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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.

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Speculation continued to swirl Monday that a deal for General Motors Corp. to buy Chrysler LLC from New York private equity firm Cerberus Capital Management LP could come soon.

Both sides have been talking for months, but the pace recently has increased. A person familiar with the negotiations told The Associated Press Friday that officials were trying to work out a deal by the end of the month.

Cerberus wants out of the auto business. And as the credit markets have dried up, GM (GM, Fortune 500), worried about running too low on cash before the U.S. auto market rebounds, wants Chrysler’s currency stockpile.

The person said that the talks have advanced to the point where top executives of both companies have looked at a deal and asked for refinements. The person spoke on condition of anonymity because the talks are secret.

In August, Chrysler said it had accumulated $11.7 billion in cash and marketable securities as of June 30. That figure remains around $11 billion, the person said, despite the Auburn Hills, Mich.-based automaker’s U.S. sales being down 25% in the year through September, the largest decline of any major automaker.

Detroit-based GM is burning up more than $1 billion per month, with several analysts predicting it will reach its minimum operating cash level of $14 billion sometime next year. GM’s sales are down 18%, and the company has lost $57.5 billion in the past 18 months, although much of that comes from noncash tax accounting changes.

Chrysler’s money pile would help solve GM’s cash problem if credit remains unavailable 24 hour payday advances.

Both automakers have had to deny bankruptcy rumors in recent weeks, saying consumers won’t buy cars from a company that looks like it could go out of business.

According to the person familiar with the negotiations, the deal being discussed calls for Cerberus to hand over Chrysler in exchange for GM’s 49% stake in GMAC Financial Services. GM sold a 51% stake in its finance arm to Cerberus in 2006.

Cerberus also would get an equity stake in GM, hoping to get a good return should GM recover when U.S. auto sales bounce back from a serious slump.

Other automakers, including the allied companies of Renault SA (RNO) and Nissan Motor Co. (NSANY), also are in discussions about Chrysler, the person said. Simultaneously, Cerberus, which bought 80.1% of Chrysler from Daimler AG (DAI) in a $7.4 billion deal last year, is negotiating to acquire Daimler’s 19.9% stake.

GM and Cerberus are still a long way from a deal, according to the person, and GM’s board reportedly is cool to the idea.

All that GM, Chrysler and Cerberus have said about the negotiations is that automakers meet all the time. Chrysler Chief Executive Bob Nardelli said Thursday the auto sales drop has created an environment that favors consolidation. 

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Qwest Communications International Inc. said Saturday it has reached a tentative agreement for a four-year contract with a union representing about 20,000 employees.

Members of the Communications Workers of America last month rejected a tentative three-year agreement with Denver-based Qwest (Q, Fortune 500), after the previous contract expired Aug. 16.

Results of a ratification vote on the new agreement by union members are expected by Oct. 31.

The new deal calls for a 12 http://payday-advance-i.com.5% raise over the course of the contract and a pension increase of 3% for those who are eligible and retire from the company after Oct. 12.

The CWA represents Qwest workers in 13 states.

Qwest shares closed Friday at $2.18, down 10 cents. 

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If you want to see how America’s credit crisis is hitting the streets of your hometown, go to your local car dealer. Auto dealers depend on credit. They need it to run their stores and their customers need it to buy their products. From every angle, credit trouble hurts.

"I’m talking to dealers every day who are just hanging on," said Denny Fitzpatrick, Chairman of the California New Car Dealers Association and owner of Fitzpatrick Chevrolet Hummer in Concord, Calif.

There could be 300 to 400 fewer auto dealerships in America by the end of the year, predicted Paul Taylor, an economist with the National Automobile Dealers Association. In an ordinary year of economic growth, the industry adds 75 to 150 dealers, he said.

High gas prices that have turned buyers away from large trucks and SUVs - and all but obliterated Hummer sales - have hurt his business, but Fitzpatrick thinks tight credit is doing even more damage.

"We’re seeing people with Beacon scores that are pretty darned good," Fitzpatrick said, "and the finance companies are just looking for reasons to turn them down."

Not every car dealer sees the situation as that dire. John McEleney, president of McEleney Autocenter in Clinton, Iowa and vice chairman of the National Automobile Dealers Association, says he understands that things are hard, but his business is holding up fairly well.

McEleney owns several dealerships and sells several General Motors brands as well as Hyundai and Toyota cars and trucks.

"Probably the most direct effect for me has been availability of retail financing for my customers," said McEleney.

So far his customers can still get auto loans, McEleney said, but they may need a bigger down payment.

"I wouldn’t say it’s that dramatic, yet," he said.

Fortunately for him, McEleney said, Iowa didn’t experience the run-up in home prices other parts of the nation did, including California. That’s means it hasn’t experienced the home equity crash, either.

In most of the country, the collapse of the housing market has left consumers without the low-cost home equity loans that drove car sales in recent years. Also, the drain of home equity has left potential customers feeling poor, said NADA economist Paul Taylor. That, as much as the actual loss of low-interest credit, has hurt car sales.

With sales down, auto dealers who carry large inventories are experiencing their own credit squeeze.

"The cost of doing business is going up," said Mike Jackson, chief executive of AutoNation, the country’s largest car dealership chain. "Especially on floorplanning with domestics."

"Floorplanning" is the line of credit dealers use to pay for their inventory. Domestic-brand auto dealers who carry large inventories will be among the first to die, Jackson predicts.

Floorplan loans become burdensome the longer cars go unsold. For the first three months a car is in inventory, interest on the floorplan loan is usually reimbursed by the manufacturer. Later, if a vehicle is still there after about six months, finance companies can start demanding payment on the principal on the loan.

As credit markets have tightened, GMAC and Chrysler Credit have raised interest rates and what are called "curtailment" costs, the cost of having vehicles in inventory for a long time, according to reports in the industry newspaper Automotive News. (GMAC and Chrysler credit would not confirm those reports.)

"When you’re scrambling with cash flow like this, it’s ‘How are we going to pay these costs?’" said California dealer Fitzpatrick, who finances his inventory through GMAC.

Many dealers have learned to operate with leaner inventories, said Iowa’s McEleney.

"When a dealer is called upon to pay down $100,000 to $200,000 in inventory they have to look to other outlets," said McEleney. Those other "other outlets," other credit sources to draw from to pay curtailment costs, are no longer easily accessible, he said.

Finance companies have an incentive not to squeeze high-performing dealers too hard, McEleney said. Pushing away a good car dealer means driving away a lot of potential consumer auto loans.

"Historically, that’s been a very desirable piece of business from a lender’s standpoint," he said.

That gives big, multi-store dealers more bargaining clout with lenders, said NADA economist Taylor. For example, Asbury Automotive, a large national dealer chain, recently announced that it had locked in a line of credit with several banks. Smaller dealers can’t do that and their interest rates have been fluctuating widely, said Taylor.

Squeezing dealers on curtailment costs can be a way for manufactures and their affiliated auto finance companies to weed out dealers they see as underperforming, Fitzpatrick said. GMAC has been scrutinizing his dealership’s finances more closely, he said. (GMAC could not immediately comment on Fitzpatrick’s complaints. A spokewoman for General Motors said GM plays no role in floorplan financing.)

"The big question is ‘Who’s going to be left standing?" he said. 

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The United States needs to act urgently to shield its economy from an escalating credit crisis and Europe must ready plans in case its problems worsen, the head of the International Monetary Fund said on Tuesday.

“We’re right at the moment where action is needed,” IMF Managing Director Dominique Strauss-Kahn told Reuters.

“A non-perfect plan is better than no plan at all,” he said of the $700 billion bank bailout plan rejected by the U.S. House of Representatives on Monday.

Strauss-Kahn said restoring market confidence required the bailout plan to be passed quickly and for the U.S. public to understand what is at stake unless the economy starts to function properly again.

As the crisis has spread beyond Wall Street, European countries have stepped up their efforts to avoid bank defaults as concerns grew that more institutions would fail, prompting the Irish government to guarantee all bank deposits.

The lack of a pan-European regulator makes it more difficult to respond to the crisis in the event of the collapse of a big bank whose business crosses borders, Strauss-Kahn said.

“Developing a contingency plan does not mean it’s announcing a lot of trouble coming. But they’re not totally immune (from the U.S. financial crisis), and so they need to organize. At the European level this is totally needed.

“The EU rules make it much more difficult than in the U.S.,” to act across borders, he said. 

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Premier Dalton McGuinty is shuffling his cabinet this afternoon to underscore the importance of attracting business and new investment to battered Ontario, which has shorn more than 200,000 manufacturing and forestry jobs in the past few years.

Sandra Pupatello moves from economic development to a new international trade and investment ministry.

Her old duties will be taken up by Michael Bryant, who moves from aboriginal affairs and remains House leader.

Labour Minister Brad Duguid succeeds Bryant at the always challenging aboriginal affairs ministry.

Duguid will be replaced by Tourism Minister Peter Fonseca payday loan low fee.

The new tourism minister will be Monique Smith, whose responsibilities as revenue minister will be taken over by Finance Minister Dwight Duncan.

Lieutenant Governor David Onley will swear in McGuinty’s revamped cabinet at 3:30 p.m.

It’s unusual to have a cabinet shuffle just days before a new legislative session, suggesting the premier is highlighting the urgency of Ontario’s sagging economy.

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The Canadian Auto Workers union is trying to form a committee for a possible organizing drive at WestJet Airlines.

The CAW confirmed yesterday it has received calls from WestJet employees expressing interest in the union, and it is now working on a committee.

"We’re at a very preliminary stage," said union president Ken Lewenza, who took the reins of the CAW on Sept. 4. Lewenza, who ran Local 444 in Windsor for 14 years, succeeded Buzz Hargrove, who was CAW president for 16 years.

Calgary-based WestJet employs about 5,700 and promotes the idea of workers becoming owners of the company no qualifying payday advance.

The CAW wants to become more aggressive in organizing outside the manufacturing sector, where it has lost thousands of members in recent years because of plant closings. The union already represents some 5,000 Air Canada workers.

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Federal Reserve Chairman Ben Bernanke said Friday that the problems in the nation’s financial markets persist and still threaten the economy.

Bernanke said that the financial woes, coupled with record oil prices and the weakening economy, had created "one of the most challenging economic and policy environments in memory."

In prepared remarks at a conference in Jackson Hole, Wyo., Bernanke also said he is encouraged by the recent oil price decline, which may signal that inflationary pressures are on the wane.

"Although we have seen improved functioning in some markets, the financial storm that reached gale force some weeks before our last meeting here in Jackson Hole has not yet subsided," Bernanke said.

"Its effects on the broader economy are becoming apparent in the form of softening economic activity and rising unemployment," he added.

Bernanke’s comments seem to signal that the central bank will keep its key interest rate at 2%, rather than raise it an attempt to keep prices in check.

"The commentary tells me that rates are on hold until they see some blue skies through this financial storm," said John Silvia, chief economist for Wachovia.

The Fed cut interest rates seven times from September through April, but left them unchanged at its last two meetings.

Earlier this summer, investors and economists were widely expecting the Fed to start raising rates as early as this fall. But there is now widespread agreement that rates will remain on hold at its next two meetings in September and October and some economists are predicting rates will stay at current levels into next year.

Silvia said the Fed had little choice but to focus on upheaval in the credit markets rather than on inflation as it cut rates. And while he agreed that financial market woes are not behind us, he said the Fed faces a risk of inflation getting out of hand the longer it keeps rates on hold.

"Inflation is not out of control, but it’s clearly drifting away," he said.

Bernanke’s remarks come more than a week after the Consumer Price Index, the government’s key inflation measure, rose to a 17-year high, gaining 5.6% over the previous 12 months. The Producer Price Index, a measure of wholesale inflation, also rose this week to a 27-year high.

Still, Bernanke reiterated that the Fed expects an economic slowdown to cause "inflation to moderate later this year and next year." And while he added that the "inflation outlook remains highly uncertain," Bernanke appeared to downplay inflation risks relative to other challenges facing the economy and global credit markets.

The discussion of inflation pressure was only a brief part of the speech, which focused on the need for stability in financial markets absolutely free credit report. Bernanke defended actions by the Fed over the past year. And he said that the Fed and regulators needed to be on the lookout for other threats to financial markets.

Bernanke offered one of the most detailed and strongest public defenses of the Fed’s role in preventing a bankruptcy at Bear Stearns in March. He argued that while Bear Stearns was not that large in comparison to other Wall Street firms, its failure would have had severe ripples throughout the financial system that the Fed could not risk.

"With financial conditions already quite fragile, the sudden, unanticipated failure of Bear Stearns would have led to a sharp unwinding of positions in those markets that could have severely shaken the confidence of market participants," he said. "The broader economy could hardly have remained immune from such severe financial disruptions."

His speech did not make any reference to Fannie Mae (FNM, Fortune 500) or Freddie Mac (FRE, Fortune 500), the two troubled mortgage finance firms who have seen their shares battered this month on fears that the government will be forced to take them over.

But his defense of the Bear Stearns action and his discussion of a doctrine of rescuing firms deemed too big to fail seemed to signal his approval of the Treasury Department taking action if either firm were to face problems covering rising losses from the trillions in mortgages they own or guarantee.

In another comment that could be read as addressing the problems facing Fannie and Freddie, he said that regulators of financial institutions had to be careful not to force troubled firms to cut back on their lending at times of economic stress.

He said mandating tighter lending standards might help the "safety and soundness of a particular institution" that such "excessively conservative lending policies could prove counterproductive if they contribute to a weaker economic and credit environment."

He also said that it is important that Congress take steps to spell out more explicitly what steps could be taken by the government to help rescue other financial institutions whose failure would pose a risk to the broader economy. He said that the Treasury Department is probably the agency best suited to perform those rescues. 

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Just because consumer stocks are staging the biggest rally in five years doesn't mean the economy is about to recover.

As Lowe's Cos., Wendy's International Inc. and Starwood Hotels & Resorts Worldwide Inc. led a 7.6 percent advance in consumer stocks this month, the extra yield bond investors demanded to own the industry's debt rose to 2.5 percentage points over U.S. Treasuries. Every time bondholders sought that much compensation to guard against default, shares of retailers, restaurants, and hotels slumped an average 16 percent, according to data compiled by Bloomberg.

Standard Life Investments, Harvard University's endowment and hedge fund Appaloosa Management LP, which manage almost $300 billion, are avoiding the shares as Americans rein in spending to cope with the highest unemployment rate in four years and faster inflation. Profits at consumer discretionary companies are forecast to be the worst since 2001, Bloomberg data show.

“It's a rally that we think will inevitably roll over,'' said Andrew Milligan, the Edinburgh-based head of global strategy at Standard Life Investments, which oversees about $242 billion. “Investor confidence has started to ease back and earnings numbers have generally been negative. The credit side just reinforces our downbeat views.''

Stocks Versus Bonds

Consumer shares have risen almost four times as fast as the Standard & Poor's 500 Index in August, sending the S&P 500 Consumer Discretionary Index toward its biggest monthly advance since an 8.9 percent increase in October 2003. A 22 percent drop in oil since its July peak and speculation the Federal Reserve will hold off raising interest rates after seven cuts in the past year improved prospects Americans will spend more. Consumer stocks in the MSCI World Index are up 1.8 percent this month.

Futures on the S&P 500 lost 0.4 percent at 11:14 a.m. in London as oil's climb above $115 a barrel sent retailers lower.

This month's gains in consumer stocks coincided with an increase in the difference between yields of U.S. retailers' bonds and those of government debt to 2.47 percentage points as investors demanded more protection against the likelihood of default, according to data from New York-based Merrill Lynch & Co.

When the gap exceeded 245 basis points in 2000, 2002, 2005 and March of this year, the consumer discretionary gauge lost an average of 16 percent over the same span, the data show. A basis point is equal to 0.01 percentage point.

Shares of Mooresville, North Carolina-based Lowe's, the world's second-largest home-improvement retailer, surged 22 percent this month as the extra yield investors demanded to own the company's 5.6 percent bond due in 2012 widened 23 basis points over U.S. Treasuries.

`Voting With Bondholders'

That's more than three times the average increase of A- rated corporate bonds over the same period, Merrill's data show.

The premium on Wendy's 7 percent bond due in 2025 climbed as much as 33 basis points above U.S. government debt this month, almost triple the gain in spreads of similar BB-rated debt. The Dublin, Ohio-based hamburger chain's stock added 16 percent.

The disparity between the stock and bond markets comes as analysts are forecasting the industry's biggest full-year profit decline since the last recession in 2001. Earnings at S&P 500 consumer-discretionary companies will drop 22.9 percent this year, data compiled by Bloomberg show payday loan.

“I would be inclined to vote with the bondholders,'' said Jack Ablin, who oversees $65 billion as chief investment officer at Harris Private Bank in Chicago. “They're sensing there's still credit deterioration going on in the group.''

Earnings Plummet

Lowe's, Wendy's and Starwood, the White Plains, New York- based company that runs the Westin, St. Regis and W hotels, all reported lower earnings for the second quarter. Industry profits have dropped 54 percent on average, the highest on record for Bloomberg data that started in 2001.

LPL Financial's Jeffrey Kleintop expects consumer stocks will continue to do well as profits decline less than analysts estimate. More than 91 percent of the S&P 500 retailers that have reported second-quarter results so far topped Wall Street's consensus forecast, data compiled by Bloomberg show.

“The outlook isn't rosy, but certainly better than what had been priced into those stocks,'' Kleintop, the Boston-based chief market strategist at LPL, which oversees $273 billion, said in a Bloomberg Television interview.

Fed Rate Cuts

Consumer stocks in the U.S., where the Federal Reserve cut its benchmark interest rate to 2 percent from 5.25 percent in the past year, are outperforming the rest of the world. The MSCI Brazil Consumer Discretionary Index lost 9.8 percent in August, while retailers, automakers and electronics makers in the MSCI Asia Pacific Index fell 2.3 percent.

To maintain the advantage, U.S. retailers will have to defy an unemployment rate that rose to 5.7 percent last month and the fastest inflation in 17 years. The economy, buffeted by the biggest U.S. housing slump since the Great Depression and more than $500 billion in bank losses, may grow 0.45 percent next quarter, or about a third the annual rate of 1.2 percent forecast this quarter, according to data compiled by Bloomberg.

“You only have so many dollars or francs or euros in your pocket,'' said Robert Weissenstein, who helps oversee $1.3 trillion as chief investment officer at Credit Suisse Private Bank. It's difficult to turn bullish “as long as you get mixed to negatively biased jobs data,'' he said from Tucson, Arizona.

Harvard Endowment

Harvard's $34.9 billion endowment, the biggest of any university, sold its holdings in 79 of 92 consumer companies including Lowe's, Wendy's and Starwood, during the second quarter, the Boston-based college fund's filing with the U.S. Securities and Exchange Commission compiled by Bloomberg show.

Appaloosa, the Chatham, New Jersey-based hedge-fund firm run by former Goldman Sachs Group Inc. bond trader David Tepper, held 10.4 percent less in consumer stocks at the end of the second quarter, partly after selling its 175,000 share stake in Starwood, filings compiled by Bloomberg show. Appaloosa, which owned equities valued at $3.1 billion as of June 30 and also invests in bonds, has posted average annual returns of about 25 percent in its Palomino Fund since the beginning of 1995.

“The corporate bond market has sold off first, fastest, and then equities follow after,'' said Standard Life's Milligan. “What the credit markets are telling us is that we need to still be cautious.''

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Oil traders have long been accustomed to reading the tea leaves for clues to the true state of fuel consumption in China, but even the savviest analysts are being tested this year by a befuddling mix of signals.

An unexpected second month of weak crude oil imports reported on Monday gave fresh vigor to the bears, who read it as a signal that refiners had overestimated demand; bulls are still enraptured by surging diesel and gasoline imports, which they say may continue as industries resume operations after the Olympics.

Both could be wrong.

With major new refiners being started toward the end of this year, China’s crude oil import growth should accelerate but its massive products stockpiling will slow, cutting fuel imports.

Between the rapidly shifting trade flows and the lack of transparency around inventory levels, which were built up substantially ahead of the Olympic games this month, traders will be hard pressed to determine whether a U.S.-spawned economic slowdown is finally taking the wind out of China’s sails.

That’s a key question for oil markets that have risen sixfold in as many years, driven in large part by burgeoning Asian demand.

Some closest to the pump say the day has already arrived, nearly two months after Beijing surprised the nation with a near 18 percent rise in subsidized gasoline and diesel prices.

“Demand is definitely coming off after the price hike bad credit payday loans. Among the worst hit is the transportation sector, which had been operating on razor-thin margins even before the increase,” said Qi Fang, a long-time independent dealer who owns a dozen petrol stations in Hebei province, near Beijing. 

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