Chrysler to Axe More Than 13,000 Workers to Cut Costs

For 13,000 Chrysler workers, Feb. 14 will now be known as the Valentine's Day massacre.

On Wednesday, Chrysler announced its long-awaited restructuring, which included a 16 percent reduction in its work force, shift reductions, a plant closing and a surprise hint that the plan could lead to a DaimlerChrysler divorce.

The Chrysler plan calls for closing the company's Newark, Del., assembly plant, and reducing shifts at plants in Warren, Mich., and St. Louis. A parts distribution center near Cleveland also will be closed, and reductions could occur at other plants that make components for those facilities.

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Chrysler blamed the wrenching restructuring on poor sales after a shift in consumer taste from SUVs and trucks to more fuel-efficient vehicles. Workers blamed management.

"It's a shame that Chrysler didn't give us something better. That's not our fault," said Victor Harris, 56, who works in the paint shop at the Newark plant and has been employed there for 35 years.

Aside from the job cuts, Chrysler's German parent, DaimlerChrysler AG (DCX), said it is looking at all options to revive its fortunes, including partners for the troubled Chrysler. Its chairman wouldn't rule out a possible sale of the U.S. operation.

With Chrysler's job losses, the domestic auto industry has eliminated or proposed cutting 132,000 manufacturing jobs at 64 U.S. plants since May 2005, said Sean McAlinden, chief economist and vice president of research at the nonprofit Center for Automotive Research in Ann Arbor.

The devastation was partially offset by foreign brands expanding their manufacturing operations in the U.S. During that same period, foreign brands, such as Japan's Toyota Motor Corp., and their suppliers have created 30,000 to 40,000 factory jobs in the U.S. That should rise to 50,000 to 60,000 by 2009, McAlinden said.

Chrysler announced its plan at its Auburn Hills headquarters, saying it hoped the move would return its U.S. operations to profitability by next year. Like the other domestic automakers — Ford Motor Co. (F) and General Motors Corp. (GM) — DaimlerChrysler's earnings have been hit hard by rising labor costs and slumping sales as consumers have turned to foreign models. For years, the so-called Big Three pinned their fortunes on higher-priced sport utility vehicles and trucks, but that strategy soured when gas prices climbed to near $3 a gallon.

Under the Chrysler plan, 11,000 production workers — 9,000 in the U.S. and 2,000 in Canada — will lose their jobs over the next three years, and 2,000 salaried jobs also will be cut — 1,000 this year and 1,000 in 2008.

"Today's action by DaimlerChrysler is devastating news for thousands of workers, their families and their communities," United Auto Workers President Ron Gettelfinger and Vice President General Holiefield said in a joint statement. "While Chrysler Group's recent losses are not the fault of UAW members, they will suffer because of the reductions announced today."

"We believe that this represents a solid plan to return to profitability and lay the groundwork for a solid future," Chrysler CEO Tom LaSorda said at a news conference.

DaimlerChrysler Chairman Dieter Zetsche, asked repeatedly about a potential sale or partners for Chrysler, refused to comment.

"I cannot and will not go into any further detail about the announcement we made today," he said during a news conference.

"In this regard we do not exclude any option in order to find the best solution for both the Chrysler Group and DaimlerChrysler," Zetsche said.

Zetsche acknowledged feeling pressure about Chrysler, which the company said was a drag on its parent's earnings. But as recently as last year, Chrysler was helping to prop up Mercedes, which only recently recovered from lagging quality and profits.

Jeremy Anwyl, president of the automotive information Web site, said potential buyers for Chrysler would be limited because of the price tag. He speculated that the company would be attractive to a Chinese automaker because it has a dealership network that could distribute China-built cars in the U.S. Chrysler Group and China's Chery Automobile Co. late last year agreed on a plan for the Chinese manufacturer to build small cars to be sold worldwide.

Nissan Motor Co. and Renault SA also could be suitors because Chrysler is strong in products such as minivans and trucks where Nissan is relatively weak, Anwyl said.

And several private equity groups recently have poured billions into troubled auto parts makers.

"There's so much money in terms of the private equity funds across all industries right now," Anwyl said. But if such a purchase took place, the firms would have to demonstrate quick results, something unlikely with Chrysler, Anwyl said.

Gerald Meyers, a former auto executive who teaches at the University of Michigan, said DaimlerChrysler's work to develop and integrate common vehicle platforms and components suggest the divorce would be unlikely.

"Once you've scrambled those eggs, it's really murder trying to separate them. I think Zetsche's decided to tough it out and try to make his plan work," Meyers said.

Bank of America analyst Ronald Tadross said he "would not be surprised if there is good interest in Chrysler. We see Chrysler as a decent business, at least relative to the other U.S. domestic manufacturers."

Chrysler said Wednesday that its fourth-quarter earnings plunged on weaker demand at the Chrysler unit, where sales fell 7 percent. DaimlerChrysler's profit fell to $761 million, or 74 cents per share, as revenue slipped to $53.7 billion.

DaimlerChrysler earned $4.26 billion, or $4.17 per share, in 2006 compared with 2005 earnings of $3.76 billion, or $3.70 per share.

LaSorda said the company expects to lose money again in 2007, but less on an operating basis than in 2006. He also said the company expects to take a $1.3 billion charge this year for restructuring expenses.

The job cuts at Chrysler will reduce by 400,000 the number of vehicles that operations can produce each year.

The Delaware plant, which makes the slow-selling Dodge Durango and Chrysler Aspen mid-sized sport utility vehicles, employs about 2,100 workers. Chrysler plans to close it in 2009, with a shift reduction this year.

Dean Almuwalld, who works in painting on the Newark plant's assembly line and has worked at the plant for 13 years, learned its future from news reports.

"I'll take a transfer," the 33-year-old said as he walked into the local United Auto Workers hall. Almuwalld said he has relatives in Detroit. "I've got family there, so I'm ready to go."

The Warren truck plant, with 3,313 hourly employees, makes the Dodge Ram and Dakota pickups, which saw sales decline last year. Chrysler plans to eliminate a shift there this year.

Harbert Jones said he likely would keep his job at the Warren plant. Still, he said, these are "terrible times" for his fellow Chrysler workers.

The other plant to lose a shift is the St. Louis South assembly plant, which makes Chrysler and Dodge minivans. It has 2,850 workers and will lose the shift in 2008.

The Cleveland-area parts distribution center, which employs 95, will close sometime this year, Chrysler said.

LaSorda said after the plant cuts, Chrysler will be using 100 percent of its factory capacity going into 2008.

He also said the company will double production of four-cylinder engines at its new Dundee, Mich., plant, and it also plans to build a new V-6 engine at a plant location to be announced later.

DaimlerChrysler shares rose $5.45, or 8.5 percent, to $69.90 in late trading on the New York Stock Exchange.

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