BusinessWeek.com, 9/16/08), and on a day when lawmakers in Washington are deliberating whether or not to grant Detroit automakers up to $25 billion in government-backed loans.

Chrysler has been coy about its electric vehicle plans, while GM has been promoting its Volt project for 20 months. And some analysts and many in the media doubted that Chrysler, which was bought by Cerberus Capital Management in August 2007, had the resources to develop state-of-the-art electric vehicles. "We have a social responsibility to our consumers to deliver environmentally friendly, fuel-efficient, advanced electric vehicles, and our intention is to meet that responsibility quickly and more broadly than any other automobile manufacturer," said CEO Bob Nardelli.

21st-Century Cars

Chrysler, like other automakers, needs to develop more fuel-efficient vehicles in order to meet stiffer fuel-economy regulations that kick in in 2015 and get tougher by 2020. It also needs to show Washington lawmakers that it is spending resources to bring 21st-century cars to market.

Congress this week is deliberating over whether to grant carmakers and suppliers a $25 billion loan package to help see the companies through 2009. It's also discussing the language of the legislation that will grant the loans based on automakers making a specific commitment to bringing more fuel-efficient vehicles with smaller carbon footprints to U.S. driveways. Automakers sought $50 billion in loans, and are expected to lobby a new Administration in 2009 for the rest.

Chrysler showed four new electric vehicles: two extended-range electric vehicles that have gas-fed generators to feed electricity to the car when a 40-mile-range battery wears down; an all-electric sports car with a range of 150-200 miles; and a four-door neighborhood-electric-vehicle, which can be used in retirement and closed communities and on streets with speed limits of 25 mph or less.

Chrysler put an extended-range electric system into a Chrysler Town & Country (BusinessWeek.com, 11/21/07) minivan and Jeep Wrangler (BusinessWeek.com, 9/7/07) four-door, rather than developing whole new vehicles around the system as GM did with the Volt. "We felt it was smarter to spend our resources on the battery technology and integration of the systems instead of a whole new vehicle platform," said Vice-Chairman Tom Lasorda. Each vehicle contains a lithium-ion battery, which will take the occupants about 40 miles on an electric charge. After the battery wears down, a gas-power generator moves energy to turn the wheels. Batteries can be charged on household current. The system works similarly to GM's Chevy Volt, which will start selling in late 2010.

Four-Hundred-Mile Trips

The choice of the minivan for an extended-range vehicle is especially surprising. "The minivan is a very efficient way to move seven people around, and families, we believe, especially need the break on energy prices that we think this vehicle will bring," says Chrysler Vice-Chairman James Press.

Between 70% and 80% of all drivers in the U.S. travel less than 40 miles per day, say studies from both Chrysler and GM. Both the Wrangler and minivan will go 400 miles before refueling. But drivers who drive little or have easy access to recharging at home and work may seldom buy gas. "This is the future of driving," says Nardelli. The cost of keeping one of these cars on the road can be less than the equivalent of less than $1 per gallon of gas. "You are going to see especially early buyers of these cars see how long they can go without gassing up…it will be a test for them," adds Press.

Chrysler was short on specifics of the car's cost to consumers, or even which one will appear first. GM says its Volt will probably cost consumers between $30,000 and $45,000 depending on the level of government incentives offered to buyers. "We will be competitively priced," says Lasorda. The vice-chairman was also coy about where the cars will be built. "We are still deciding whether to add the electric production to the existing assembly lines, or put it out to a separate location," he said.

Chrysler, say sources, is in talks with battery maker A123 Systems, which is also partnering with GM on the Volt, as a supplier.

Nardelli maintains that Chrysler has enough liquidity and cash on hand to see it through 2009, but he also said he and other automaker CEOs told Treasury Secretary Henry Paulson, Speaker of the House Nancy Pelosi, and other congressional leadership last week that the loans are "crucial" for achieving the new fuel-economy mandates in such a tough sales environment. The show of future technology is interpreted by many as a showcase gesture to Washington, but it also works to Chrysler's advantage to show other automakers, and potential buyers, that it has state-of-the-art electric technology.

European Start

Chrysler plans to put around 100 electric vehicles into government and business fleets in 2009 for testing. It says it will deliver at least one to a consumer in 2010, with a ramp-up of production in 2011. The company also expects to sell its first vehicle in Europe.

For all the rationality surrounding extended-range electric vehicles, there is also plenty of skepticism. "Battery and final cost is still an issue, but one we think we can overcome, especially with a bit of help from the government on policy and incentives to consumers," says Chrysler's Lasorda.

"Sometimes I think that all the hype around extended-range vehicles can never live up to what we are hearing," says independent marketing consultant Dennis Keene. "The costs are big, but if they can get the first generation of vehicles out at between $30,000 and $35,000, I think that will be enough to get a tsunami of interest started."

Chrysler also showed the press an all-electric rear-drive sports car, which can also be recharged on household current. That car can accelerate from zero to 60 mph in just five seconds. Chrysler's product development chief Frank Klegon said the car might be developed with Lotus, which already plays a major role in an electric car being built by California startup company Tesla Motors. The Wrangler and minivan achieved the same speed in nine seconds.

The Peapod

Chrysler has for years sold GEM-branded neighborhood vehicles, with 40,000 sales since 2001. The new four-door, called Peapod, is expected to expand the market a bit for both retirement communities as well as for suburban and city driving. It has a speed limit of 25 mph and a range of 30 miles on a charge.

Ford Motor (F), which is adding two new hybrid vehicles to its lineup in 2009, has not come forth with any specific launch plans for an all-electric or extended-range electric vehicle. It has instead been concentrating its resources on smaller gas engines for its cars and trucks, as well as bringing smaller cars to the U.S. from Europe. "Hybrids and all-electric vehicles are part of Ford's future, but we aren't ready to talk about specifics yet," says Ford global product development boss Derrick Kuzak.

Click here to read about what it's like to drive one of Chrysler's new electric cars.


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