From the allpar.com article on the Horizon/Omni:
"Originally, a 2.0 liter four-cylinder was created by Chrysler for use in the new car; and while this was being engineered, negotiations were started with Volkswagen to adapt their existing Rabbit engine to Chrysler’s needs. This involved a power boost, handled by expanding from 1.5 to 1.7 liters, and modifications to fit in the engine bay; minor changes were made to the block to accommodate the longer stroke and to attach the A404 automatic transmission. Engine dressing was very different from the Rabbit due to differences in the engine compartment; Chrysler used its own intake and exhaust manifolds, engine mounts, and fuel delivery. As a result, Volkswagen merely shipped “short engines” to the Trenton Assembly plant, which dressed the engines, adding even timing belts and sprockets. The engines produced 75 hp at launch, backed up by 90 lb-ft of torque (in California both numbers were lower), for sprightly acceleration with a manual transmission and acceptable automatic performance.
The 1.7 liter engine used an iron block with aluminum heads; valves were powered by a single overhead cam that used shims to adjust valve lash. There were five main journals on the forged-steel crankshaft; the timing belt drove the cam and an auxiliary shaft for the oil pump and distributor. A two-barrel carburetor was used, as was an electric fan. Emissions were aided by an air pump. The Omni and Horizon launched in the United States in January 1978 and were instant sales successes, despite the failure of prior European imports, due to the Americanization efforts and local manufacturing. Based on their success, Chrysler created the TC3 and O24 models, both using the 1.7 liter engine at first.
Over one million Volkswagen engines made their way into Chrysler Corporation vehicles by 1981; however, 1983 was the last year for both these and the Simca engines that were used on lower-end models. From 1984 onwards, it was 2.2 liters across the board — with or without turbochargers. "
"While engineering started early on the 2-liter four-cylinder engine, capital was needed to create the Horizon itself, and the Volkswagen engines released some of the time pressures; so Chrysler was able not only to take more time, but also to get a close look at how the Volkswagen engines performed in American driving conditions and to learn from their engineering. This engine was expanded to 2.2 liters, and was set up differently from the Volkswagen motors in numerous ways; however, they also moved from the Simcas. The famous 2.2 liter engines arrived, at last, in 1981, with 81 horsepower, as an option for the Omni/Horizon and TC3/O24; with substantially more torque, they were much zippier and only a little worse on gas."