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Chrysler insists new SUV is crucial part of product offering

IT sounds crazy: Just a week after the White House scolded Chrysler LLC for relying too much on gas guzzlers, the company headed to a marquee auto show yesterday to unveil a new SUV.

Chrysler insists the Jeep Grand Cherokee, which clocks in at 20 miles per gallon (8.5 kilometers per liter) in its two-wheel-drive version and 19 in a four-wheel-drive, is a crowd favorite and a crucial part of its lineup.

"This is a very important vehicle for us. It's one of the primary legs of the Chrysler stool," spokesman Rick Deneau said. "Customers have told us they want this vehicle and that it's the right size."

The new SUV is 11 percent more fuel efficient than its predecessor, powered by a cleaner and more powerful engine. Still, Chrysler's decision to debut an SUV as its only new car at the New York International Auto Show seems like odd timing to say the least.

On March 30, the Obama administration issued a scathing rejection of the company's survival plan and gave it 30 days to secure a merger with another auto maker, most likely Italy's Fiat SpA.

The White House slammed Chrysler for having a product lineup so heavily weighted with trucks and SUVs. It added that the auto maker does not have enough products in the pipeline to meet an expected increase in demand for small cars.

But Chrysler is standing by the Grand Cherokee. It's profitable, recognizable and the No. 2-selling vehicle in the Jeep lineup. Grand Cherokee sales fell by almost half during the first three months of the year, but its market share has remained steady, according to Autodata Corp.

"It is one of their most important vehicles," said John Wolkonowicz, senior automotive analyst for the consulting firm IHS-Global Insight. "The market for SUVs has not completely gone away, particularly for smaller ones like the Grand Cherokee."

Chrysler, which is clinging to a US$4-billion taxpayer lifeline, has little choice but to focus on the present.

Alliance with Fiat

The auto maker expects its tentative partnership with Fiat to plug the holes in its small-car offerings. It hopes fuel-efficient Fiat cars, like the two-seater 500, will sell on this side of the Atlantic.

But even if an alliance with Fiat goes through, the Italian auto maker's vehicles wouldn't make it to the US until 2011. That means that until then, Chrysler has little choice but to survive on revenue from its current vehicle lineup.

"I think it's going to be written up as being out of touch, but from a business standpoint, I think it's the right thing to be doing," Wolkonowicz said of the Jeep's unveiling.

In fact, the new Grand Cherokee's new engine does manage to eke out higher fuel economy on top of additional power.

Assuming a customer opts for the 20-mpg Cherokee, that means a driver who logs 10,000 miles in a year will spend about US$1,020 on gas at today's prices.

The Grand Cherokee also features an air suspension system that lowers the vehicle at higher speeds to improve aerodynamics and fuel efficiency, while also delivering 33 percent better horsepower than its predecessor.

Still, it's no gas sipper. A 2009 Toyota Camry, by contrast, gets 26 mpg and would cost the same driver US$785 per year in gas.


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