Chrysler to Lay Off 12,000

Slow sales prompted Cerberus Capital Management, the private-equity firm that owns Chrysler, to seek more layoffs.
Slow sales prompted Cerberus Capital Management, the private-equity firm that owns Chrysler, to seek more layoffs. (By Paul Sancya -- Associated Press)

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By Sholnn Freeman
Washington Post Staff Writer
Friday, November 2, 2007

Chrysler ramped up its North American turnaround plan yesterday, announcing as many as 12,000 layoffs, fresh cuts in factory work shifts and the demise of four slow-selling models.

The moves came just days after the company won deep concessions from the United Auto Workers union in a new labor contract. Some UAW workers said they were shocked by yesterday's announcement. "Not having job guarantees put us in a very vulnerable state," said Brett Ward, a Chrysler worker at a plant near Detroit. "We wouldn't have thought that a week later they'd already be announcing drastic cuts."

Analysts said the rapid changes showed how aggressively Cerberus Capital Management, Chrysler's new private-equity owner, was moving to remake the company.

"It is not all that surprising to see them moving aggressively," said Colin C. Blaydon, director of the Center for Private Equity and Entrepreneurship at Dartmouth College. "These are choices that are harder to make as a public company."

Chrysler first put in place a recovery plan in February, months before Cerberus took control. The plan called for 13,000 job cuts and the closing of one major assembly plant. Robert L. Nardelli, Chrysler's chairman and chief executive, said the plan had been redrawn as sales continued to slow in the U.S. market.

Chrysler is struggling against intense competition from Asian automakers such as Toyota. Chrysler held the No. 3 position in the U.S. market for decades before being bumped from the spot last year by Toyota.

The latest moves were announced as October sales figures released yesterday showed a 9 percent decline for Chrysler from a year ago. Overall, total U.S. sales of new vehicles grew 1.2 percent last month, compared with the same period last year.

Among American automakers, General Motors sales grew 3.6 percent in October while sales at Ford Motor declined 9.6 percent, according Autodata, an industry research firm based in England. Toyota sales climbed 4.5 percent.

As part of its restructuring plan, Chrysler is eliminating shifts at five assembly plants, leading to a reduction of 8,500 to 10,000 hourly jobs through 2008. Additionally, the company is cutting 1,000 salaried workers and 1,000 contract workers.

The new cuts, which are in addition to the jobs eliminated in February, affect plants in Belvidere, Ill.; Toledo; Brampton, Ontario; Detroit; and Sterling Heights, Mich.

The Chrysler models that were eliminated yesterday had created lots of buzz when they entered the market but eventually faded, said Jesse Toprak, an analyst at Edmunds.com.

He said the Crossfire, a two-door roadster priced at about $40,000, proved a poor rival to the Mercedes-Benz SLK, which cost about $3,000 more.

The Pacifica, a crossover sport-utility vehicle, suffered because it could never ditch its "minivan persona," he said. The Magnum, a sedan, which was often derided as a beefy station wagon, could not keep up with more stylish rivals, he said.

The convertible version of the PT Cruiser also will be eliminated.

Dealer Jack Fitzgerald, who owns multiple dealerships in the Washington region, including Chrysler, Jeep and Toyota, said he welcomed the changes in the Chrysler product line. "When I stand in my Toyota showroom, all my techniques work and I'm a big star," he said. "When I go down to my Chrysler store it's humbling."

The labor cutbacks in Ontario drew a sharp reaction from Buzz Hargrove, president of the Canadian Auto Workers union. He blamed trade policies in the United States and Canada for allowing too many Asian vehicles to be sold. He said governments in both nations lack the political will to protect North American manufacturing jobs.

At Brampton, Hargrove said about 1,100 jobs will be lost, most of which were held by young workers who were hired in recent years. Hargrove also said his union's last-minute attempt to save plant jobs were rejected flatly by the automaker.

"We are completely frustrated and angry," he said.


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