Hot Hemi Engine Gives DaimlerChrysler Market Edge: Doron Levin
May 19 (Bloomberg) -- DaimlerChrysler AG has discovered a sweet spot in the U.S. auto market that's not been exploited by Asian and European competitors, at least not yet. It's moderately priced rear-wheel-drive sedans.

Demand in the U.S. for such cars is burgeoning, a trend that benefits DaimlerChrysler AG, whose Chrysler Group is scoring with its big Hemi engine.

The popularity of the Chrysler 300 sedan and a sister model, the Dodge Magnum, have been big reasons for Chrysler Group posting an operating profit for seven consecutive quarters, and a reason why Chrysler is faring better than its larger Detroit counterparts, Ford Motor Co. and General Motors Corp.

This week the average price of gasoline in the U.S. fell to $2.16 a gallon, according to the Energy Information Administration, down three cents from a week ago but still up 14.6 cents from a year earlier.

Some motorists naturally are trying harder to save energy and money at the pump, helping sales of the gasoline-saving Toyota Prius hybrid to rise more than 150 percent this year to 34,225 through April 30.

On May 17, Toyota announced its intention to build a hybrid version of its Camry in Georgetown, Kentucky, starting in 2006.

And speed is simple to accomplish with big, heavy engines that work better mated to rear-wheel-drive transmissions than front-wheel-drive counterparts.

Expensive Winners

General Motors Corp.'s Cadillac CTS rear-wheel-drive sedan has been a winner, as have the many rear-wheel-drive cars introduced by Bayerische Motoren Werke AG. And DaimlerChrysler AG's Mercedes cars are rear-wheel-drive as well. These and other luxury cars, however, are pricey.

Ford Motor Co.'s new moderately priced sedan, starting at $22,165, suffers from lack of power. The new Ford Five Hundred sedan, a front-wheel-drive model with a six-cylinder, 203 horsepower engine, is adequate without providing excitement. GM's Pontiac GTO sales have been mediocre, averaging less than 1,200 cars a month this year. GTO's bland exterior overwhelms its hot rear-wheel-drive performance.

The six-cylinder Chrysler 300 starts at $27,425. Equipped with the Hemi, the starting price jumps to $33,325. And the new Dodge Charger, on its way to dealers, will start at $22,995, equipped with a 3.5-liter V6.

DaimlerChrysler's Chrysler Group had hoped that 30 percent or more of the buyers of its 300 sedan, introduced a year ago, would specify Chrysler's most powerful engine, the 340-horsepower 5.7-liter Hemi, according to Craig Love, vice president of Chrysler's rear-wheel-drive product team.

`Take Rate'

``The take rate on the Hemi by customers is now more like 45 to 50 percent,' said Love. The engine has proved thrilling, at least to Chrysler. Sales of the 300 are up more than three-fold to 49,089 through April. Sales of the Dodge Magnum wagon also have been strong, reaching 21,508 for the first four months of the year.

The latest Hemi also features a fuel-saving technology, which shuts down four of the eight cylinders when the vehicle is cruising and needs less power.

Now Chrysler Group is coming to market with its third rear- wheel-drive version of the same vehicle architecture that serves as the basis of the 300 and the Magnum, the Charger.

And Dodge executives are giddy at the prospect of Charger's return to the NASCAR racing circuit. A race car styled to look like Charger, and driven by Kasey Kahne, won the May 14 race at Richmond International Raceway in Richmond, Virginia.

Another Life

Charger becomes the first rear-wheel-drive, full-size Dodge sedan since the late and unlamented 1981 Dodge St. Regis. The original Charger was a two-door muscle car, which went out of production in the 1970s due to tighter emission and fuel- efficiency regulations.

The name lived on in NASCAR before finally fading away. (The old Charger's last NASCAR race circuit victory came when driver Neil Bonnett won in Ontario, California in 1977.)

Now suddenly the Hemi brand, which identifies Chrysler's powerhouse V8 engine, has come back to life, and with it the pitch to those buyers who like pickup and the feeling of driving a hot car.

Chrysler's first Hemi engine dates to the 1950s. The name is short for ``hemispherical,' a proprietary design and the shape of the top of the engine's piston chambers, which added power. The new Hemi design went back into production in 2002 at a $500 million plant in Saltillo, Mexico.

``We decided as early as 1996 to study a new V8 engine, to see what was technically feasible,' said Burke Brown, chief engineer of the architecture used for the 300, Magnum and Charger.

Another Version?

The Hemi first was installed in Dodge's Ram full-size, light- duty pickup, then in the Jeep Grand Cherokee and Dodge Durango sport-utility vehicles and now in the rear-wheel-drive cars. The next use will be in Jeep's new Commander, a bigger version of the Grand Cherokee with seating for seven, due to reach the market this fall.

Since opening the Saltillo plant, capacity has been increased twice, raising it from 400,000 a year to more than 480,000. And the Brampton, Ontario, factory that builds the 300, Magnum and Charger is operating on three shifts, nearly round the clock.

With production apparently reaching capacity, Chrysler doesn't appear to have much room for one more version using its successful rear-wheel-drive architecture. Yet Love says another one could be announced within a year.

The popularity of the Chrysler 300 sedan and a sister model, the Dodge Magnum, have been big reasons for Chrysler Group posting an operating profit for seven consecutive quarters, and a reason why Chrysler is faring better than its larger Detroit counterparts, Ford Motor Co. and General Motors Corp.