Plan is to eliminate shifts, ax 4 models
November 1, 2007
In the past decade, Chrysler's headquarters have seen a series of corporate leaders march into its executive suite and launch recovery plans by cutting jobs and models. Its latest owner took its first swing of the ax Wednesday -- and took aim at thousands of jobs in Michigan and elsewhere.
Under a plan approved during the automaker's first board meeting Tuesday run by Chairman and Chief Executive Bob Nardelli, Chrysler will shed at least 4,900 hourly workers as part of a wide-ranging cut in production across its factories. It will also cut about 2,100 salaried and contract jobs before the end of the year.he automaker also will announce today that it will cut shifts at the Jefferson North and Sterling Heights assembly plants, with each shift accounting for about 1,000 workers. It will also eliminate shifts at assembly plants in Toledo, Belvidere, Ill., and Brampton, Ontario, and cut 200 jobs at the Mack Avenue Engine plant, said a person familiar with the plan.
The plan also calls for eliminating four slow-selling models from its lineup over the 2008 model year: the Chrysler Pacifica, Crossfire, PT Cruiser convertible and the Dodge Magnum. The company has spared the regular PT Cruiser wagon, one of the few Chrysler models with a loyal fan base.
The cuts come in addition to Chrysler's February plan to eliminate 13,000 jobs over three years, including 2,000 salaried jobs.
The first of the cuts came down Wednesday, when roughly 300 contract workers were let go, and the remainder will be cut this month and next, said Chrysler spokesman Mike Aberlich. White-collar workers will be offered a package of early retirements and buyouts this month.
Nardelli, who declined to discuss the cuts on Wednesday following meetings with lawmakers in Washington, has moved quickly to put his stamp on Chrysler. In less than 100 days, he has hired two top executives away from Toyota Motor Corp., reached a new labor contract with the UAW and shuffled top management in Auburn Hills.
But speed is likely a necessity for Chrysler's new owner Cerberus Capital Management, which is famed for making rapid moves in its acquisitions.
While the privately held Chrysler is not required to make its financial results public, it had lost $2 billion in the first three months of this year and saw its sales decline 3% through September. Several of its newer products, such as the Jeep Commander built at Jefferson North and the Chrysler Sebring at Sterling Heights, have not met expectations.
With corporate borrowing costs on the rise, Nardelli and other Chrysler executives have said Cerberus was focused on improving the company's cash flow. Culling models and fleet sales will reduce losses, but Chrysler will need a healthy amount of cash for new model development and its $8.8-billion commitment to a union-run health care fund.
"All three of the Detroit automakers need to have deep pockets at the moment," said industry analyst David Healy of Burnham Securities. With the weak economy, Cerberus' intent "is to turn it around as fast as they possibly can."
Under DaimlerChrysler, Chrysler had updated its factories to handle more models using second and third shifts rather than building new plants. The cuts at Toledo will hit 750 workers, while Brampton's third shift has 950 workers and Belvidere employs 1,000.
Additional hourly reductions are likely as Chrysler attempts to shed excess capacity through less dramatic steps, such as slowing production line speeds.
The model cuts target four vehicles whose sales have sagged in recent years. The aging Pacifica and Crossfire share no common underpinnings with other Chrysler vehicles and need expensive updates, while the slow-selling Magnum will be replaced by the Dodge Journey crossover when it launches next year.
The retro-styled PT Cruiser also had been on the short list of four models that Chrysler was expected to cut. But despite a sales decline of 27% through September, the PT Cruiser is still the third best-selling model in the Chrysler brand's lineup, behind the 300 sedan and the Town & County minivan.
The PT Cruiser has been a mainstay of the Chrysler lineup since it was launched in 2000, and the company has struggled to find a way of updating the Mexico-built wagon without losing its styling flair. The PT Cruiser often has been the most reliable Chrysler model in durability surveys, and fans of the wagon started an online petition in August to convince Chrysler to keep it in production.