Chrysler to build Hornet compact car

Rising fuel prices, which have led to flagging sales of SUVs and pickups, has forced the Detroit 3 to cut production and layoff thousands of workers. At the same time, Japanese carmakers, who lead the industry in the compact car segment, have been benefiting from record sales as consumers downshift to smaller and more fuel-efficient vehicles. American carmakers are now rushing to get small and mid-sized vehicles onto the market, and have already made several major announcements in the past month alone.

GM has confirmed plans to build a new compact car in the U.S. by 2010 and recently unveiled an updated Aveo range. Ford has also updated its Focus compact and plans to launch the new Fiesta sub-compact by the end of the decade.

Despite its poor financial situation, Chrysler is also making several advances in the small car field. Already confirmed for the U.S. is the new Versa hatch and sedan, which Chrysler is sourcing from Nissan, but a second smaller car based on the 2006 Dodge Hornet Concept is also in the works and will be launched in Europe and the U.S. by 2010.

Speaking with the Financial Times Deutschland, Chrysler’s vice president for international purchasing, Thomas Hausch, confirmed the carmaker was developing a production version of the Hornet and plans to make an announcement soon.

Hausch wasn’t willing to reveal which of Chrysler’s brands will sell the new model but he hinted that there could be a car smaller than the current 2.0L Sebring in the works. The reason the new car may not be sold as a Dodge is because Chrysler is hoping to differentiate each of its three brands, Chrysler, Jeep and Dodge, by limiting them to the types of vehicle each sells. Chrysler is to be responsible for cars, Jeeps is expected to stick with 4WDs, while Dodge is to feature pickup and SUV models.