DaimlerChrysler To Cut 26,000 Jobs

Monday, January 29th 2001, 12:00 am
By: News On 6

AUBURN HILLS, Mich. (AP) — DaimlerChrysler AG announced plans Monday to cut 26,000 jobs, or about 20 percent of its North American work force, over three years at its struggling U.S.-based Chrysler division as part of a sweeping bid to curb losses.

DaimlerChrysler chairman Juergen Schrempp has said Chrysler would lose money this year, and that rehabbing the troubled U.S. unit could take two to four years.

Chrysler group president and chief executive Dieter Zetsche, tapped in November to lead the division's turnaround effort, already has asked for 5 percent price cuts from Chrysler suppliers. Chrysler also plans to slash hundreds of millions of dollars in advertising and showroom subsidies to its 4,400 dealers.

Monday's plan calls for six manufacturing plants to be idled through 2002. Chrysler said it expects a large part of the job-cutting to be done through retirement programs, achieved within the framework of existing union contracts.

The plan will reduce overall production capability by 15 percent.

``These decisions are absolutely necessary to be kept competitive and in fact to survive,'' Zetsche said at a news conference Monday. ``They must be made as soon as possible to take control of costs and end uncertainty that many people are feeling. No one wants this to happen.''

The vaunted 1998 trans-Atlantic merger of equals appears to be entering another crucial stage.

Chrysler's performance hasn't met Stuttgart-based DaimlerChrysler's expectations, with sales incentives erasing profits and production of the hot new PT Cruiser falling short of demand. Daimler and Chrysler also have been reluctant to share parts to cut costs, which might change with a new emphasis on saving money.

Chrysler said the job cuts will involve 19,000 hourly workers and 6,800 salaried employees. United Auto Workers union spokesman Paul Krell declined to comment immediately Monday. The union represents Chrysler's hourly workers.

The job cuts will be made through a combination of retirements, special programs, layoffs and attrition.

Chrysler expects that three-quarters of the overall reduction will be achieved this year. Company officials would not comment on how much the automaker will save as a result of the job cuts.

Plants slated to be idled include the Toluca transmission plant in Mexico, and assembly plants in Cordoba, Argentina, and Parana, Brazil.

Chrysler also plans to shift production from a Detroit engine plant to two other sites. In Mexico, Chrysler also plans to shift production from its assembly plant in Lago Alberto and close its Toluca engine plant.

Production will be scaled back at plants in four states and Canada, including Detroit; Belvidere, Ill.; Toledo, Ohio; Newark, Del.; Brampton, Ontario, and two sites in Windsor, Ontario.

``The only consolation is that many people at Chrysler have faced this before and responded well,'' Zetsche said.

Zetsche said Chrysler will unveil its complete plan to turn around the unprofitable division on Feb. 26.

In the long run, what matters most is Chrysler's ability to develop and make vehicles that people want to buy, said analyst David Garrity of Dresdner Kleinwort Benson in New York.

He said he was encouraged that the company was leaving its product development budget relatively untouched.

But he said it was shortsighted for the company to cut production the most in Mexico and Canada, where costs are lower, while shielding higher-paying jobs in the United States. The Chrysler-UAW national contract contains safeguards against job cuts.

``You have a company that in some respects had been hamstrung by the UAW agreement, that has limited their ability to reduce costs,'' Garrity said.

Last year, Chrysler posted a third-quarter loss of $512 million and warned that its fourth-quarter loss could more than double that amid a downturn in the U.S. auto market.

On Saturday, Germany's Stuttgarter Zeitung newspaper reported the Chrysler unit could lose $1.3 billion in the fourth quarter.

DaimlerChrysler's stock price has fallen steadily since reaching a high of $108 in January 1999. In trading on the New York Stock Exchange Monday morning, the company's stock was down 58 cents to $47.66.

DaimlerChrysler has insisted it has no plans to spin off or sell Chrysler.


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