DaimlerChrysler Builds on Diesel Leadership with Strong Product Launches, But Challenges Remain

* Strong Customer Response to Jeep Liberty CRD Diesel Builds Interest in Diesel Products * Business Case Must Address Different Consumer Needs, Regulation in New Markets * Power, Performance, Fuel Economy Make Diesel a Key Element in DaimlerChrysler's Vision of Clean Vehicles

TRAVERSE CITY, Mich., Aug. 5 -- DaimlerChrysler is an established leader in diesel technology, but developing new diesel vehicles for the U.S. market must be supported with a solid business case, says a top product development executive at Chrysler Group.

"We still need to make a strong business case in order to justify expanding our diesel offerings," Frank Klegon, Vice President - Product Development Process and Components, told a session on advanced powertrains at the annual Management Briefing Seminars here Friday. Klegon will become Executive Vice President, Product Development, for Chrysler Group on January 1, 2006.

DaimlerChrysler is driving the introduction of modern, clean diesel products in the U.S. market with the Mercedes-Benz E320 CDI and the Jeep(R) Liberty CRD. More than 60,000 consumers inquired about the Jeep Liberty CRD before production began, and initial production and sales estimates have already been surpassed.

"Through the end of July we had shipped nearly 8,300 units and sold more than 4,000 -- compared with our original estimate that the market might buy 5,000 units the first year," Klegon said. "Dealers report that the Liberty stays on the lot less than a month, about one-third the industry average."

In Europe, where diesel vehicles make up more than 40 percent of the market, Chrysler Group sells diesel-powered versions of the Chrysler 300, Jeep Grand Cherokee, Chrysler PT Cruiser, Chrysler Voyager minivan and the Liberty (badged Jeep Cherokee). This lineup has led to speculation that one or more of these vehicles will be marketed in the United States.

But Klegon said, "We can't just bring a European diesel-powered passenger vehicle and put it unchanged into the U.S. market."

Differences in consumer preferences, regulations and fuel quality require extensive development to adapt a product for American consumers.

"The fundamental costs are the same whether you are going to produce 5,000 vehicles or 500,000," adding to the challenge of re-introducing diesel to U.S. consumers, Klegon said.

Recent studies have predicted a doubling of the diesel market in the U.S. over the next several years. Diesels provide the power and performance customers want; with typical 30 percent improvement in fuel economy, diesels can dramatically reduce greenhouse gas emissions and cut dependence on oil.

And diesel engines typically run thousands of miles longer than their gasoline counterparts and offer significantly higher re-sale value.

The environmental benefits of diesel can be further enhanced with use of biodiesel, fuel made from plants. The Jeep Liberty CRD is fueled with B5 -- 5 percent biodiesel made from soybeans -- at the factory in Ohio.

This makes diesel one of the cornerstones of DaimlerChrysler's overall vision for lessening the motor vehicle's impact on the environment and on our world's dependence on oil, Klegon said. That vision includes:

* Improved internal combustion engines with new technologies like the Multiple Displacement System feature in the HEMI V-8 which improves fuel economy up to 20 percent.

* 1.5 million vehicles capable of running on E-85 flex fuel, a mix of gasoline and 85 percent renewable ethanol.

* GEM electric vehicles; more than 30,000 are in use nationwide.

* Hybrids. Chrysler launched its first hybrid with a diesel-electric Dodge Ram 2500/3500 Quad Cab heavy-duty pickup and is working jointly with General Motors to develop a state-of-the-art, two-mode, full hybrid propulsion architecture with potential to leapfrog current hybrid designs.

* Hydrogen fuel-cell technology, which holds the greatest promise for ultimately replacing fossil fuels. DaimlerChrysler has more than 100 fuel cell vehicles in use around the world.

"We'll keep looking at powertrain alternatives that provide a better experience for our customers or help us meet societal goals like cleaner air and reduced dependence on oil," Klegon said.