What the Chrysler-Fiat Deal Means for Green Car & Battery Startups

The hours-old tie-up between Italy’s Fiat Auto and Chrysler, which finally toppled over the brink and filed for Chapter 11 today, is no Renault-Nissan. As we noted earlier this year when Chrysler chief Bob Nardelli (who’s now stepping down) announced Fiat’s 35 percent equity interest in the U.S. automaker, the sum of Fiat and Chrysler’s parts does not amount to the kind of electric vehicle powerhouse that Renault and Nissan are trying to build up with their combined vehicle and battery resources.

But the partnership could alter the landscape for green car and battery startups. Chrysler tapped battery maker A123Systems earlier this year as the supplier for at least the first generation of plug-in vehicles in its planned ENVI lineup, which includes electric versions of the Town & Country minivan and Jeep Wrangler and Patriot SUVs, as well as a new plug-in hybrid 200C sedan and Dodge Circuit roadster. With Fiat on board and looking to re-introduce several of its brands on the North American market (including Alfa Romeo and Cinquecento, CEO Sergio Marchionne said today) the electric lineup could eventually get some lighter-weight entries, based on Fiat’s array of compact and subcompact vehicle platforms. As we’ve noted before, giving electric drive and decent battery range to these smaller cars would be less complicated than Chrysler’s plans to electrify its heftier fleet.

An expanded or revised electric lineup could spur the allies to look at other battery suppliers — although not for awhile. According to J.D. Power and Associates powertrain analyst Mike Omotoso, the bankruptcy judge or Fiat itself may decide Chrysler’s electric ambitions are simply too expensive, and “shut down the ENVI operation completely.” Omotoso said he expects Chrysler to put all their electric vehicle plans on hold until further notice.

In the meantime, diesel could rule the day. “Fiat may decide that it’s more cost effective for Chrysler to use Fiat’s 4-cylinder diesel engines instead to meet future CAFE standards,” Omotoso said, referring to the tighter MPG requirements that automakers will have to meet by 2011. “Fiat has one of the most fuel-efficient lineups in Europe and it’s all done with gasoline and diesel engines. No hybrids, no plug-ins. Of course they don’t have anything like the Dodge Ram either, but the point is that there are cheaper solutions to the fuel economy problem.”

This is not to say that A123Systems is on the bench. Omotoso said the company may have to delay its planned IPO, but he expects “they’ll be OK as long as they find another customer.” If Fiat and Chrysler do eventually roll out smaller plug-in vehicles, A123 could be a front-runner for the contract. Fiat’s new Alfa Romeo subcompact, the MiTo, shares enough architecture with BMW’s Mini that the companies have discussed joint use of components and systems. For its electric Mini E, BMW turned to AC Propulsion for the initial 500-car test run of electric drive systems, but it’s now reportedly on the hunt for a battery partner, and A123Systems is in the running.

Other contenders, if the government-aided Chrysler-Fiat alliance goes shopping for a U.S.-based battery supplier, may include Ener1 subsidiary EnerDel, one of three battery companies tapped for Norwegian automaker Think Global’s compact electric Think City (slated to launch in the U.S. next year, despite recent setbacks), and Tesla Motors (if it can beat the odds and set up large-scale production), which Daimler picked for a small pilot run of electric drivetrains for its electric Smart.

According to AutoblogGreen, BMW is also considering LG Chem for the Mini E. That’s the South Korea-based battery maker that beat out A123Systems for GM’s Chevy Volt battery cell deal, in part because LG Chem has a longer track record with flat lithium-ion cells than A123 does (it has focused more on cylindrical cells for power tools, but plans to produceflat, nanophosphate lithium-ion batteries for Chrysler). The prismatic design allows for higher density of cells in lower-volume battery packs.

By the time Chrysler and Fiat are able to invest in new technology, today’s startups could be some of the more established players.

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