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Chrysler working with EPA on new hybrid system

ANN ARBOR, Michigan (Reuters) - Chrysler Group LLC is working with the U.S. Environmental Protection Agency to adapt a hydraulic hybrid system for potential use in an upcoming version of its popular minivan.

Chrysler Group LLC CEO Sergio Marchionne speaks during the production launch of Chrysler vehicles at the assembly plant in Brampton, January 7, 2011. REUTERS/Mike Cassese

Chrysler, which has been criticized for a lineup heavy on gasoline-guzzling trucks and sport-utility vehicles, plans to design and build the hydraulic hybrid minivan by November and complete testing by July 2012.

The project comes as automakers scramble to meet strict new fuel economy standards expected to take effect after 2016 that have forced automakers to rethink the design of their fleet.

“We need to continue to explore ways to drive the most cost-efficient solution to achieve that objective,” Chrysler Chief Executive Sergio Marchionne told reporters Wednesday.

Marchionne appeared on Wednesday with EPA Administrator Lisa Jackson at the agency’s laboratories in Ann Arbor.

Chrysler, which is operating under the management control of Fiat SpA, is the only major automaker in the U.S. market without a hybrid offering.

The hydraulic hybrid system, which was developed at EPA’s lab in Ann Arbor, captures power from braking in a hydraulic-pressure vessel. By contrast, conventional hybrids like Toyota Motor Corp’s market-leading Prius use batteries to store that power otherwise lost in braking.

Eaton Corp has worked with the same EPA lab to develop a separate hydraulic hybrid system being tested in heavy work trucks as a way to improve fuel efficiency and reduce emissions.

Chrysler’s work with EPA is the first attempt to bring hydraulic hybrid systems into passenger vehicles.

The EPA and Chrysler aim to develop a simplified version of the technology that will improve fuel economy in a minivan by between 30 percent and 35 percent and offer a quiet drive.

Chrysler will fund the majority of the project and the EPA will put in $2 million. Chrysler did not disclose how much money they would pour into the project.

A HYBRID PUSH

The hydraulic hybrid minivan is one of a number of electric and hybrid vehicles Chrysler is looking to develop over the next few years as it complies with tightening government standards and higher gas prices.

Chrysler’s lineup for the 2010 model year ranks last in terms of fuel economy compared to 13 other major automakers, according to EPA statistics. Toyota tops the list.

For the 2010 model year, the average fuel economy of a Chrysler vehicle was 19.2 miles per gallon, falling short of the 22.5 miles per gallon average for all automakers.

This week, Marchionne said Chrysler is also exploring options to make a more conventional electric hybrid version of its minivan. An electric version of its Fiat 500 is in the works for 2012. A hybrid Chrysler 300 sedan is planned for 2013.

Chrysler underwent a 2009 bankruptcy funded by the U.S. and Canadian governments. Fiat has a 25 percent stake in Chrysler.

Under terms of the bailout, Chrysler must produce a compact car that will reach 40 miles per gallon for Fiat to receive another 5 percent slice in Chrysler. Marchionne has said this vehicle will be on the market by January 2012.

Chrysler plans to go public in the second half of 2011, but before launching an IPO, it must refinance $7.4 billion in U.S. and Canadian loans that command a high interest rate.

It applied for about $3 billion in low-cost loans from the U.S. Department of Energy, but the process has taken longer than Marchionne had initially expected.

Still, he told reporters it was likely that Chrysler would ultimately get the funding.

Reporting by Deepa Seetharaman; Editing by Lisa Von Ahn and Richard Chang

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