Monday, July 23, 2007

Chrysler expecting tighter fuel standards

Chrysler, expecting tighter fuel efficiency standards in the United States, has scrapped production plans for a large luxury vehicle to be built near Toronto.

The local union at the Brampton, Ontario, Canada, assembly plant agreed in March to contract concessions in exchange for the promise of a $700-million Canadian investment at the facility to prepare for the luxury Imperial - a vehicle that would have been larger and heavier than any car now in Chrysler’s production lineup.

But Chrysler recently told Canadian Auto Workers President Buzz Hargrove that the Imperial was scrapped because of pending legislation in the U.S. Congress to increase fuel-efficiency standards, Hargrove said in an interview with the Detroit Free Press.

Hargrove said Chrysler still plans to invest in the plant, which also produces the Chrysler 300.

“They’ve told us that the investment is not off for the new generation of the 300 series,” Hargrove said. “But it looks like they are dropping the Imperial because of the U.S.’ more stringent requirements for fuel efficiency.”

A Chrysler spokesman confirmed that Imperial production is off and that expected efficiency standards and rising fuel costs are to blame.

“The decision to build the Imperial concept was always contingent upon our ability to create a profitable business case for the vehicle,” spokesman David Elshoff said. “In light of the current economic climate and the climate for restrictive fuel efficiency legislation, we can’t justify a business case to add that vehicle.”

“Frankly it would’ve been irresponsible to bring that car to market,” Elshoff said.

Legislation that has passed the U.S. Senate would require the auto industry to meet a combined vehicle standard of 35 miles per gallon by 2020.

Several executives have warned such standards could bankrupt Chrysler, which has a truck-heavy lineup.

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