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Chrysler's electric surprise jolts analysts

October 09, 2008

Chrysler LLC used unmarked test cars, a secret budget and an engineering skunk works to pull off last month's surprise unveiling of three electric vehicles, thrusting itself into the competition between General Motors Corp. and Toyota Motor Corp. for fuel-efficiency bragging rights.

With a mandate from then-chief executive Tom LaSorda to produce working prototypes by this summer, Chrysler in January 2007 plucked designers and engineers from around the company to work in a secluded area of the automaker's Auburn Hills, Michigan, headquarters, said Doug Quigley, the chief engineer on the project.

"We were completely shocked here," when Chrysler announced the vehicles on Sept. 23, said Tracy Handler, an automotive product analyst at Global Insight Inc. in Troy, Michigan. "And probably skeptical a little bit as to how real these are."

Until the announcement, Chrysler rarely figured in industry electric-car buzz, dominated by GM's Chevrolet Volt, due in 2010, and Toyota's planned plug-in version of the gasoline-electric Prius, which has helped the Japanese automaker snare 77% of the U.S. market for hybrid vehicles.

Chrysler's initial electric-car fleet consists of a Jeep Wrangler, Town & Country minivan and a two-seat sports car called, for now, the Dodge EV, based on a Group Lotus PLC Europa design.

2010 Target
Reporters at the event were able to test-drive a Wrangler sport-utility vehicle and a yellow two-seater on a test track behind company headquarters. An electric minivan was on display. One of the three models will be on sale in 2010, Chrysler said.

Developing prototypes is one thing. Whether a money-losing automaker one-quarter the size of GM and Toyota can assemble competitive advanced electric vehicles as collapsing sales reduce revenue is another.

"It's going to be tough for them to pull this off," said Mike Omotoso, a Troy, Michigan-based analyst at market-research firm J.D. Power & Associates. It's unlikely that Chrysler will have the resources or technology to develop production vehicles by its 2010 goal, he said.

In addition to the Volt, which GM says will travel 40 miles on an initial charge, Tokyo-based Nissan Motor Co. plans to sell an all-electric car with a 100-mile range, also in 2010. Toyota hasn't given a target date for the plug-in Prius.

Development Tradeoffs
Chrysler used existing models to speed the project along. The tradeoff is the vehicles may lack the weight-savings and aerodynamics GM's Volt will have as an all-new design, Quigley said. Those improvements will go into Chrysler's next generation models, already in development, he said.

It will be "interesting" to see how Chrysler accomplishes the power needs for a vehicle the size of a minivan, said David Darovitz, a GM spokesman in Detroit.

"They have to come out with something," John Hanson, a Toyota spokesman in Torrance, California, said of the Chrysler project. He said new zero-emission vehicle regulations imposed by the California Air Resources Board makes it necessary for the largest automakers to sell some kind of super-low emissions vehicle, such as an electric car, starting in 2010.

Nissan spokesman Fred Standish in Nashville, Tennessee, said the company wouldn't comment on Chrysler's electric-car program.

Chrysler's U.S. sales fell 25% through September from the year-earlier period, while its market share dropped to 11% from 12.8%.

Test Fleets

The privately owned automaker, purchased by Cerberus Capital Management LP in August 2007, isn't required to report financial information. Chrysler said July 24 its automotive and finance units lost a combined $515 million in the first quarter. Robert E. Nardelli, the new CEO, said April 18 the company won't be profitable this year.

To try to quell skepticism about its electric vehicles, the company decided to put 100 prototypes in test fleets. Otherwise "people would automatically conclude it's just talk," Quigley said.

Chrysler will give governments, utilities and companies vehicles beginning in 2009 to test in real-world conditions.

The company won't say how much it is spending on the project. It has a $3 billion annual capital budget that includes new product development. Detroit-based GM has said it will spend at least $500 million building the Volt.

Chrysler's future was thrown into doubt a few weeks after LaSorda, 54, approved the electric-vehicle program. The following month, in February 2007, the automaker was put up for sale by its parent, Stuttgart, Germany-based DaimlerChrysler AG. The sale to Cerberus was announced in May of that year.

Speeding Procurement

Nardelli, 60, kept the project alive. He authorized the team to bypass the normal procurement process for parts to accelerate development, Quigley said.

The program was named ENVI, which is pronounced like envy, for "Environment," Chrysler spokesman Todd Goyer said.

Prototypes, with their electric motors concealed inside the bodies of existing models, went unnoticed on test tracks and around Chrysler headquarters, said Lou Rhodes, president of the electric-car unit.

The development team, which has grown to "several hundred" employees, has worked in isolation on half a floor within Chrysler's restricted-access design center.

"Ninety% of the people in Chrysler had no idea what we were working on," Quigley said.

Help Wanted

Chrysler, which has announced cuts of 28,500 employees since February 2007, or more than a third of its workforce, is hiring engineers and designers for the electric car program. Advertisements for nine positions, including a "high voltage battery and battery management systems engineer," were placed as recently as Aug. 20 on Internet posting service Monster.com.

An electric Wrangler or Town & Country minivan would give consumers types of high-fuel-economy alternatives not offered by GM, Toyota or Nissan, said Stephanie Brinley, an analyst with AutoPacific Inc. in Southfield, Michigan.

"Will they be able to build some kind of extended range vehicle by 2010? Probably," Brinley said. Chrysler may accomplish its goal with just 400 vehicles, she said.


Bloomberg News

LINK: Chrysler's electric surprise jolts analysts

Rick

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