Chrysler's Plug-Pulling on Electric Vehicle Development Could Have Serious Consequences

Chrysler's controversial move to abandon its electric-vehicle development program could carry significant consequences for the ailing company.

While GM has announced new lines of electric cars, Chrysler went ahead and pulled the plug, breaking up its ENVI division responsible for electric-vehicle development and moving them to other areas within the company. Such a disparity in approaches to an changing industry is a surprise given the similar circumstances both companies were in several months ago.

Around a year ago, Chrysler announced three models that made up its ENVI lineup: the Dodge Circuit EV (a 2 seat, BEV sports car), a 40 mile extended range Jeep Patriot and a 40 mile extended range Town & Country van. Two others, a Jeep Wrangler and a concept sedan would follow in the next few months.

Now the projects have been dismantled, which begs the question:  why?

The move to scrap the electric vehicle programme was reportedly the decision of Italian automaker Fiat, which somewhat ironically was handed a 20 per cent stake in the automaker by the US government in return for access to a range of its fuel-efficient technologies. After discovering the shambles that was GM's accounting, finances, and business affairs, Fiat withdrew from speculative development. This, in turn, prompted Chrysler to abandon its plethora of projects for 2011 and on.

The problem is, the electric-vehicle projects were part of Chrysler's promise to the federal government, ensuring it would actively reduce vehicle emissions and pursue non fossil-fuel transportation. These promises ensured it $12.5 billion of taxpayer's money.

The question remains then, what will the federal government do? Clearly Chrysler's latest moves come in conflict with the tenets of government bailout.

Something tells me Chrysler will have to come up with something. Abandoning such a high-profile program, directly motivated and tied to taxpayer's dollars, would be downright stupid unless a contingency plan of some sort were in the making. Time will tell.