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Chrysler to cut up to 12,000 jobs
DETROIT -- The ink barely dry on a new four-year labor contract, Chrysler LLC says it plans to cut up to 12,000 jobs and remove four models from its lineup. The move stunned workers and suggests the now-private Chrysler won't hesitate to cut production and jettison vehicles that aren't selling well.
Chrysler said Thursday it will cut 8,500 to 10,000 hourly jobs and 2,100 salaried jobs through 2008, or about 15 percent of its work force. The cuts come on top of 13,000 Chrysler layoffs that were announced in February.
Chrysler also will eliminate shifts at five North American assembly plants -- including in Belvidere, Ill. -- and cut four models: the slow-selling PT Cruiser convertible, the Dodge Magnum wagon, the Chrysler Pacifica crossover and the Chrysler Crossfire sports car.
'Hard to swallow'
Debbie Raper, a 52-year-old assembly line worker in Belvidere for 30 years, said she felt sorry for her co-workers who are nowhere near retirement age.
"I'm very sad that those young people might not have a future with Chrysler," said Raper, who already was planning to retire in early 2008. "It's hard to swallow."
Chrysler officials said falling demand for vehicles in the U.S. market made the cuts necessary. Chrysler's sales fell 3 percent in the first nine months of this year, according to Autodata Corp., and the company said it expects sluggish sales in 2008.
"We have to move now to adjust the way our company looks and acts to reflect a smaller market," Chrysler vice chairman and president Tom LaSorda, who led the company through the recent contract talks, said in a statement. "That means a cost base that is right-sized and an appropriate level of plant utilization."
Most workers will be offered buyout or early retirement packages. The details of those packages weren't released Thursday. Workers also could be offered jobs at other plants. About 1,100 of the salaried workers affected are temporary workers, who don't get severance packages.
"Our union will make sure our members receive all of the benefits and protections to which they are entitled under the contract," UAW spokeswoman Christine Moroski said.
Industry analysts said the cuts were long overdue to avoid overproduction, which leads to high inventories, angry dealers and costly incentives to move cars off dealers' lots. Chrysler, which became a private company in August, is now better equipped to make those changes, since it doesn't report earnings and can afford to take a short-term hit paying for buyouts. The private equity firm Cerberus Capital Management became the majority owner of Chrysler after buying an 80.1 percent stake from Chrysler's former partner, German automaker Daimler AG.
"One of the things that private equity does is give them the discipline and the financial patience to be able to do things like this," said David Cole, chairman of the Center for Automotive Research in Ann Arbor. "It's about time. We're starting to see the kind of discipline that will build these companies into a sustainably profitable future."
As part of the new plan, shifts will also be cut at vehicle assembly plants in Toledo, Ohio; Brampton, Ontario; and Jefferson North and Sterling Heights in the Detroit area. Also, jobs will be cut at the company's Mack Avenue engine plant.
The announcement comes less than a week after Chrysler workers represented by the United Auto Workers union ratified a four-year contract with the automaker. The agreement passed by a slim margin after a six-hour strike. Belvidere and Jefferson North were among the plants that voted against the agreement, while the Sterling Heights plant voted for it. All of the plants except the Toledo plant are covered by the contract, which promised $15 billion in investment at U.S. plants through 2011.
Several local union presidents and workers said UAW President Ron Gettelfinger and chief UAW-Chrysler negotiator General Holiefield should have been more forthcoming about the impending cuts before members ratified the contract.
"I think we just got sold out by our leadership," said Edward Mendrysa, 56, of Southgate, who for the past 13 years has worked on the door line at the Jefferson North plant.
Raper said workers in Illinois knew cuts were coming, citing drastic rumors that have circulated since the Cerberus deal. "We all think they're here to dice and chop and sell us off," she said.
Raper said outside help is needed to stop the declining trend.
"We all want to be competitive," she said. "There isn't anybody that's not conscientious about their job. But the government has to step in here at some point and help us out."
The company also said it will eliminate four products through 2008: the Dodge Magnum wagon, the convertible version of the Chrysler PT Cruiser, the Chrysler Pacifica crossover and the Chrysler Crossfire sports car.
In the same time frame, Chrysler plans to add two new products: the Dodge Journey crossover and Dodge Challenger sports car, along with two new hybrid models, the Chrysler Aspen and Dodge Durango.
Pacifica sales were down 30 percent in the first nine months of this year as the crossover faced stiff competition from other automakers with newer models. Erich Merkle, vice president of auto industry forecasting for the consulting firm IRN Inc., said Chrysler should have refreshed the Pacifica, because it now has a big hole in its lineup in a crucial segment.
But Merkle said the cuts were necessary to get off an endless cycle of overproduction.
"They're producing more than the country is demanding," he said. "This allows them to produce with much less volatility.