Marchionne Scraps Chrysler’s Electric Vehicle Program

In August, Chrysler Group received $70 million in federal grants for the express purpose of developing a test fleet of 220 hybrid vehicles. Now, under the management of Fiat SpA, the automaker has announced that it is disbanding its team of electric vehicle engineers.

In addition to the recent $70 million infusion of federal aid, Chrysler has used its electric car ambitions to argue its case in receiving $12.5 billion in taxpayer assistance in the last year.

The announcement was made last week by Chrysler’s new CEO, Sergio Marchionne, and was included in his long awaited five-year plan for the struggling automaker.

According to Nick Cappa, a Chrysler spokesman, the automaker has decided to focus its efforts on improving more traditional automotive technologies.

Under its former owner, Cerberus Capital Management, Chrysler had established the “Envi” engineering division. The Envi division (derived from Environment) was set up to help the automaker close the gap with competitors in the hybrid vehicle market.

According to Cappa, “Envi is absorbed into the normal vehicle development program.” He said that the group’s chief engineer, Lou Rhodes, will now serve as the executive in charge of electric vehicle development for both Chrysler and Fiat.

In September of 2008, Chrysler announced that it would begin selling the first of its electric vehicles in 2010 and that two other models were in development.

At the Detroit Motor Show this past January, Chrysler raised the stakes by announcing that it anticipated having 500,000 electric vehicles, including trucks and sports models, on the roads by 2013.

During his presentation of the automaker’s five-year plan last Wednesday, Sergio Marchionne made no mention of these previous predictions.

As of last Friday, Chrysler Group’s corporate website still featured product information describing its now-abandoned electric cars including the Dodge Circuit all-electric sports model.

Chrysler is one of the only major automakers not currently selling a hybrid model in the U.S.

Marchionne’s justification for scuttling Chrysler’s electric vehicle program is his assertion that it would represent a mere “one to two percent” of the automaker’s total sales (less than 60,000 units) until at least 2014. He asserted that electric vehicles have a long way to go, technologically, before gaining widespread acceptance. Referring to the current limitations of all-electric vehicle batteries he said, “Until the storage gets resolved, I think electric vehicles are going to struggle.”

Although plans for Chrysler to develop new electric vehicles have been sidelined, Fiat may introduce a battery powered commercial van, the Doblo, to the U.S. market in the near future, but Chrysler executives said the plan has not yet been finalized.

Fiat was awarded a 20% ownership stake in Chrysler by the Obama administration for the purpose of improving the automaker’s fleet-wide fuel economy. The administration has set a goal of 1 million battery-electric vehicles on the roads by 2015.

According to Marchionne, Chrysler will reach the break-even point in 2011 and double its sales over the next five years.

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