Chrysler expected to cut 11,000 jobs

BUSINESS DIGEST

February 14, 2007|By New York Times News Service

AUBURN HILLS, Mich. -- The Chrysler Group is set to announce a restructuring plan today aimed at securing its place in the crowded American car market - and within DaimlerChrysler AG.

The plan is expected to include the elimination of about 11,000 blue- and white-collar jobs, along with the closing of one and possibly two assembly plants - in Delaware and Missouri - people with direct knowledge of the plan said this week.

Chrysler may shut smaller plants elsewhere and announce other cost-cutting measures to meet its stated goal of reducing costs by about $1,000 a vehicle.

Along with those steps, Chrysler may announce a project to share more parts and engineering technology with Mercedes-Benz. It has largely avoided doing so since the DaimlerChrysler merger in 1998, even though other car companies routinely use the same underpinnings for their different brands.

The restructuring is yet another attempt by Chrysler to remake itself in the face of stiff competition from foreign brands and a shift in taste among American buyers.

Chrysler already has undergone two overhauls this decade - one major and one of more limited scope - both under the guidance of Dieter Zetsche, who ran the Chrysler Group from 2000 until 2006, when he became DaimlerChrysler's chief executive.

Throughout the 1990s, and while Zetsche was in charge, Chrysler kept its hold on third place in the American market, with a vehicle lineup weighted heavily to sport utilities, minivans and pickups.

Until last fall, three-quarters of Chrysler's models were light trucks, even though its American and Asian rivals were shifting to build smaller, more fuel-efficient vehicles that buyers sought when gasoline prices rose above $3 a gallon.

Last year, DaimlerChrysler, including Chrysler and Mercedes, was unseated by Toyota of Japan as the third-biggest carmaker in the American market, behind General Motors and the Ford Motor Co.

DaimlerChrysler could reclaim third place this year simply because of shifts by its rivals. Ford, which lost $12.7 billion last year, is giving up its unprofitable sales to rental car companies, a move that will accelerate its decline in market share.

Chrysler's restructuring plan is being unveiled on the same day that its parent announces results for 2006. Analysts expect DaimlerChrysler to be profitable. But they predict Chrysler, which lost $1.5 billion on an operating basis during the third quarter after a profitable first half, will post an operating loss of at least $1 billion for the year.

Adam Jonas, who follows European automakers for Morgan Stanley, said he expected Chrysler's operating losses to continue through 2007, given the costs it will incur from its restructuring plan.

Another challenge facing Chrysler is its reputation in the marketplace. Even though Chrysler has rolled out more fuel-efficient models in the past year, like the small Dodge Caliber and the Sebring sedan, its image is still that of a company that relies on Jeeps and trucks.

Chrysler's mission includes removing any doubts at its parent company about whether to keep Chrysler in the fold. Last fall, DaimlerChrysler's chief financial officer, Bodo Uebber, refused to rule out a spinoff, although company officials, including Zetsche, subsequently insisted the idea was not under consideration.

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