DaimlerChrysler trails other automakers in hybrids but is working on alternatives.
Joe Guy Collier - Detroit Free Press - May 25, 2006
With gas prices soaring and interest growing in more fuel-efficient vehicles, the top automakers in the U.S. market are publicly pushing gas-electric hybrid vehicles, except for one.
DaimlerChrysler AG does not plan to have a hybrid passenger vehicle available in the United States until 2008, trailing Toyota Motor Corp. and Honda Motor Co. by almost a decade.
By then, Ford Motor Co. plans to have at least eight different hybrid models on the market or on the way soon. Even General Motors Corp. and Nissan Motor Co., slow to embrace hybrid technology, will have been selling hybrids for a year or more.
So has the maker of the Dodge Ram pickup and Chrysler 300 made a major misstep on hybrids?
Hardly, DaimlerChrysler officials say. They say the company has the right plan, waiting to enter the fray until profits can be made.
DaimlerChrysler executives say improving fuel efficiency is important, but hybrids aren't the only answer. The added cost of the hybrid technology does not yet provide a payback for consumers or the company. Sales are still small, about 1% of U.S. vehicles last year.
By the time DaimlerChrysler introduces its first hybrid, the technology will make better business sense, said Mark Chernoby, Chrysler Group vice president of advanced vehicle engineering.
"We think we've got ourselves focused on the right point where we can get that return on investment," Chernoby said.
Hybrid experts and environmental groups disagree. They say DaimlerChrysler is falling behind in an important segment. Other automakers already are tweaking their hybrid technology, developing supplier relationships and building customer loyalty.
Toyota and Honda, which introduced hybrids in the late 1990s, could be on their fourth generation of hybrids by 2008. Ford, which introduced the Escape hybrid in 2004, is painting itself "green" with an aggressive marketing campaign and hybrid vehicle roll-out.
"They're going to have an advantage," said David Friedman, clean vehicles research director for the Union of Concerned Scientists, a Washington, D.C., environmental group. "Not only will they have built up a following. They will have built up a capacity."
DaimlerChrysler's strategy highlights a major dilemma facing the auto industry. Hybrid vehicles are generating buzz because of high gas prices. These hybrids use a combination of gas engines and electric motors to improve fuel efficiency.
But despite the recent attention, most hybrids on the market don't make sense from a pocketbook point-of-view. Consumers have to drive these vehicles for years - most far beyond a useful lifetime - to recover the added cost of the technology.
In recent years, hybrid sales have risen, along with gas prices. U.S. hybrid sales reached 212,000 vehicles last year, compared with fewer than 10,000 in 2000, reports J.D. Power and Associates. But that's a sliver of the 17 million vehicles sold overall in the United States.
Consumer demand for hybrids has been weak so far, said Alan Helfman, vice president of River Oaks Chrysler Jeep in Houston. Helfman said his dealership in Texas isn't missing out on significant sales by not having a hybrid in its lineup.
Small, affordable cars or crossovers, such as the Dodge Caliber and soon-to-be-released Jeep Compass, are welcomed additions, he said. They reach customers on a tight budget by providing fuel-efficiency at a lower sticker price.
Hybrids cost more and customers are wary of having to foot the bill for expensive replacement parts if something goes wrong, Helfman said. "I don't think the hybrids are all they're cracked up to be yet."
Even with modest sales, though, most major automakers are scrambling to add hybrids to their lineups. Two camps formed early in the auto industry.
Toyota, Honda and Ford have been big promoters of the technology, entering the market first with hopes that they can capture future sales.
Toyota has made clear where it sees the market heading. By early next decade, Toyota expects to sell 1 million hybrids a year worldwide. "Eventually, everything will be a hybrid," said Jim Press, president of Toyota Motor North America, earlier this month while in Detroit.
Nissan, GM and DaimlerChrysler have been slow to the market, arguing that hybrids don't make business sense.
GM introduced mild-hybrid trucks in 2004 and will release a Saturn Vue hybrid this summer.
Some environmental groups refer to GM's current lineup as hollow hybrids because they offer only modest fuel savings. The company says upcoming hybrids, such as the Vue, will offer significant fuel-efficiency improvements, 20% or more.
DaimlerChrysler soon will be the only major player in the U.S. market without a hybrid -- hollow or otherwise - for retail customers.
DaimlerChrysler is working with GM and BMW on a joint venture to develop a hybrid system. The company will put that system in the Durango in 2008 but hasn't committed to any other passenger vehicles.
While Toyota, Honda and Ford have made bold projections about future hybrid sales, DaimlerChrysler officials say there is no magic bullet for improving fuel efficiency and reducing oil dependency.
"It's going to require a portfolio approach," Chernoby said. "There's not going to be any one winner."
Other alternatives where DaimlerChrysler has a lead - ethanol, diesel, biodiesel and hydrogen fuel-cell vehicles - also will play a role, he said.
The company has more than 100 fuel-cell vehicles in use worldwide. DaimlerChrysler also has strong offerings for diesel, biodiesel and ethanol-capable vehicles.
But there are problems with those technologies, too. Most experts predict fuel-cell vehicles won't be a viable option for decades. Diesel engines deliver more miles per gallon but they also traditionally have come with higher emissions. Biodiesel and ethanol aren't widely available at U.S. fueling stations. If these other options take off, DaimlerChrysler should be positioned well.
But in the meantime, gas-electric hybrids have become the hot technology because they offer increased fuel efficiency without the need for new infrastructure. Hybrid owners can fill the tank at the gas station and the car recharges the electric battery.
Hybrids are the bridge between gas-powered engines and hydrogen fuel cells, said Roland Hwang, vehicles policy director in the San Francisco office of the Natural Resources Defense Council, an environmental advocacy group.
The sales figures may be small now, but it's important to be in the market early, he said. Other automakers already are building their brand image with consumers and perfecting the technology through real-world driving while DaimlerChrysler is still in the lab.
"They're 10 years behind Toyota and Honda," Hwang said. "That's a long time. That's a lot of catching up you need to do."
But DaimlerChrysler can still be a major player, said Friedman of the Union of Concerned Scientists.
"The question is are they going to decide to catch up?" Friedman asked. "Or are they going to play this as a media game?"
DaimlerChrysler officials are confident they can catch up and even surpass the current leaders.
Chernoby said the company is committed to improving fuel efficiency but wants to make money, too.
"Will the media attention and, potentially, the market concern shift up and down over time? Yes," Chernoby said. "But we clearly recognize as an" automaker "we must, absolutely must, drive forward. And we will."