AUBURN HILLS, Mich. - DaimlerChrysler AG's Chrysler unit said yesterday that it had agreed with the United Auto Workers union on voluntary retirement incentives of $35,000 per worker as it tries to cut one-fifth of its work force.
Half of the incentive amount would be a one-time cash payment, with the rest going toward buying a selected Chrysler, Dodge or Jeep vehicle, the company said. Eligible hourly workers must be 60 years old with at least 10 years of service; have 30 years of service; or be 55 to 59 years old and have combined age and service years of at least 85.
"They needed to work out some sort of kicker for people who are close to retirement age to keep them from sticking around," said Rod Lache, an analyst at Deutsche Banc Alex. Brown.
The world's fifth-largest automaker is trying to cut costs at its U.S. unit, which lost $1.75 billion in last year's second half and is expected to lose at least $2 billion this year. The company said last month that it would eliminate 26,000 Chrysler employees, including 19,000 hourly workers, during the next three years.
About 800 Marylanders are employed at Chrysler's Dodge Durango plant in Newark, Del.
Last month, Chrysler said it planned to cut production there by 20 percent and cut nearly 400 of the 2,900 employees. At that time, it said it expected most of the cuts to be early retirements.
DaimlerChrysler didn't say how much it expects the incentives for hourly employees to cost. The company said Jan. 29 that 28,620 hourly and salaried workers would be eligible for some sort of retirement program. But spokesman Trevor Hale said yesterday that the number who will qualify under programs already announced is far smaller.
"We do expect there to be some layoffs," he said.
DaimlerChrysler expects 75 percent of the job cuts to occur this year.
Some employees with skills critical to the company may not be eligible for the incentives, Hale said. The company will make formal offers to those eligible, he said.
DaimlerChrysler has offered a similar retirement package for salaried workers, including 4,600 people in the United States and 320 in Canada, and they have until Feb. 28 to accept, said company spokeswoman Megan Giles.
Under that plan, employees 62 or older already eligible for retirement can get a cash incentive or a Chrysler vehicle, the company said. Salaried employees 53 or older will get 100 percent of pension and health-care benefits if they accept the offer, about twice what they would normally receive for early retirement, she said.
The overall job cuts will cost the Stuttgart, Germany-based automaker about $2 billion, Lache estimated. He said the agreement with the UAW was in line with his expectations.
Lache, who rates DaimlerChrysler a "market perform," said he expects the Chrysler unit to be profitable in the first half of next year.
Chrysler's sales have yet to show any rebound. The unit's domestic sales of cars and light trucks fell 16 percent last month compared with sales in January last year, while the industrywide decline was 6.7 percent. Chrysler's sales this month are 30 percent lower than in the year-earlier period, said Lehman Brothers analyst Nicholas Lobaccaro, who rates DaimlerChrysler shares "underperform."
DaimlerChrysler shares rose 87 cents to $50.07 yesterday and have gained 22 percent this year.