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Chrysler's bigger cars defy higher gas prices Add to ...

Chrysler Group LLC is taking another step in its comeback Friday with the launch of the redesigned 300, but the full-sized car arrives just as surging gas prices threaten to derail the industry's recovery.

The Chrysler 300 and Dodge Charger, which represent the auto maker's flagship passenger cars, will roll off an assembly line in Brampton, Ont., in the latest chapter of Chrysler: The Recovery from a Near-Death Experience.

But as Chrysler was gearing up for the launch, the price of gas hit $3.19 Thursday at the BP station on University Drive in Auburn Hills, Mich., about a kilometre north of the company's head office. And while Chrysler goes big, much of the rest of the industry is going small and going electric, with a slew of small car, hybrid and battery-powered vehicle introductions scheduled for the North American International Auto Show in Detroit on Monday.

While Chrysler shows off its big new sheet metal Friday, Ford Motor Co. will unveil the electric version of its Focus compact car at the Consumer Electronics Show in Las Vegas.

The rising price of gas, which helped push Detroit close to the brink before the credit crisis sent Chrysler and General Motors Corp. into Chapter 11 bankruptcy protection, is a problem for all three auto makers.

"It's going to be a really critical issue for Chrysler because their most profitable vehicles are full-size and above," said long-time industry analyst Joe Phillippi, who heads Auto Trends Consulting Inc. of Short Hills, N.J. "Their money-spinners are pickups, Grand Cherokees, 300s, all of which are large vehicles at a point in time when everybody is predicting that gasoline is going to $4 a gallon at a minimum by mid-year."

This is the hand Chrysler chief executive officer Sergio Marchionne was dealt when Fiat SpA picked up 20 per cent of Chrysler and management control of the No. 3 Detroit auto maker when it emerged from bankruptcy protection in 2009. The new-product cupboard was close to bare, with just the Grand Cherokee sport utility vehicle and the new full-sized cars on the drawing boards.

New vehicles are conceived and developed over periods ranging from two to four years before they begin rolling off assembly lines, so it's impossible to have new, fuel-sipping compact cars on dealers' lots in a short period of time.

Fiat has developed a North American version of its 500 subcompact and already has that car on sale, but in the compact segment, Chrysler's Dodge Caliber is barely an also-ran in the U.S. market, which is also the destination for about 85 per cent of the cars that will come out of the Brampton assembly plant.

Both Ford and GM have new entrants in the compact segment with a redesigned Focus and the Chevrolet Cruze, respectively.

Fiat engines and technology will be prominent in new Chrysler vehicles as they arrive, but a replacement for the Caliber isn't scheduled to arrive until next year.

In the meantime, Chrysler will try to deal with the gasoline issue by making its new vehicles as fuel efficient as possible.

The new Pentastar V6 engine on the 300 will generate an 8-per-cent improvement in fuel economy. The car it replaces got 18 miles out of a gallon of gas in U.S. city driving and 26 mpg on the highway.

In Canada, the car was rated at 12.2 litres for every 100 kilometres of city driving and 8.1 litres per 100 kilometres of highway driving.

Chrysler also trails its rivals in offering hybrid and electric vehicles, but is scheduled to offer an electric version of the Fiat 500, likely by next year.

"Chrysler's been gutted, so they're just trying to get the bread and butter working," said one industry source, pointing to the loss of several thousand engineers during the crisis and the lack of attention the company received when it was owned by New York hedge fund Cerberus Capital Management LP.

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  • Ford Motor Co
  • Updated January 16 4:00 PM EST. Delayed by at least 15 minutes.

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