RON430

Announced earlier today but not posted yet.

Chrysler slashing 5,000 jobs as sale talk goes on

Auto Writer Tom Krisher, Ap Auto Writer

DETROIT – As talks over the potential sale of Chrysler LLC continued, the struggling automaker said Friday that it will slash 25 percent of its salaried work force and make further cuts to deal with a continued downward spiral in U.S. auto sales.

Negotiations for Chrysler's sale or merger, which involve majority owner Cerberus Capital Management LP, General Motors Corp. and the combined Nissan Motor Co.-Renault SA, were to continue into the weekend. But they are snagged on items such as tax liabilities, tight credit and the slowing economy, according to a person briefed on the talks.

The person, who asked not to be identified because the discussions are private, said multiple parties remain involved in the complex talks, which include several possible configurations such as the sale of Chrysler in its entirety, or a partial sale of the company.

Under the job cuts announced Friday, Chrysler, which has about 18,500 white-collar workers, will get rid of about 5,000 salaried workers and contract employees — those who work for other companies under contract with the automaker.

Chief Executive Bob Nardelli, in a memo to employees obtained by The Associated Press, warned that more restructuring is coming at a pace faster than before.

"We recognize that in order to strengthen our competitive capability, and reduce the time and cost to achieve our objectives, we cannot operate as we have in the past," he wrote. "In the near future, we will be making organizational announcements as a result of restructuring actions reflecting the need to find new ways to operate."

Industry analysts said Nardelli's comments likely mean further plant closures and layoffs as the company shrinks itself to be acquired or perhaps signs deals for other automakers to design and even produce its new vehicles.

The cuts are so dramatic that they likely spell the end for Chrysler as in independent company and indicate it is preparing to be sold, said Aaron Bragman, an auto analyst with the consulting company IHS Global Insight.

"Cutting fully one-quarter of your staff is not the way to develop future vehicles," he said.

The prospect of further cuts has scared already-weary Chrysler employees who have been working under the shadow of sale talks.

Jerry Fogarty, who works at the company's Trenton, Mich., engine plant, figures GM will consolidate even more if it takes over Chrysler.

"If GM takes us, man, we're done," said Fogarty, of Wyandotte. "I've got 16 years. I'll lose my damn job. I already see it coming."

GM and Chrysler have declined to comment on the sale talks except to say discussions between automakers are routine.

Cash-starved GM would benefit by gaining access to Chrysler's roughly $11 billion stockpile, while Nissan-Renault may be interested in forming an alliance with Chrysler to give it a stronger North American presence, and it may even take an equity stake in the company.

GM, the nation's largest automaker, is burning through more than $1 billion in cash per month and is trying to stay afloat until the U.S. auto market recovers. Industry analysts say that may not be until 2010, and without a recovery, GM could burn up so much cash that it could reach the minimum required to run the company sometime next year.

GM shares fell 15 cents, or 2.5 percent, to $5.95 Friday.

A GM acquisition may involve going to Congress for cash, perhaps to preserve jobs and protect Chrysler's pension plan, which has about 125,000 people receiving benefits. Chrysler employs about 49,000 people in the U.S.

U.S. Sen. Debbie Stabenow, D-Mich., said Friday that Michigan legislators are looking into ways for the federal government to help the auto industry, including an injection of money into a Chrysler deal.

"We're looking at a variety of things. I would say everything's on the table. We don't know exactly what they'll need," she said.

Lawmakers also are trying to pressure the Treasury and Federal Reserve to help thaw frozen credit for auto loans, and pushing to speed up the release of $25 billion in already-approved loans for the industry to develop new technology, she said.

Chrysler's sales are down 25 percent through the first nine months of the year, the worst decline of any major automaker.

Although Chrysler is a private company and doesn't report earnings, it had a $772.5 million operating loss in the second quarter, according to the balance sheet of Daimler AG, which still owns 19.9 percent. Chrysler issued a statement pegging the loss at $660 million. Its loss for the first half of this year totals about $1.28 billion, after losing $1.6 billion last year.

Nardelli's memo said the company will reduce capital expenditures and cut discretionary spending while protecting "all major product programs." But Bragman said the size of the cuts likely means new product expenditures will be cut.

The company already has signed an agreement with Nissan to build a subcompact car for Chrysler and may be discussing a new midsize product with the Japanese company, Bragman said. Chrysler also has a deal with Chinese automaker Chery Automobile Co. to build a small cars.

"You can eliminate a large group of people if you're simply going to be buying it from someone else," Bragman said.

David Cole, chairman of the Center for Automotive Research in Ann Arbor, said Chrysler has to take advantage of poor sales, tight credit and the weak economy to make more cuts in factory capacity and other areas — whether it is sold or not.

"They've got to be very active, decisive," Cole said. "Anything they can do prior to coming together would be less that would be required afterward."

In a statement, Nardelli said the auto industry is going through "truly unimaginable" times.

"We continue to be in the most difficult economic period most of us can remember. The combination of troubled financial markets, difficult credit, volatile commodity prices, the housing crisis and declining consumer confidence continues to weigh on the economy. Never before have auto industry sales contracted at such a fast rate," he said.

The cuts come atop an announcement made Thursday that Chrysler announced it will shed 1,825 jobs by eliminating one shift at a Toledo, Ohio, Jeep plant and accelerating the closure of its sport utility vehicle factory in Newark, Del.


http://news.yahoo.com/s/ap/20081024/...hrysler_cuts_6

I normally don't like to make predicitions but my guess is that this layoff of white collar salaried workers is setting up at least a proportionate cut in blue collar union workers shortly. They can get rid of the salaried employees pretty quick, although I was surprised that they are saying they will cut them in November. The blue collar workers will take longer. But the longer it takes, the more they are going to go through that $11B that seems to be the biggest reason why GM wants to merge. And the prospect of the taxpayer picking up ChryCos, and then probably GMs, pension liabilities is really something to look forward to.

I8ABMR

I met a guy today that was laid off 2 days ago. I am sad for these people who will lose their jobs and homes while the CEO's are pimping and will escape any harm and actually may even leave the company with huge sums of cash.

mmarshall

Sometimes companies just don't stop and THINK.

That's 5000 more people who probably won't be able to buy a new Chrysler product (or any other new car)......and Chrysler needs to SELL CARS.


Unemployed people CAN'T BUY NEW CARS The more people they lay off, the smaller their potential customer base becomes.

SoCalSC4

Too bad.

Not surprising, but a shame, I guess.

Maybe the UAW will smarten-up and negotiate to minimize the number of blue collar jobs lost. A 25% pay cut is a lot less than a 100% pay cut. It's the new math!

mmarshall

Agreed. And it would probably end up less than 25% as a practical figure, when you also take the lower taxes into account that they will be paying.

The real problem is not the number of employees working for the Big Three, but the fact that they have lost so much of the market share. And much of that, as we all know, has been because of the poor design and quality of many domestically-designed cars until recently.

Trexus

That's 5,000 more people that can go work for Toyota, Honda, Volkwagen, Nissan and so on right here in the U.S.

mmarshall

Agreed.........no one's arguing that, providing, of course, those companies are hiring. But, my point was, that's 5000 less people who will probably be in a positon to buy a new Chrysler product. Laying people off may save a few $$$$$ in the short run, but eventually it will come back to bite you.

Take all the people who have been laid off at Ford and GM over the years (and, of course, there are plenty of them). What do many of them have in their driveways today? Exactly.........Hondas and Toyotas. And what will those who are being laid off TODAY have in their driveways TOMORROW (assuming they can buy a new car in the first place)? MORE Hondas and Toyotas.

LexFather

Sad, just sad......

Trexus

It is very sad and there's lots of history with Chrysler. My buddy does love the Viper and at one point I wanted the Ram pickup...

-J-P-L-

And I imagine that EVERY Chrysler/Dodge/Jeep worker buys a Chrysler, Dodge, or Jeep. I would think they wouldn't be very liked if they bought something else.

So yeah, 5,000 potential sales gone.

UDel

I know a couple people who work/worked at the Newark Del plant building the Durango including one of my old next door neighbors, it was right next to University of Delaware. It is ashame as that is going to hit the economy pretty hard there. The GM plant in Wilmington, DE which was right next to the neighborhood I used to live in that builds the Solstice/SKY is going to be closing in a couple years too and I unfortunately now a lot of people who work there and worked there myself off and on, Bob Marley once worked there when he was younger. It is ashame knowing all these people who are going to be out of work.
Hopefully there is some better products on the horizon so these company's won't have to keep making cuts.

mmarshall

While, of course, there is no formal written policy on this (there can't be, for obvious reasons), the unwritten policy at most auto plants is that if you don't buy and drive what the plant produces (or another vehicle from that same manufacturer), you run the risk of everything from social alienation from your co-workers (and possibly management) all the way to actual vandalism to your vehicle. And most auto firms, of course, help a little by giving their employees a special discount.

Byprodrive

iTrader: (1)

I imagine that only applies to the formerly big 3 domestic manufacturers.

mikemareen

it amazes how something so simple to fix, can go so horribly wrong.

they are lacking two simple things:

incredible styling and incredible dependability. I guess Cadillac is kinda there but the rest of the big 3 (chrysler, ford, gm) is seriously lacking these two traits. The 300c was a good call but only because daimler had something to do with it.

anyhow, it may just be too late. Most people have given up on american cars. It would have to be significantly cheaper and incredibly better looking with great dependability.

the whole problem is really very simple and comes down to how GM, ford, chrysler decides on the design of their cars and who they choose to design them.

If the top dog at ford thinks the ford Taurus is a hot looking car, well then the company is pretty screwed even before they manufacturer their first taurus.

it's the crucial critical decisions made at the top that trickle down the everything else.

I8ABMR

They are overpaid already. 25% cut would be reasonable and they will not lose everything. Its sad to be put in that position, but Id rather lose 25% and be pissed than to lose it all and still be pissed. some of these people make 26-32 dollars an hour to do very simple work. the cuts are inevitable and necessary