NPR.org, May 14, 2008 · German automaker Daimler announced that it was selling Chrysler, at a rock-bottom price, on the same day that retail gasoline prices hit a record high: $3.07, on average, according to the Automobile Association of America. The timing of these two events was coincidental, but it underscores the challenges facing Chrysler and other U.S. automakers: how to transition from the Age of the SUV to the Age of the Prius, the popular hybrid car made by Toyota.
Chrysler, even more than Ford and General Motors, built its reputation on big, burly vehicles: Dodge pick-up trucks, Jeeps and other gas guzzlers. In recent years, these kinds of vehicles have accounted for more than half of Chrysler's sales. But with gasoline prices at record highs, and Americans concerned about global warming and U.S. dependence on foreign oil, Detroit is trying to shift gears. Again.
Nearly 30 years ago, Congress stepped in to rescue Chrysler, which was on the verge of bankruptcy due to lackluster sales of its gas guzzlers. Chrysler finds itself in a similar situation today, but this time it is not likely to find much sympathy in Washington — or on the campaign trail. Many presidential candidates say Congress needs to press the automakers to manufacture more fuel-efficient vehicles.
"We're talking about saving the auto industry from itself," said Sen. Chris Dodd (D-CT) in an interview with the Associated Press. Dodd wants to double the average fuel economy from about 24 mpg today to 50 mph by 2017. Other candidates have made similar, though slightly less ambitious, proposals.
The automakers are opposed to stricter mileage requirements. They say that such changes can't be rushed and, besides, they are merely making the cars that Americans wan to buy. Increasingly, though, the car that Americans want to buy is one that was made in Japan — or at least, by a Japanese company. The best selling car in the U.S. is the Toyota Camry. In fact, the Japanese automaker recently surpassed Chrysler as the third biggest seller of cars in the U.S. — yet another blow for a company that reported an operating loss of $1.5 billion last year.
The U.S. automakers are asking for government intervention in one regard: They want $500 million in federal funds to help develop a new generation of high-tech batteries. Their plea has received a decidedly cool response from both Republicans and Democrats.
Chrysler, meanwhile, is making changes to its product lineup. Next year, it will introduce two hybrids-SUVs: one based on the Dodge Durango and another on the new Chrysler Aspen. The company already sells the relatively fuel-efficient PT Cruiser and Dodge Neon.
Some industry analysts say Chrysler may prove itself capable of changing with the times. They point out that it already has a head start in one market niche: the cross-over SUV. These vehicles are based on a car platform, as opposed to a truck platform, and are therefore lighter and more fuel efficient.
"Chrysler has done a better job than the other U.S. automakers in pursuing these cross-over SUVs," says David Healy, an industry analyst with Burnham Securities.