Chrysler LLC, the automaker owned by private-equity firm Cerberus Capital Management LP, will almost double its planned job cuts to as many as 25,100 and scrap four models after losing $680 million last year.
The company will fire as many as 12,100 more employees through 2008, after saying in February that it would eliminate 13,000 positions over three years. The latest job reductions include plants in Michigan, Ohio, Illinois and Ontario, the Auburn Hills, Michigan-based company said in a statement today.
Chrysler, the third-largest U.S.-based automaker, is dropping the PT Cruiser convertible, Crossfire car, Dodge Magnum wagon and Pacifica sport-utility vehicle, a model once promoted by former chief Dieter Zetsche in television adds. Prospects for U.S. auto sales have declined since it announced the February cuts, Chrysler said. Cerberus bought the automaker in August.
``The world has gotten tougher and you have new owners with a fresh view,'' said John Casesa, managing director of Casesa Strategic Advisors LLC in New York. ``The speed of decision- making reflects private ownership.''
Private-equity firms typically trim costs to increase profit after they buy a company. Cerberus is deepening the cuts as the U.S. auto industry's annual sales head toward their lowest since 1998. Chrysler Chief Executive Officer Robert Nardelli, hired by Cerberus, said the market ``changed dramatically'' from February.
Chrysler said today that its U.S. sales fell 8.9 percent in October from a year earlier, its fifth straight monthly decline and biggest of 2007. They have dropped 3.5 percent year to date.
The latest reductions come less than a week after the United Auto Workers union ratified a four-year contract with Chrysler. They include 8,500 to 10,000 hourly jobs, 1,000 salaried positions and about 1,100 contract workers, and represent as much as 16 percent of the automaker's 77,000 employees. Buyouts and early retirement offers will be used to trim the hourly jobs, spokesman Mike Aberlich said, without elaborating.
Chrysler has cut 7,100 jobs this year and will have about 59,000 employees at the end of 2009, spokesman Dave Elshoff said.
The company's new contract with the UAW reduces entry-level wages and sets up a trust that will take over the company's retiree health-care obligations in exchange for an $8.8 billion contribution. General Motors Corp. reached a similar accord Oct. 10 and Ford Motor Co. is negotiating with the union.
UAW spokesman Roger Kerson didn't respond to messages left on his office and mobile phone.
``This is just horrible, horrible news,'' Canadian Auto Workers President Buzz Hargrove. The nation's auto industry already has ``been on its knees'' because of the strong Canadian dollar and previous job cuts, the union leader said.
Chrysler's U.S. market share has fallen to 12.7 percent this year through October from 15.7 percent in 2000 as Asian rivals led by Toyota Motor Corp. and Honda Motor Co. won more customers.
The four models being dropped made up 92,047, or 4.5 percent, of the 2.02 million vehicles Chrysler sold worldwide through September.
The Pacifica is built at a Windsor, Ontario, plant that may not lose jobs because of increased production of a minivan at the factory, Hargrove said. A Magna International Inc. unit in Windsor that makes Pacifica seats will halt production, said Tracy Fuerst, a spokeswoman for the supplier. She said it's too early to comment on what will happen to the unit's 190 workers.
The Crossfire is produced in Austria by contract assembler Wilhelm Karmann GmbH.
The company also repeated that it will add two new models, the Dodge Challenger car and Dodge Journey crossover wagon, and said it will build gasoline-electric hybrid versions of the Chrysler Aspen and Dodge Durango SUVs.
``These product actions are all in response to dealer requests,'' Jim Press, one of Chrysler's two presidents, said in the statement.
``We have to move now to adjust the way our company looks and acts to reflect a smaller market,'' Tom LaSorda, the automaker's other president, said in the statement.
The automaker said it will eliminate third shifts at the Belvidere, Illinois, plant that makes the Dodge Caliber small car and two Jeep models; the Toledo, Ohio, plant that produces Dodge Nitro and Jeep Liberty SUVs; and the Brampton, Ontario, factory that builds the Magnum and Chrysler 300 and Dodge Charger cars.
In addition, Chrysler will cut a second shift at the Jefferson North plant in Detroit that makes Jeep Grand Cherokee and Commander models. The plant may return to a second shift in 2010 with new models, the company said.
A second shift will also be eliminated at the Dodge Avenger and Chrysler Sebring sedan plant in Sterling Heights, Michigan.
Chrysler will cut one of three crews at the Mack Avenue V-6 engine plant in Detroit.
``These are the next tough choices that needed to happen to put Chrysler in a more competitive position,'' said Laurie Harbour-Felax, managing director of Chicago-based consulting firm Stout Risius Ross Inc. ``I didn't see a lot of substance in the first turnaround plan and so this is a welcome Round Two.'' ( Bloomberg )