Chrysler Group to trim executives by 15%

July 04, 2006|By THE DETROIT NEWS

DaimlerChrysler AG's Chrysler Group plans to thin its top management ranks by 15 percent within three years, with the bulk of the job cuts taking place this year, Chrysler Chief Executive Officer Thomas W. LaSorda said Sunday.

Trimming the number of executives is part of an overall reorganization at DaimlerChrysler announced in January.

DaimlerChrysler CEO Dieter Zetsche announced plans then to eliminate 6,000 positions to cut costs and streamline jobs across the German-based company's operations. The plan aims to save $1.8 billion a year in worldwide costs.

The plan will reduce Chrysler's senior management ranks - now about 1,200 executives - by 180 positions, LaSorda said.

Chrysler has previously undergone a restructuring and has been profitable in recent years. But it has seen sales weaken in recent months.

LaSorda said it was critical that the company keep its operations as lean as possible with competition from Asian rivals mounting in the U.S. market.

"We're doing a [headcount reduction] right now, 15 percent of executives for the next three years, with 70 percent of that by the end of the year," he said during a trip to Indianapolis for the U.S. Grand Prix race.

In a letter sent to employees this year, LaSorda said the cuts could be achieved "with limited voluntary programs and a no-layoff strategy." Part of the reduction will be through attrition but senior managers also are being offered buyouts and early retirement packages.

Brad Rubin, an analyst with BNP Paribas, said Chrysler's move to cut most of the jobs this year could result in a loss of key managers at a crucial time.

"With the recent departures on [Chrysler's] marketing side, you lose the top people who helped turn around Chrysler and made it a successful entity," Rubin said.

But the move is part of a trend sweeping the U.S. auto industry. Competitors General Motors Corp. and Ford Motor Co. are slashing staff, and Nissan Motor Co. expects to reduce its North American staff as it transfers headquarters from Gardena, Calif., to Nashville, Tenn.

"Chrysler's doing that to be competitive on the cost side," Rubin said. "Hopefully, they'll still be able to keep the infrastructure in place so they're able to continue running without skipping a beat."

The automaker has launched two new models this year and plans to roll out eight more before the end of the year.

Recent departures of senior executives in the marketing department would count toward Chrysler's reduction target, said company spokesman Jason Vines. But he said those departures had nothing to do with the headcount reduction.

Analysts associate the executives' exit with the company's weakening sales performance and bloated inventories.

Chrysler's U.S. sales for June fell 15.5 percent to 185,946 vehicles from year-earlier levels. The company also has been reporting inventory of unsold vehicles well above the industry average.

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