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Chrysler to cut 26,000 jobs
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January 29, 2001: 2:35 p.m. ET
Automaker to slash jobs, idle plants at money-losing North American unit
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NEW YORK (CNNfn) - DaimlerChrysler unveiled Monday its plans to slash 26,000 jobs at its sputtering Chrysler arm over three years.
The reduction of about 20 percent of Chrysler's work force is part of a restructuring plan aimed at bringing the North American division back to profitability. The company also said it will idle six of its 50 worldwide plants through 2002, as well as eliminating shifts or cutting production at another seven assembly plants.
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 CNNfn's Jack Cafferty takes a look at DaimlerChrysler's plan to cut jobs. Also, watch part of the company's news conference from Detroit. |
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The United Auto Workers union, which represents hourly workers in the United States, had no immediate comment on the closings and staffing cuts. The Canadian Auto Workers union, which represents hourly employees there, said it would work to minimize the impact on its members.
Its statement said that its negotiators convinced Chrysler to slow production at its Windsor, Ontario, plant rather than eliminate a shift. It said it would not agree to any concessions or opening of labor agreements reached in 1999 that run through 2002.
"Canadian workers contributed significantly to record billion dollar profits in recent years," said the union's statement. "The company had no argument for concessions from CAW members."
Analysts said that the savings from production cuts will be greatly limited by the labor agreements in Canada and the United States.
"It's going to cost them a great deal in the short term to put the savings through," said Michael Dean, analyst with Merrill Lynch in London. "They still have to pay blue collar workers they lay off 95 percent of their wages." While company officials would not give any estimates on charges related to the cutbacks, Dean estimated the charge will be in the range of  3 billion to 4 billion, or $2.8 billion to $3.7 billion.
"The cuts are a bit higher than we thought would happen," said Dean. "Still we think this is not a quick fix for DaimlerChrysler. The main problem for Chrysler going forward is the softening of the U.S. market and increased competition in its key markets, such as the minivan."
Dean said that Merrill Lynch expects Chrysler to post a 2 billion loss, or $1.8 billion, this year and to only break even next year.
"They are far away from making the profit they were making in 1999," he said.
Production to be cut 15 percent
The planned shift changes, plant closings and idling of factories will reduce Chrysler's overall output by about 15 percent, the company said. The German-American automaker said 75 percent of the job cuts would be made this year and that the cuts were in line with its union contracts. It also said it believed most of the job cuts will be accomplished through retirement programs, although Dieter Zetsche, Chrysler's new CEO, said there would a need for layoffs, primarily among salaried staff. There would also be some cuts in salaried compensation this year. (358KB WAV) (358KB AIFF)
Chrysler, the third-largest North American automaker, announced a $512 million loss in its operations in the third quarter last year, and published reports indicate that it lost about $1.25 billion in the fourth quarter. The company has blamed the high cost of launching new vehicles and a competitive U.S. market.
 "The markets are deteriorating, and our company's performance even more so. Competition is brutal," said Zetsche, at a news conference Monday in Detroit. "North American manufacturers are under pressure from imports and an incentive war is on."
The job cuts will involve 19,000 hourly workers and 6,800 salaried employees, and they will come through a combination of retirements, special programs, layoffs and attrition, the company said.
Zetsche said that while company executives still plan to give further details of their turnaround plans for Chrysler Feb. 26, they felt the staffing and production cuts announcement needed to be made immediately.
"It's important that we take them as quickly as possible for two reasons -- first, to gain control of our costs and second, to end the uncertainly many of our people are feeling," he said.
The company will also release fourth-quarter results on Feb. 26 and details on the size of charges from the cutbacks.
Click here for a look at automotive stocks
Click here for details of plant closings and production cuts
A plague of job cuts
There are no U.S. or Canadian assembly plants being closed under Monday's announcement. But three U.S. plants and two Canadian plants will each lose one of their shifts. In addition, one other plant in each country will slow the assembly line speed in order to cut production. Models affected include some of the company's core vehicles, including the Voyager and Caravan minivan, the Jeep Grand Cherokee and Dodge Durango sport/utility vehicles, and the Neon compact cars.
The six plant closings will include a Mexican transmission plant and assembly plants in Argentina and Brazil that will close this year, a U.S. engine plant on Mound Road in Detroit, a Mexican assembly plant, and a Mexican engine plant slated to close next year.
Chrysler was once the paragon of U.S. innovation, before it agreed to an unprecedented transatlantic purchase by Germany's Daimler-Benz valued at $38 billion in May 1998. Analysts and industry observers then questioned how well Daimler's stodgy culture would mesh with the upstart U.S. carmaker. 
The deal sparked an exodus of top managerial talent from Chrysler, culminating in the replacement of James Holden, a veteran of the automaker, with Zetsche in November.
As part of Monday's announcement, Juergen Schrempp, the chairman of DaimlerChrysler, issued a statement saying, "I have full confidence in the management team under the leadership of Dieter Zetsche. These measures will substantially help to turn around the Chrysler Group."
But Schrempp has himself been under fire. Billionaire investor Kirk Kerkorian, the largest U.S. shareholder, in November filed an $8 billion lawsuit claiming he was hoodwinked by Schrempp with false promises the deal would be a merger or equals. Kerkorian has sold a chunk of his shares since filing the suit.
In Frankfurt trading Monday afternoon, shares of DaimlerChrysler lost 1.55 to close at 51.35. U.S. shares of DaimlerChrysler (DCX: Research, Estimates) fell 93 cents to $47.31 in U.S. trading.
-- from staff and wire reports 
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