TRAVERSE CITY, MI – Chrysler Group Chief Operating Officer Eric Ridenour says the auto maker is ready to do battle in the fast-changing U.S. market.

Speaking to reporters here at the Center for Automotive Research Management Briefing Seminars, Ridenour says the steadily rising price of fuel is affecting nearly every aspect of the industry.

Nonetheless, he believes Chrysler, thanks to careful product and powertrain planning and the largest stable of new vehicles it has ever introduced in a single year, is well-positioned to adjust to the U.S. market’s rapid shift from light trucks and SUVs to more fuel-efficient alternatives.

“Fear is the operative word right now,” Ridenour says. “Consumers fear more (fuel) price increases.”

Ridenour says Chrysler’s product mix, although as exposed as any OEMs, due to a heavy reliance on the Ram pickup and its seminal Hemi V-8, is becoming more “balanced” with the launch of several new or upcoming vehicles and fuel-saving technologies.

These include the Caliber compact car, an increase in production of flexible-fuel vehicles and the pending launch of Chrysler’s first hybrid-electric drivetrain.

Ridenour doesn’t discount consumers’ seemingly rapid shift from light-truck segments to passenger vehicles perceived to be more economical, but he admits the subcompact, or “B” portion of the market is, “a tough segment to make money in.”

He says the company remains on track to announce a B-car production partner by the end of the year but says Chrysler is being careful about its options. “We won’t do it (enter the B segment) to lose money,” he says. “We see a good-size market, but it’s not huge.”

Ridenour says it likely will take longer than a year to reach the market with a B-segment vehicle once Chrysler forms an alliance with a production partner.

Time to market with the new B-vehicle “will depend on the partner and the maturity of the product underneath.”

It is not inconceivable smaller vehicles could generate SUV-like profits – it’s all about demand, Ridenour insists.

However, he thinks the U.S. subcompact-car customer is driven more by price and package versatility than by fuel economy, so there is a price point at which the average consumer simply will not buy a vehicle that small.

Addressing the early success of B-segment vehicles such as the Honda Fit and Toyota Yaris, Ridenour says their rapid market acceptance resulted from an “unnatural starting point” that coincided with upward-spiking gasoline prices.

He thinks next year, the first full year of sales for new compacts with the effect of high gasoline prices already assumed, will be a more telling indicator of long-term demand for the segment.

Ridenour admits Chrysler also has noted a shift away from its Hemi V-8 in vehicles where there is a smaller-engine option. “We always knew the (Hemi installation) rate we were seeing was higher than we ever expected.”

For now, the auto maker sees no reason to put a damper on Hemi production at its assembly plant in Saltillo, Mexico. The plant has been expanded, and there is no plan to reduce shifts or otherwise curtail Hemi production.

Ridenour says midsize SUVs appear to be “the most distressed” segment, but insists, as with pickups, there is a certain portion of the buying public that always will need this type of vehicle and will not compromise.

He notes Chrysler is launching, as part of its 10-vehicle offensive, a diesel-powered variant of the Jeep Grand Cherokee. The Mercedes-Benz-made 3L V-6 turbodiesel will offer better efficiency and torque than a gasoline V-8 and a 425-mile (684-km) driving range.

Chrysler predicts diesels could account for 5%-15% of the U.S. market within the next 10 years, he says.

Another option is flexible-fuel vehicles that run on a gasoline/ethanol mix. Chrysler already has about 1.5 million flex-fuel vehicles on the road and plans to produce about 250,000 flex-fuel vehicles in 2007 and double that amount in 2008.

“We believe flex-fuel vehicles are part of the answer,” Ridenour says, noting that in 2008, one in four Chrysler vehicles will be flex-fuel capable.

Additionally, Chrysler is joining with General Motors Corp. to help promote flex-fuel capability to customers, he says. Starting with ’07 models, Chrysler flex-fuel vehicles will carry new badging, as well as yellow fuel-filler caps (also used by GM) to “let consumers know their vehicle is flex-fuel capable.”

Ridenour says the new-product and powertrain-technology offensive “positions DaimlerChrysler (AG) for success no matter what the future brings.”