Despite promises to fast-track development of three electric car models using federal loan dollars to prevent its bankruptcy, Chrysler announced yesterday that it will instead disband the engineering team responsible for the projects.
For decades Chrysler has relied on selling gas hogs like trucks and minivans to turn a profit. As the producer of five out of the top 10 most polluting, inefficient passenger vehicles in America, Chrysler has not surprisingly seen its sales plummet by half in the last few years of volatile gas prices. So the plans to become a leader in the electric vehicles market introduced under pre-bailout CEO Bob Nardelli seemed like a welcome change of direction for this old industrial giant.
However, Chrysler’s new CEO Sergio Marchionne, who took leadership of the company after the government-brokered merger with Fiat, is himself personally skeptical of electric vehicles, stating that E.V.’s will only account for one to two percent of overall production by 2015 – a mere 60,000 vehicles.
The announcement that Chrysler’s electric vehicle program, ENVI, would be scrapped came amidst optimistic projections in the company’s brand new 5-year plan. “Some of you have [assumed] that we are losing money,” said Marchionne, “this is not true.” The 5-year plan promises repayment of the $12.5 billion bailout money by 2015, resting these projections on questionable assumptions that the company would double its sales by 2014, and grow revenue by 20% each year for the next five years. “Today is the first day of the new Chrysler.”
Unfortunately, the “new Chrysler” is going to be one that produces about half a million fewer electric vehicles by 2014 than it promised in its application for the $12.5 billion federal bailout it received from taxpayers. Not only will this slow the growth of electric and plug-in hybrid vehicles on US roads, it will also have negative supply-chain effects on suppliers of critical components, such as battery manufacturer A123.
These are the technologies that Chrysler promised American taxpayers when it sent its CEO to Washington begging for money to avoid its collapse. To renege from the agreement is unethical at best and downright dubious at worst. As recently as August, Chrysler received $70 million more in federal funds from DOE to support the development of a fleet of 220 test vehicles, which has now been scrapped.
Meanwhile, virtually every other major US automaker is putting a serious down payment on commercializing an electric drive or hybrid vehicle – from small start ups like Tesla, Fiskar, and Coda to giant mega brands like Honda, GM, and Toyota. GM plans to have the first U.S. plug-in hybrid electric vehicle, the Volt, on the market next year. GM estimates that it could get 203 miles per gallon.
Maybe Chrysler’s departure from electric vehicles is a sign of an early industry “shake out,” where companies without a competitive advantage tip their hat and exit the market when they foresee an inability to compete. But with more efficient fuel economy standards to contend it seems unwise for a company struggling to define its future to be turning its back on electric drive technology.
– Sean Pool
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