"As we continue to refine the vehicle's powertrain software, we are implementing a plan that will allow us to make the required updates more quickly than anticipated, thereby making additional layoffs unnecessary at this time," Chrysler spokeswoman Jodi Tinson said in a statement.
Chrysler was withholding at least 12,000 assembled Cherokees from dealers -- worth at least $300 million retail -- to fix their software.
A source told Automotive News that the software at issue regulates how the nine-speed transmission interacts with the Cherokee's innovative disconnecting driveshaft and differential. Chrysler confirmed the issue in its statement today.
"This is the world's first application of a highly technical nine-speed transmission; on top of that, it is being mated to two new engines and three complex 4x4 systems. As our senior management has stated many times before, we will only introduce a vehicle to consumers when we are completely satisfied," the statement said.
To make sure the powertrain is working right, the automaker has also taken the highly unusual step of test driving each Cherokee before it is released for delivery.
Chrysler's design for the Cherokee's powertrain is ambitious and complex.
The SUV has two engines, a 2.4-liter inline-four and a 3.2-liter V-6, plus a nine-speed automatic transmission and the disconnecting driveshaft and differential. All of these parts are new to Chrysler and none have been combined before on one vehicle.
The engines were designed by Chrysler, the transmission was licensed from ZF Friedrichshafen and the disconnecting driveshaft and differential were developed by American Axle & Manufacturing. But it's Chrysler's responsibility to write the software to make the parts work together.
Jeep engineers have had to develop and perfect operating software -- shifting patterns, when to automatically disconnect or reconnect the rear driveshaft for added traction -- for each of the Cherokee's powertrain configurations.
In addition, the Cherokee is being assembled in Chrysler's Toledo Assembly Complex, which underwent an extensive $500 million renovation and was off-line for almost 10 months in order to build the successor to the Jeep Liberty.
Most automakers roll out new vehicles in stages -- perhaps putting new sheet metal atop an already tested powertrain, or adding a new engine variant one year and an updated transmission the year after.
Jeep's design gamble with the Cherokee -- launching new engines, transmission and drivetrain controls together with the new design -- was necessary because its product in the segment, the Liberty, was in last place and fading, Jeep executives said.
"For me, this whole segment is opportunity, because we only had 3 percent of it, 4 percent in a good month," Jeep brand head Mike Manley told Automotive News this month. "That leaves 96 or 97 percent of the segment open for me to really show what Jeep can do."
Dealers, of course, have spent months answering questions from consumers about when the Cherokees would arrive in showrooms.
Production was originally scheduled to begin May 23, but the start was delayed until June 24. On June 30, Manley said he expected Cherokees could begin arriving in showrooms as early as mid-August, but left himself room to say that they would begin significantly affecting the company sales results in the third quarter, which ends Monday, Sept. 30.
Earlier in September, Manley said "a true commercial launch" of Cherokee marketing would begin by early October. He said initial dealer orders were encouraging, and that consumer interest in the Cherokee was "actually higher than it was for Grand Cherokee at this stage."
But dealers said that while online interest in the Cherokee might be brisk, it hasn't materialized into a crush of prospects at the door waiting for Cherokees to arrive.
"We're not getting inundated. I wish we were," said Don Lee, president of Lee Auto Malls, which has a pair of Chrysler-Jeep-Dodge-Ram stores in Maine. "We're not advertising it yet, and Chrysler's not advertising it yet. But there's no big push."