Chrysler cutting up to 12,000 jobs, eliminating products
11-01-07, 08:18 AM
#1
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Chrysler cutting up to 12,000 jobs, eliminating products
Thursday, November 1, 2007
Day of pain: Downsizing aims to return Chrysler to profitability
Bill Vlasic and David Shepardson / The Detroit News
Chrysler LLC is expected to eliminate five shifts and about 4,000 hourly jobs at manufacturing plants in Michigan, Ohio and Illinois as part of a broad cost-cutting effort by the automaker's new private owner.
People familiar with the situation said Chrysler will drop shifts in early 2008 at assembly plants in Detroit, Sterling Heights, Toledo, and Belvidere, Ill., as well as at its Mack Avenue engine complex in Detroit.
The moves are expected to be announced by Chrysler today, along with plans to slash 1,000 salaried jobs, cut 1,100 contract positions, and drop four slow-selling models including the retro-styled PT Cruiser convertible.
Chrysler officials declined Wednesday to comment on the sweeping cuts.
The additional approximately 6,000 job losses come as the automaker is already in the midst of a major reorganization announced in February that will eventually eliminate 11,000 hourly jobs and 2,000 salaried positions through buyouts, retirements and attrition.
People familiar with Chrysler said its new owner, the private-equity firm Cerberus Capital Management LP, is determined to downsize the automaker to speed its return to profitability.
Chrysler's board, led by new Chairman and CEO Bob Nardelli, met for the first time Tuesday since Cerberus acquired the automaker in August from Daimler AG.
Industry analysts said the dramatic cuts to be unveiled today are characteristic of how a private-equity firm moves aggressively to streamline a new acquisition such as Chrysler.
"Decisions like this are being made a lot faster than they would be if Chrysler were under public ownership," said Aaron Bragman, an analyst with the automotive forecasting firm Global Insight Inc.
The shift reductions reflect Chrysler's shrinking U.S. market share and its need to reduce inventories of unsold vehicles.
Dropping shifts will eliminate 1,000 jobs at the Jefferson North Assembly Plant in Detroit; 1,000 jobs at Sterling Heights Assembly; more than 1,000 jobs at Belvidere Assembly; and 750 positions at the Toledo North Assembly Plant. About 200 jobs will be affected at the Mack Avenue Engine Complex. It is not clear whether the reductions will be at Mack I, which builds V-8 engines, or the Mack II V-6 engine facility.
People close to the company said one shift at each plant will be cut in the first quarter of 2008. Affected workers likely will be offered early retirement or buyout packages, the people said.
The shift reductions come on the heels of Chrysler agreeing to a new four-year labor contract with the United Auto Workers.
Nardelli said at a public appearance Monday that the new UAW contract represented a "major step forward" in reducing labor costs. The contract, however, was bitterly debated during ratification by about 45,000 Chrysler workers and passed Saturday by a close vote.
But the new UAW contract is proving to be just the beginning of a bigger cost-cutting blitz at Chrysler.
The wide-ranging cuts in hourly, white-collar and contract workers were orchestrated by Nardelli, a veteran General Electric Co. executive and former Home Depot Inc. CEO.
Nardelli confirmed Wednesday that the Chrysler board had held its first meeting, but declined to confirm reports in The Detroit News that directors had approved job cuts and plans to kill four vehicles.
"We had a good healthy discussion and that will be communicated at the appropriate time," Nardelli told reporters after meeting with congressional leaders in Washington.
'It's really a shock'
But even as Nardelli was attending meetings on Capitol Hill, the first wave of contract workers was being terminated at Chrysler headquarters in Auburn Hills.
Chrysler is eliminating 1,100 contract positions by the end of the year, according to company spokesman Mike Aberlich.
Several hundred of those workers left Wednesday, including Suchindra Gunvavarapu, a 24-year-old contract employee for two years in Chrysler's information technology unit.
"It's really a shock for me, even though we were told this was coming," said Gunvavarapu. "About a hundred people in my area are gone."
Chrysler will begin eliminating 1,000 salaried employees this month through early retirements and buyout programs, said people familiar with the situation.
Unsettled workers were openly wondering Wednesday about their futures at the company.
"Heads are going to fly here," said Bob Langlois, an analyst in Chrysler's comptroller's office. "You try to go to work every day knowing they'll probably try to whack your department by Christmas."
Lineup changes
In addition to the manufacturing, salaried and contract-worker cuts, Chrysler's board has also ordered significant changes to the company's product lineup.
According to people familiar with its plans, Chrysler will eliminate four models including the convertible version of the PT Cruiser, the Chrysler Pacifica crossover, the Dodge Magnum wagon, and the Chrysler Crossfire roadster.
The funky PT Cruiser had been a mainstay of Chrysler's lineup for nearly a decade, but its sales have tumbled 27 percent this year through September. The convertible version will be dumped, while the hardtop PT likely will be kept through its current product cycle.
Sales of the Pacifica and Magnum have slid at least 30 percent as well, and the niche-volume Crossfire never built a following among sports-car enthusiasts.
Cutting slow-selling models is another indication that Cerberus and Chrysler's new CEO have little patience for products that are not performing in the marketplace.
"Now they've been able to speed up cutting that product that wouldn't have added much value to the bottom line, and use that money for advertising and other things," said Global Insight's Bragman.
Chrysler is expected to unveil a capital-spending plan today along with its personnel cuts and product changes.
People with knowledge of the plan said the automaker will commit to spending between $12 billion and $18 billion on new products, advancing technology and factory upgrades over the next four years.
Day of pain: Downsizing aims to return Chrysler to profitability
Bill Vlasic and David Shepardson / The Detroit News
Chrysler LLC is expected to eliminate five shifts and about 4,000 hourly jobs at manufacturing plants in Michigan, Ohio and Illinois as part of a broad cost-cutting effort by the automaker's new private owner.
People familiar with the situation said Chrysler will drop shifts in early 2008 at assembly plants in Detroit, Sterling Heights, Toledo, and Belvidere, Ill., as well as at its Mack Avenue engine complex in Detroit.
The moves are expected to be announced by Chrysler today, along with plans to slash 1,000 salaried jobs, cut 1,100 contract positions, and drop four slow-selling models including the retro-styled PT Cruiser convertible.
Chrysler officials declined Wednesday to comment on the sweeping cuts.
The additional approximately 6,000 job losses come as the automaker is already in the midst of a major reorganization announced in February that will eventually eliminate 11,000 hourly jobs and 2,000 salaried positions through buyouts, retirements and attrition.
People familiar with Chrysler said its new owner, the private-equity firm Cerberus Capital Management LP, is determined to downsize the automaker to speed its return to profitability.
Chrysler's board, led by new Chairman and CEO Bob Nardelli, met for the first time Tuesday since Cerberus acquired the automaker in August from Daimler AG.
Industry analysts said the dramatic cuts to be unveiled today are characteristic of how a private-equity firm moves aggressively to streamline a new acquisition such as Chrysler.
"Decisions like this are being made a lot faster than they would be if Chrysler were under public ownership," said Aaron Bragman, an analyst with the automotive forecasting firm Global Insight Inc.
The shift reductions reflect Chrysler's shrinking U.S. market share and its need to reduce inventories of unsold vehicles.
Dropping shifts will eliminate 1,000 jobs at the Jefferson North Assembly Plant in Detroit; 1,000 jobs at Sterling Heights Assembly; more than 1,000 jobs at Belvidere Assembly; and 750 positions at the Toledo North Assembly Plant. About 200 jobs will be affected at the Mack Avenue Engine Complex. It is not clear whether the reductions will be at Mack I, which builds V-8 engines, or the Mack II V-6 engine facility.
People close to the company said one shift at each plant will be cut in the first quarter of 2008. Affected workers likely will be offered early retirement or buyout packages, the people said.
The shift reductions come on the heels of Chrysler agreeing to a new four-year labor contract with the United Auto Workers.
Nardelli said at a public appearance Monday that the new UAW contract represented a "major step forward" in reducing labor costs. The contract, however, was bitterly debated during ratification by about 45,000 Chrysler workers and passed Saturday by a close vote.
But the new UAW contract is proving to be just the beginning of a bigger cost-cutting blitz at Chrysler.
The wide-ranging cuts in hourly, white-collar and contract workers were orchestrated by Nardelli, a veteran General Electric Co. executive and former Home Depot Inc. CEO.
Nardelli confirmed Wednesday that the Chrysler board had held its first meeting, but declined to confirm reports in The Detroit News that directors had approved job cuts and plans to kill four vehicles.
"We had a good healthy discussion and that will be communicated at the appropriate time," Nardelli told reporters after meeting with congressional leaders in Washington.
'It's really a shock'
But even as Nardelli was attending meetings on Capitol Hill, the first wave of contract workers was being terminated at Chrysler headquarters in Auburn Hills.
Chrysler is eliminating 1,100 contract positions by the end of the year, according to company spokesman Mike Aberlich.
Several hundred of those workers left Wednesday, including Suchindra Gunvavarapu, a 24-year-old contract employee for two years in Chrysler's information technology unit.
"It's really a shock for me, even though we were told this was coming," said Gunvavarapu. "About a hundred people in my area are gone."
Chrysler will begin eliminating 1,000 salaried employees this month through early retirements and buyout programs, said people familiar with the situation.
Unsettled workers were openly wondering Wednesday about their futures at the company.
"Heads are going to fly here," said Bob Langlois, an analyst in Chrysler's comptroller's office. "You try to go to work every day knowing they'll probably try to whack your department by Christmas."
Lineup changes
In addition to the manufacturing, salaried and contract-worker cuts, Chrysler's board has also ordered significant changes to the company's product lineup.
According to people familiar with its plans, Chrysler will eliminate four models including the convertible version of the PT Cruiser, the Chrysler Pacifica crossover, the Dodge Magnum wagon, and the Chrysler Crossfire roadster.
The funky PT Cruiser had been a mainstay of Chrysler's lineup for nearly a decade, but its sales have tumbled 27 percent this year through September. The convertible version will be dumped, while the hardtop PT likely will be kept through its current product cycle.
Sales of the Pacifica and Magnum have slid at least 30 percent as well, and the niche-volume Crossfire never built a following among sports-car enthusiasts.
Cutting slow-selling models is another indication that Cerberus and Chrysler's new CEO have little patience for products that are not performing in the marketplace.
"Now they've been able to speed up cutting that product that wouldn't have added much value to the bottom line, and use that money for advertising and other things," said Global Insight's Bragman.
Chrysler is expected to unveil a capital-spending plan today along with its personnel cuts and product changes.
People with knowledge of the plan said the automaker will commit to spending between $12 billion and $18 billion on new products, advancing technology and factory upgrades over the next four years.
11-01-07, 05:41 PM
#2
Lexus Fanatic
Yes, that's just what they need at Chrysler, isn't it?.......MORE cost-cutting.
This, from a company that already produces some of the flimsiest vehicles and poorest-quality interiors and fit/finish in the industry.
This, from a company that already produces some of the flimsiest vehicles and poorest-quality interiors and fit/finish in the industry.
11-02-07, 04:16 AM
#4
Lexus Fanatic
Who's mincing words? Not me.
Outside of the Hemi engine, styling, bright colors, and the graphics on some of the Magnum, Charger, and new Challenger models (which recalls some of the cars I grew up with), their products do not impress me. Their sheet metal, material quality, hardware, and general flimsiness in assembly leave a lot to be desired.
From the posted article, I fail to see how closing plants alone and cutting 12,000 jobs is going to give their vehicles more Honda-like or Subaru-like build assembly quality.....and having less vehicle inspectors will only allow more errors and slip-ups to pass quality checks.
Cutting thousands of jobs will only help if they take that money saved and invest it in better-quality materials for their vehicles......and given the company's recent history, I wouldn't hold my breath waiting for that to happen.
Now, enough of my ranting............tell us how YOU feel about them.
Last edited by mmarshall; 11-02-07 at 04:21 AM.
11-02-07, 08:55 AM
#5
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This is normal for company that is losing a ton of money. If the cost of losing that contribution margin outweighs the avoidable costs then of course you have a problem. Otherwise, this decision makes business sense.
Hot looking car.
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