Chrysler could cut beyond buyouts

November 28, 2007

BY TIM HIGGINS

FREE PRESS BUSINESS WRITER

(DAVID P. GILKEY/Detroit Free Press)

"It's never an easy decision to shrink a company," Chrysler chief Bob Nardelli reportedly told employees. But we need "to get it right-sized."

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Chrysler officials have not ruled out the possibility of layoffs at the Auburn Hills automaker if they fail to get enough salaried workers to leave with voluntary buyouts over the next month.

Chrysler Chief Executive Officer Bob Nardelli has warned employees to expect a tough 2008, leaving open the possibility of job cuts even beyond the 25,000 already announced, a figure that include the buyouts."It's never an easy decision to shrink a company, but we felt we needed to get it right-sized," Nardelli reportedly told employees during an internal company broadcast. "We didn't want to be chasing costs throughout the year. We hope we were aggressive enough and, if not, we will adjust."

Nardelli's statements were first reported by the Dow Jones news operation. A Chrysler spokesman confirmed that Nardelli addressed workers.

At this point, Chrysler officials do not anticipate layoffs, but aren't sure they can be avoided either, people familiar with the situation said. They added that the decision would be based upon the take rate of the buyouts.

Buyout offers similar to those offered to salaried employees earlier this year are again on the table.

The first wave of this new set of buyouts is aimed at salaried workers 62 or older and with 10 or more years of service. Their package includes three months' pay and a $20,000 car voucher. Their last day will be Friday, said Chrysler spokesman David Elshoff.

The second wave is for employees at least 53 years old and with 10 or more years of service. Their last day is Dec. 31. The second wave will receive early retirement benefits.

As first reported by the Free Press, Chrysler wants to shed 1,000 salaried workers by the end of the year through the buyouts.

In the auto industry overall, analysts predict a rocky 2008 with even the rosiest predictions calling for a decline in the number of new cars and trucks sold in the United States.

Citing market conditions, Chrysler announced plans Nov. 1 to cut as many as 12,000 jobs, including 1,000 salaried and 1,000 contract positions. The hourly-worker portion of the cuts is expected next year.

These cuts are on top of those announced in February, when the automaker unveiled a turnaround plan that called for the elimination of 13,000 jobs over three years.

The path of reductions

Chrysler's February plan came after the automaker reported a loss of $1.5 billion in 2006, a number later adjusted to $680 million because of accounting changes.

Chrysler lost $2 billion in the first three months of this year.

By July, Chrysler announced it had reached its head-count reduction goals for 2007 under the February plan, with 7,100 employees granted a buyout or early retirement package. More employees sought the packages than were accepted.

In the same month, DaimlerChrysler AG was in the process of selling a majority stake in Chrysler to Cerberus Capital Management. That deal was completed in August.

In his internal broadcast to employees, Nardelli reportedly said the company was cutting jobs now to prepare itself for next year's tough climate.

"No matter what you read, no matter what you hear, it will be a tough economic marketplace," he said.

David Cole, chairman of the Center for Automotive Research in Ann Arbor, said Nardelli's comments illustrate a new thinking in Detroit.

"It's confirmation, frankly, of a new level of discipline that's not been on the scene very long," Cole said. "It's really very good news" for the auto industry. "The foundation for this was the labor deal."

The UAW contract recently ratified with the company lowers Chrysler's hourly cost of labor, a cost often cited as a reason Asian-based competitors were better able to compete against U.S. automakers.

"The idea of trying to get a balance between production and profitable sales is now how they are going to play the game and that's very healthy," Cole said.