Chrysler's Hybrids are Dead...and Maybe Its Future Too

Walter Chrysler is probably spinning in his grave. The enterprise he proudly founded in 1925 is moving closer into collapse. Just a week after getting a final go-ahead from the EPA (through mileage confirmation), Chrysler execs announced the complete demise its fledgling gas-electric hybrid program. The Newark, Del., assembly plant is set to shut down for good at the end of the year. The fact is that for all the pretty favorable words the Durango and Aspen hybrids received, Chrysler's revenue has vanished and company reserves are becoming depleted. There is also, sadly, no real demand for the high-priced SUVs.

A good indicator of misfortune was GM's own gas-electric SUV campaign that has gone miserably. Though the vehicles were praised for their blend of smooth operation, quality engineering, and good mileage (averaging 20 to 21 mpg), the high cost for the gas-electric powertrain option and the trend away from large trucks has left the vehicles collecting dust on dealer lots. Chrysler's own hybrid SUVs, by contrast, were built on a smaller budget and with less labor in areas like weight reduction and aerodynamics. The Chrysler HEVs were to be marketed on their cheaper price, which was projected at around $5,000 less than their GM competitors. Independent road tests actually found them to be commendable in ride, fuel economy, and handling. Alas, that wasn't enough to keep the hybrid program alive.

Even more shocking are the developments in the "merger" talks between GM and Chrysler. Industry and business publications have been reporting that a lineup comparison of GM and Chrysler products for a possible future business model concluded nearly all of the Chrysler, Jeep, and Dodge products were inferior--and would be axed. The only vehicles that fared well were Dodge's full-size pickups and Jeep's SUVs.

Things are going to get tougher with dwindling consumer activity and market uncertainty. Chrysler's powertrain solutions platform has been shifting from imported and modified diesel engines to a new line of long-range electric vehicle systems that have yet to be shown in complete form. The Viper, its proud halo, will be set for retirement early next decade with dwindling interest. Even the Challenger, which had to borrow heavily the Charger parts bin due to tight budgets, has failed to ignite a burst of buyer energy.

Could Chrysler come out of this crisis?

There is history.

Lee Iacocca was able to revive the firm with a government-backed loans. He was able to use Chrysler's one strong asset, the arena of drivetrains, as a foundation from which to market dependability while using added resources for his K-car program. The minivan, an Iacocca innovation, became such a sensation in the 1980s that it helped to pull Chrysler into secure profitability once again.

Pertaining to the present, Chrysler has invested large amounts of capital into its EV program. The new line of electric cars hasn't found much spirit in the press given that they are just concept exercises, but they could provide the groundwork for a niche for the next decade.

Sadly, this is the only area Chrysler seems to have a muscle in. The GM/Chrysler talks will determine where this former corporate giant will go. The proposed $25 billion government loan is the only other.