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Published: Thursday, 2/15/2007

Chrysler will cut 13,000 U.S. jobs

BY JULIE M. McKINNON
BLADE BUSINESS WRITER

Less than 10 years after DaimlerChrysler AG was formed with great fanfare, the German automaker may sell its troubled American unit.

Chrysler plans to trim 13,000 employees in three years as part of the restructuring announced yesterday, including 9,000 hourly jobs in the United States, 2,000 salaried positions overall, and 2,000 hourly spots in Canada.

That will cut 16 percent of its work force, which already had been slashed by a third since 2001, and employees will be told of special retirement buyouts and other programs in coming weeks.

The cost-cutting had been widely anticipated and followed huge employee reductions in the past year by General Motors Corp. and Ford Motor Co., which each have chopped 30,000 workers in the past year or so. One staffing expert said the American auto industry has sliced 285,000 jobs in the past 25 months.

As expected, the announcement had no direct effect on the firm's operations in the Toledo area.

Toledo Jeep Assembly contin-ues to hum with the Jeep Wrangler, Jeep Liberty, and Dodge Nitro. Workers at the machining plant in Perrysburg Township agreed last year to a labor pact that will transform it into an engine operation while reducing the work force by 800.

Among the biggest moves will be closing Chrysler's Newark, Del., sport-utility vehicle plant in 2009 after eliminating a production shift there this year. It also will idle a parts distribution center in Cleveland in December.

Work shifts will be cut at plants in Warren, Mich., and St. Louis, and production at parts plants will be scaled back to reflect the 400,000 fewer vehicles to be built annually by the end of 2009.

Chrysler, which lost $1.4 billion last year, built too many vehicles in 2006 as competition from foreign automakers increased and gas prices drove customers away from its SUVs, pickups, and minivans, said Tom LaSorda, president and chief executive.

Cutting production and mending relations with dealers who were harmed as inventories rose will help the Auburn Hills, Mich., firm reach profitability next year and get a 2.5 percent return on sales by 2009, Mr. LaSorda said.

"Our inventories were not aligned with the changing market," he told reporters. "Overall, the status quo is clearly unacceptable."

Daimler Chairman Dieter Zetsche said the German firm will consider all options to find the best solution. Those could include alliances with other automakers or a sale of part or all of the U.S. operation.

He declined to elaborate or comment on reports Daimler was in talks with GM, as did GM officials. The Detroit News, quoting unidentified sources, said the Chrysler owner had hired J.P. Morgan & Co. to explore options.

Any talks with GM most likely would concern a joint project, not an acquisition, but potential buyers for Chrysler include PSA Peugeot-Citroen, the Renault-Nissan Alliance, or an emerging Chinese automaker that wants to quickly establish a U.S. presence, said David Cole, chairman for the Center for Automotive Research in Ann Arbor.

Combining Daimler-Benz AG and Chrysler Corp. nine years ago did not result in anticipated cost savings, Mr. Cole said. Chrysler must undergo the restructuring to fix its business, he said.

"It's pretty clear that there's a sense of urgency," he said.

Chrysler's Mr. LaSorda said the automaker will spend $3 billion on the so-called Phoenix V-6 engine project, part of which involved the Perrysburg Township factory, and other initiatives to improve fuel economy, but he declined to give more details.

The company also plans to double production of four-cylinder engines at its new Dundee, Mich., joint venture plant.

Meanwhile, the upcoming redesigned Liberty was touted by Mr. LaSorda as one of eight new vehicles that will hit the market this year and one of 20 in the next three years.

But Chrysler continues to push for cuts in health-care costs from the United Auto Workers, which is reviewing financial information it requested, the executive said. The company also wants a "responsible" labor pact from negotiations this year, he said, declining to elaborate.

Chrysler's restructuring will be the subject of ongoing discussions and contract negotiations, the UAW said yesterday.

"We maintain that the company cannot cut its way to profitability and have emphasized that a successful growth strategy depends on the skills and know-how of the UAW work force," union President Ron Gettelfinger said in a statement.

The latest moves follow GM's slashing 34,000 hourly workers and 2,000 salaried workers last year and Ford's elimination of 44,000 jobs, including the upcoming closure of Maumee Stamping Plant and 15 other factories.

All three Detroit automakers - especially Ford - are struggling and may need to trim more jobs, as will suppliers, according to Challenger, Gray & Christmas, a Chicago consulting agency.

Contact Julie M. McKinnon at:

jmckinnon@theblade.com

or 419-724-6087.



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