Chrysler and GM plan additional cost cutting
DETROIT — The carnage in the ever-shrinking U.S. auto industry continues.
Chrysler LLC on Thursday announced it would cut 1,825 factory jobs. And General Motors Corp. trimmed some benefits and said it would make further white-collar cuts.
As the slumping U.S. economy speeds the industry’s slide, and tight credit cuts into sales, Auburn Hills, Mich.-based Chrysler said the jobs will be eliminated at the end of the year when it closes a Newark, Del., sport utility vehicle plant ahead of schedule and eliminates a shift at a Toledo, Ohio, Jeep plant.
At GM, senior managers sent a memo to executives Wednesday saying early retirement and buyout offers to white-collar workers had been well-received but that the company still would have to make involuntary layoffs.
More job cuts are likely if the U.S. auto sales volume continues to decline into 2009, said Laurie Harbour-Felax, president of the Harbour-Felax Group, a Detroit-area auto industry consulting company.
"If volume continues to fall through the tank as we go into 2009, then they’re going to be left with a whole bunch more people," she said.
If recent talk about a potential acquisition of Chrysler by GM comes true, even more job losses are likely, she said.
"The whole thing becomes somewhat scary of a concept to think about, more job losses, especially in Michigan," she said.
Chrysler’s job cuts Thursday amount to about 6 percent of its U.S. hourly work force. They include the indefinite layoff of about 825 workers at the Toledo North Assembly Plant, where the company makes the Jeep Liberty and Dodge Nitro.
The Newark Assembly plant, where 1,000 people make Dodge Durango and Chrysler Aspen SUVs, originally was expected to shut down at the end of 2009, and its hastened closure puts in doubt whether the company will keep making the large truck-based SUVs.
Chrysler spokesmen wouldn’t say if production would be sent to another factory. They said, however, that a plant in Detroit was being retooled to make several sport utility vehicles.
The company said it would work with the United Auto Workers union to handle the layoffs in a "socially responsible manner." In the past, it has offered buyout and early retirement programs to workers affected by plant slowdowns and closures free credit report online.
Chrysler said in a statement that the changes will adjust inventory to better match consumer demand. Through the first nine months of the year, the company’s U.S. sales have fallen 25 percent from the same period last year, the largest decline of any major automaker. U.S. sales industrywide are down 13 percent from a year earlier.
The sales slump showed up on Daimler AG’s bottom line Thursday. Daimler’s third-quarter earnings release showed a $154.5 million operating loss for its 19.9 percent share of Chrysler, indicating that Chrysler lost about $772.5 million in the second quarter as its U.S. sales slumped.
Chrysler is privately owned and does not have to report its earnings, but issued a statement saying its second-quarter loss totaled $660 million when taking into account the differences between international and U.S. accounting standards.
Chrysler’s majority owner, New York private equity firm Cerberus Capital Management LP, has been talking to GM, the combined Nissan Motor Co.-Renault SA and others about a possible sale or merger, or Chrysler could be sold in pieces to other companies, according to people briefed on the talks. The people have asked not to be identified because the talks are private.
Meanwhile, Cerberus has said it’s in talks with Daimler to buy the German company’s stake in the struggling U.S. automaker. On a conference call Thursday, Daimler Chief Financial Officer Bodo Uebber said those negotiations continue.
At GM, the company decided it will temporarily stop matching salaried employees’ 401(k) contributions as of Nov. 1, and it will suspend tuition reimbursement and adoption assistance programs at the end of this year.
Spokesman Tom Wilkinson would not say how many white-collar workers had accepted offers to leave, nor would he say if the company has a goal for reducing their ranks.
GM has reported losing $57.5 billion in the last 20 months, including a $15.5 billion loss in the second quarter. Its vehicle sales declined 18 percent in the first nine months of this year, and it is burning through $1 billion in cash per month.