Chrysler, VW Ponder Small Cars

Chrysler Group confirms it is in talks with Volkswagen AG about the possibility of together producing a small car for international markets.

But it is unclear whether VW would have the cost base necessary for the program, which Chrysler is targeting at retail prices less than $10,000 in the U.S. and £10,000 ($12,315) in Europe.

Critical is finding a partner with both an appropriate existing platform and a low-cost production site, Frank Klegon, Chrysler executive vice president-product development, says. And that favors an auto maker with either Asian or Eastern European assembly capacity, he says.

Klegon wouldn't reveal planning volumes for the proposed car but says it would be aimed primarily at markets outside the U.S., with a heavy emphasis on Western Europe and Asia.

But the emerging small-car sector in the U.S. also is a potential market for the car, which could be based on the Dodge Hornet concept shown in Geneva in March.

“I think (the Hornet) works here, because it is very stylish,” Klegon says. But he admits the B-car segment “still has a long way to go (in the U.S.). I think it's still a challenge.”

A decision on the program is expected later this year.