Big job cuts at Chrysler

Days after UAW signs pact, firm says it will trim 11,000 positions

November 02, 2007|By New York Times News Service

DETROIT -- Over the last two years, the three American auto companies have vowed that their plans to slash nearly 80,000 jobs and close more than two dozen plants would be enough to transform them into leaner and nimbler competitors.

But the housing bust and soaring oil prices have forced Chrysler LLC and General Motors Corp. to make another round of surprising cuts, with no guarantees that these will be the last.

Yesterday, Chrysler announced it would eliminate 11,000 hourly and salaried jobs in the United States and Canada, and cut shifts of workers at five plants. The decision comes on top of a plan, announced in February, to eliminate 13,000 jobs and close a factory in Newark, Del.

Taken together, Chrysler will be reducing its 2006 work force of about 80,000 employees by 30 percent.

General Motors also recently said that it would eliminate shifts at three assembly plants in Michigan. The moves, announced after GM union workers approved their new contract, will likely cut 3,000 jobs, though the automaker has not confirmed the total. Two years ago, GM announced 30,000 job cuts as part of a broad restructuring.

"It does take one's breath away to realize that the auto industry in the U.S., having gone through so much turmoil and so many rounds of cuts, is going through them yet again," said Michael Useem, a professor of management at the Wharton School of the University of Pennsylvania.

The recent wave of cuts shows that the United Automobile Workers contract - passed after brief strikes at GM and Chrysler, and now under negotiation at Ford - has offered little protection against the sagging auto market, despite union leaders insisting they got the best deal they could for workers.

Chrysler's new chief executive, Robert L. Nardelli, blamed sagging auto sales for the company's steps. Chrysler developed its earlier plan in a stronger car market, Nardelli said, while still under the wing of Daimler AG, its former German parent.

Now, given the economic uncertainty, auto sales this year are expected to be the weakest since 1998.

And Nardelli said the soft environment is expected to continue through next year.

Chrysler also said yesterday that it would retire four models: the convertible version of the PT Cruiser, the Pacifica, and two models, the Dodge Magnum and Chrysler Crossfire, that were developed during its failed merger with Daimler. Chrysler said the cutbacks were based on suggestions from dealers.

The job cuts at the automaker were twice as deep as some had expected and came with little warning to the factories affected by them.

"This is a huge shock for us," said Buzz Hargrove, president of the Canadian Auto Workers union.

The CAW represents workers at plants in Windsor and Brampton, Ontario, where shifts will be cut. Other factories to lose shifts are in Belvidere, Ill., Toledo, Ohio, and two plants in Detroit. Chrysler said some of the work might be restored when it introduces new models.

The UAW did not comment. But one dissident union leader, Gregg Shotwell, said Chrysler's actions threatened to create general distrust and divisiveness within the union.

Union leaders "certainly deserve to be distrusted because they misled people," said Shotwell, whose group, Soldiers of Solidarity, campaigned against the versions of the UAW contract that passed at Chrysler and GM. "This has opened up peoples' eyes."

The cuts are an example of the new way of doing business at Chrysler, purchased in August by Cerberus Capital Management, a private equity firm. Since then, the new owners have hired Nardelli, the former Home Depot chief executive, as well as James E. Press, a veteran Toyota executive who is now a Chrysler's president.

Useem said the steps showed Cerberus would not hesitate to take quick action that might take months or even years at other automakers.

"Private equity is much better equipped to take the Draconian cuts" than public companies such as GM and Ford, he added. "They don't owe anything to anybody."

Many industry analysts have said that Cerberus' turnaround efforts are intended to ready it for another global alliance or possibly a sale, although Nardelli has said he intends to run Chrysler as an independent player.

Long term, however, Chrysler can only survive with low costs and respectable profits, a formula that its two Detroit rivals also are trying to carry out.

The cuts are putting the UAW's president, Ron Gettelfinger, in a difficult political position.

After all, he backed Cerberus despite warning that private equity owners would "strip and flip" Chrysler.

With the cuts announced on yesterday, "that's stripping," said Gary N. Chaison, professor of industrial relations at Clark University in Worcester, Mass.

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