Chrysler to roll out diesel SUV, hybrid pickup

But Chrysler said it had cancelled another hybrid vehicle that had been planned for 2003 because it could not build a business case for it. And Chrysler executives warned that hybrid-and diesel-powered models would not be built in significant volume unless U.S. customers accept their higher costs. Chrysler President Dieter Zetsche said Chrysler would sell a Jeep Liberty SUV powered by a Mercedes diesel engine in the second half of 2004 that will have up to 30 percent better fuel economy than a gasoline-powered model. Zetsche said Chrysler will build about 5,000 diesel Liberty models to see how well American consumers accept diesels. Chrysler already sells diesel-powered Jeeps in Europe, but has to tweak the Liberty slightly to meet U.S. standards. \"This diesel Liberty is an opportunity to test customer acceptance of modern, clean-burning diesel technology,\" Zetsche said during a conference in New York. U.S. automakers, facing tougher government rules on fuel economy, have been touting diesel engines as a way to improve efficiency, reduce greenhouse gas emissions and cut U.S. dependence on imported oil. While diesels get better fuel economy than gasoline engines, they also produce more nitrous oxide, a component of smog, as well as particulates that have been linked to lung disease. In Europe, diesels account for roughly 40 percent of all new vehicle sales, thanks to tax incentives and low-sulfur diesel fuel, which allows automakers to better control emissions. The U.S. Environmental Protection Agency has ordered U.S. oil refiners to begin producing low-sulfur diesel fuel in 2006, a regulation oil companies have been fighting. American automakers have also been loathe to roll out diesels in the United States for fear of rejection by consumers who remember Detroit\'s diesel experiments of the 1970s and 1980s, which were renown for their noise, smell and lack of reliability. Chrysler research found that only about 6 percent of buyers were interested in diesels. Zetsche also said Chrysler would not be able to raise the Liberty\'s prices to cover all the extra cost of the diesel. \"Obviously, to change the image of diesels in the customer\'s mind is a heroic challenge, and we don\'t know what is possible,\" Zetsche said. \"We hope we\'ll have a positive surprise about the demand.\" HYBRID SHUFFLE Bernard Robertson, Chrysler\'s senior vice president of engineering technology and regulatory affairs, said the company had cancelled a hybrid vehicle slated to be built in 2003 that would have used electric motors to provide all-wheel-drive. Two years ago, Chrysler said it would offer its hybrid system as an option on its Dodge Durango SUV that could provide a 20 percent boost in fuel economy. But the Durango was delayed after testing found the hybrid system did not perform as well as planned. While Chrysler tested the system on other vehicles, Robertson said the fuel economy and all-wheel-drive benefits were not enough to offset the extra cost. \"We liked the idea, but the execution just got a bit more expensive than we had intended,\" Robertson told Reuters. To keep its pledge to build a hybrid in 2003, Chrysler accelerated the Dodge Ram Contractor\'s Special hybrid pickup truck by a year. The Ram hybrid uses a different system than the Durango, placing an electric motor between the gasoline engine and the transmission. It also features an electrical panel that drops down from the side of the truck, allowing it to do double duty as a low-cost generator. That model, and a similar proposal from General Motors Corp.,have drawn the attention of the U.S. Army, which sees combat versions of hybrid trucks helping to reduce its fuel demand. Chrysler officials said while they had originally planned about 5,000 hybrid Rams a year, an army contract could boost output substantially. Ford Motor Co. is planning to introduce a hybrid Escape SUV late next year and GM is planning on rolling out a hybrid pickup in 2004. Story by Justin Hyde REUTERS NEWS SERVICE