The Chrysler group is planning to build a new, cheaper version of its struggling Pacifica crossover utility vehicle, industry sources say, a move that deals a blow to the auto maker's strategy of distancing itself from competitors by offering premium-priced vehicles.

The new vehicle -- assembled at the company's Windsor, Ont., minivan plant -- is scheduled to go into production next year as a 2005 model, but will offer significantly less content than the two versions currently offered, industry sources familiar with the program said.

The scaled-down version will have just two rows of seats instead of the three rows that are standard on the current versions. Some other luxury features now offered as standard equipment will also be eliminated, the sources said.

"From what I'm hearing, it's definitely a go," said Jeff Schuster, senior manager of forecasting and product planning for automotive consulting firm J.D. Power and Associates.

Chrysler officials would not confirm the move.

"We don't comment on future products," DaimlerChrysler Canada Inc. spokeswoman Kerrey Kerr said.

The shift in strategy underlines the difficulty the Chrysler division of DaimlerChrysler AG is facing as it tries to upgrade its vehicles and push them into premium categories and out of the traditional mass market segments where it has always played.

This is a key part of the company's plans for its flagship passenger cars being assembled in Brampton, Ont. Those cars, identified so far as the Dodge Magnum and Chrysler 300C, will be switched to rear-wheel-drive from front-wheel-drive, putting them in territory now occupied by luxury makers such as another DaimlerChrysler division, Mercedes-Benz and the Lexus division of Toyota Motor Corp.

Chrysler officials were also hoping that strategy would enable the company to withdraw -- at least in part -- from the fierce incentive battle that has all but wiped out profits for the Detroit-based auto makers.

Sales of the Pacifica struggled initially after Chrysler messed up the launch by offering only the most expensive versions of the vehicle first and having few base-priced models on hand.

The all-wheel-drive model originally sold for a base price of $32,980 (U.S.) without options. The front-wheel-drive version fetches $29,525. Both now come with a $3,000 rebate Chrysler slapped on the vehicle earlier this month or a five-year, interest-free loan.

The all-wheel-drive version offers such standard equipment as premium power front seats, side curtain air bags and automatic dimming rear-view mirrors.

The price tag of up to $40,000 after options and taxes didn't sit well with consumers.

Purchasers of vehicles are currently enjoying a sustained run of deflation in the North American auto market because of fierce competition and the incentive wars.

"We had to learn our lessons," Manfred Gentz, chief financial officer for DaimlerChrysler AG, acknowledged last week on a conference call with analysts.

The Chrysler group took the unusual step last week of sending out a news release quoting dealers and customers in the United States lauding the vehicle and bragging that the auto maker has created an entirely new vehicle segment with Pacifica.

The news release said sales of Pacifica have increased every month since the vehicle went on sale in March and reached 7,589 in the U.S. market last month.

But initial projections were that 120,000 Pacifica models a year would roll off the assembly lines in Windsor, where it is put together along with Chrysler's minivans.

About 80,000 will probably be sold this year, said Mr. Schuster of J.D. Power.

"I don't think they're going to do 120,000 next year," he said.

With a major restructuring that involved more than 25,000 job cuts and several plant shutdowns -- including a plant in Windsor that assembled full-sized vans -- Chrysler has reduced its costs.

But that has not been enough to restore profitability because the incentive wars have taken a bit out of the revenue side of the financial statements.

"What really hurts for Chrysler is the lack of a place to hide from the price wars," Saul Rubin, an auto analyst for UBS Securities LLC in New York, wrote in a report on the company last month.

The failure of Pacifica to attract new customers at the higher price point means it has not helped out as much as Chrysler hoped and pushing up the prices for the passenger cars early next year is a risky strategy as well, Mr. Rubin wrote.