The New Chrysler: Still Connected Under the Hood with Daimler and Others

July 30, 2007

By Bill Visnic

The “breakup” of Daimler-Benz and the Chrysler Group is nearly complete, with Chrysler’s new owner, Cerberus Capital Management, due to ink the deal any day now. But like a married couple that’s amicably split, the two companies will continue to “get along” -- continuing with many technical, manufacturing and development ventures neither company is seeking to put asunder.

For one, Chrysler will stay connected in an under-the-hood venture with Daimler and other entities because of the capital-intensive nature of developing new powertrain technologies for global use. Chrysler said recently will spend upward of $3 billion on new, efficiency-enhancing powertrain initiatives over the next several years.

One other reason Chrysler and Daimler will maintain amicable post-breakup relations: the oft-overlooked detail that Daimler will hold a 19.9-percent equity interest in the new Cerberus-owned Chrysler, legally known as Chrysler Holding LLC.

Bob Lee, Chrysler Group’s vice president of the Powertrain Product Team, said in an interview with AutoObserver that Chrysler will continue to work with Daimler –- and other automakers –- now that Chrysler is going it alone under the aegis of its new owner.

“We will have ongoing relationships in a number of areas,” said Lee, who supervises all design, development and release of the Chrysler Group’s powertrains.

He said the various powertrain-related ventures Chrysler will continue with Daimler other automakers –- even direct rivals –- “were set up because they are good business arrangements.”

The powertrain and its related components still account for the single largest capital investment most automakers retain in vehicle development.

Lee said one hot button for the U.S. market, a potential onrush of fuel-stingy, performance-rich new-generation diesel engines, is an example of how the New Chrysler will continue with its existing diesel-engine ventures with other automakers and suppliers to optimize the deployment strategy for diesel in the U.S. Currently, Chrysler itself does not make any diesel engines.

“At this point, we have a somewhat divergent diesel supply base,” said Lee, adding that the variety will enable Chrysler to pick and choose its opportunities for diesel power in the U.S.

He said Chrysler currently is using diesel engines manufactured by no less than four distinct entities:

• Cummins Inc., which produces the well-regarded 6.7-liter, inline six-cylinder diesels for medium- and heavy-duty versions of the Ram pickup sold in the U.S. Cummins reputedly is working on a diesel for Chrysler light vehicles.

• Volkswagen AG, which supplies four-cylinder diesels for Dodge Nitro and Caliber models in Europe. Chrysler will be installing VW diesels in VW-badged variants of Chrysler’s new-generation minivans next year.

• VM Motori S.p.A, which makes the 2.5- and 2.8-liter V-6 diesels that power European variants of the Chrysler Voyager minivan and Jeep Cherokee (Liberty) and Wrangler.

• Daimler’s Mercedes-Benz unit, which developed and manufactures the 3.0-liter V6 diesel Chrysler launched this year for the Jeep Grand Cherokee in the U.S. The same engine also is used in Chrysler’s strong-selling Sprinter commercial vans, and the company recently said it is studying expanding this engine’s applications into other Chrysler vehicles.

As the pressure ratchets up to quickly deploy fuel-saving and emissions-reducing powertrain technology such as diesels in the U.S., Lee said continuing these ventures makes strong business sense because all of the diesel-powered models currently not available in the U.S. are variants of vehicles Chrysler already sells here. That minimizes the time and engineering and development investment necessary to offer these diesel-powered models Stateside.

“A European diesel has a huge percentage of the work done,” Lee said, to make an easy transition to vehicles in the U.S. market. Lee said Chrysler has about 17 diesel-powered models sold worldwide.

Much the same is true for hybrid technology, said Lee, as well as the advanced dual-clutch transmission Chrysler recently announced it will build and operate in a joint-venture collaboration with Europe-based transmission specialist Getrag Corporate Group.

With hybrids, Lee said Chrysler will continue a joint-development venture with General Motors and BMW for the well-publicized “2-mode” hybrid system that first will be deployed in Chrysler’s Dodge Durango Hybrid and Chrysler Aspen Hybrid early next year, after it is introduced in the Chevrolet Tahoe and GMC Yukon this fall.

Lee said the 2-mode hybrid transmission venture –- originally signed in fall 2005 by DaimlerChrysler –- encompasses future developments beyond the 2-mode hybrid system for SUVs. It will include front-drive vehicles and passenger cars, and the new Cerberus-led Chrysler will carry on with that development venture.

The entire structure of the hybrid venture is built around developing three distinct versions of the 2-mode system, Lee said, and as such, Chrysler fully plans to continue to collaborate with GM and BMW to bring those technologies to market –- both in the U.S. and elsewhere.