Chrysler said Thursday it would cut 12,000 jobs in North America through 2008, including up to 10,000 hourly workers, as it retrenches in the face of lower than expected demand for its cars and trucks.
In addition to the elimination of shifts at five assembly plants, Chrysler said it would also trim workers at other plants. The moves come on top of the 13,000 job cuts announced in February under the company's previous turnaround plan.
Chrysler Chairman and Chief Executive Bob Nardelli said that the automaker is moving now because it expects industry sales to run "significantly lower" than the 17.2 million vehicles it had expected for 2007, with the weakness stretching into 2008.
"We have to move now to adjust the way our company looks and acts to reflect a smaller market," said President and Vice Chairman Tom LaSorda in a statement. "That means a cost base that is right-sized and an appropriate level of plant utilization."
The plan also calls for Chrysler to shed about 2,100 salaried and contract jobs before the end of the year. The automaker also announced it was culling four slow-selling models from its lineup over the 2008 model year: the Chrysler Pacifica, Crossfire, PT Cruiser convertible and the Dodge Magnum.
In addition to the shift cuts at Jefferson North and Sterling Heights, Mich., Chrysler will cut third shifts at Toledo North; Belvidere, Ill.; and Brampton, Ontario. It will also cut a shift at the Mack Avenue Engine plant in Detroit. Chrysler said it would consider adding a shift back to Jefferson North when it launches the next generation of its sport-utility vehicles in 2010.
The automaker reiterated that it had committed under the new UAW labor contract to spending more than $15 billion on products, plants and engineering through 2011.
Nardelli has moved quickly to put his stamp on Chrysler. In less than 100 days, he has hired two top executives away from Toyota Motor (TM), reached a new labor contract with the UAW and shuffled top management.
But speed is likely a necessity for Chrysler's new owner Cerberus Capital Management, which is famed for making rapid moves in its acquisitions.
While the privately held Chrysler is not required to make its financial results public, it had lost $2 billion in the first three months of this year and saw its sales decline 3% through September. Several of its newer products, such as the Jeep Commander built at Jefferson North and the Chrysler Sebring at Sterling Heights, have not met expectations.
With corporate borrowing costs on the rise, Nardelli and other Chrysler executives have said Cerberus is focused on improving the company's cash flow. Culling models and fleet sales will reduce losses, but Chrysler will need a healthy amount of cash for new model development and its $8.8-billion commitment to a union-run health care fund.
"All three of the Detroit automakers need to have deep pockets at the moment," said industry analyst David Healy of Burnham Securities. With the weak economy, Cerberus' intent "is to turn it around as fast as they possibly can."
Under DaimlerChrysler, Chrysler had updated its factories to handle more models using second and third shifts rather than building new plants.
The model cuts target four vehicles whose sales have sagged in recent years. The aging Pacifica and Crossfire share no common underpinnings with other Chrysler vehicles and need expensive updates, while the slow-selling Magnum will be replaced by the Dodge Journey crossover when it launches next year.
The retro-styled PT Cruiser also had been on the short list of four models that Chrysler was expected to cut. But despite a sales decline of 27% through September, the PT Cruiser is still the third best-selling model in the Chrysler brand's lineup, behind the 300 sedan and the Town & County minivan.
The PT Cruiser has been a mainstay of the Chrysler lineup since it was launched in 2000, and the company has struggled to find a way of updating the Mexico-built wagon without losing its styling flair. The PT Cruiser often has been the most reliable Chrysler model in durability surveys, and fans of the wagon started an online petition in August to persuade Chrysler to keep it in production.
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Print | posted on Thursday, November 01, 2007 5:52 PM