NEW YORK (CNN/Money) - Dieter Zetsche, the new chief at DaimlerChrysler and its Mercedes unit, told a Detroit newspaper that Chrysler is a key to turning around the luxury car brand.

Zetsche, who had previously restored Chrysler Group to profitability, was named chairman of DaimlerChrysler's management board and head of its Mercedes Car Group in July. In an interview with the Detroit News, he dismissed talk that Mercedes would be better off without Chrysler.

"There's no doubt that the speed and sustainability of bringing Mercedes back to very good profitability can only be increased by being able to work with Chrysler, versus on a stand-alone basis," he told the newspaper. For instance, he said the company decided two months ago to combine the advanced engineering for vehicle electronics.

Chrysler has lagged behind both Japanese auto manufacturers and Ford Motor Co. in offering more fuel efficient gas-electric hybrid cars. He told the newspaper the company now expects to launch a hybrid sport/utility vehicle in late 2007 or early 2008. But he said the company still needs to press ahead with other fuel-saving alternatives, such as diesel power, which is more widespread in Europe and more fuel-efficient in long-distance, highway driving than the hybrid vehicles, which see their greatest fuel savings in city driving.

He also told the newspaper that some of the problems at Mercedes were due to denial by executives there.

"Some people couldn't imagine that there could be problems at Mercedes," he said. "They were in denial before the problems became full-blown."

He vowed the company's German and U.S. auto divisions will work together more closely in the future. He also said he wants to bring to Mercedes some low-cost, lean manufacturing methods that Chrysler adopted from Japanese auto manufacturers during his tenure there.

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