Chrysler to Cut 26,000 Employees

Chrysler head Dieter Zetsche yesterday announced that his company will cut 26,000 jobs and shutdown five manufacturing plants in a effort to stem the company's downward financial spiral. In making the announcement, Zetsche said the turnaround at Chrysler could take as long as four years, an indication that there may be more cuts coming that need to be negotiated into a new labor contract with the UAW. The job cuts will be devastating for company workers and suppliers alike. The bottom line for many Chrysler suppliers is that the company will build as many as 15% fewer cars over the next few years, and wants to pay 15% less for the components it buys. Zetsche did not discuss how he will reorganize Chrysler but look for Chrysler and Mitsubishi to nearly come together as one company. Chrysler will eventually kill some models and replace them with Mitsu models. Shared powertrains and engines are likely along with the manufacturing plants that make them.

Following are the changes in Chrysler operations announced yesterday. To be permanently shut down are: Toluca, Mexico Transmission Plant; Lago Alberto Assembly Plant, Mexico; Cordoba, Argentina assembly plant; Campo Largo, Parana, Brazil assembly plant; and Mound Road, Detroit engine plant which will shift production to Mack I and II. The following plants will eliminate one shift until further notice: Belvidere, Ill.; Jefferson North, Detroit; Toledo, Ohio; Bramalea, Ont.; and Pillette Road, Ont. Line speed will be reduced at Newark, Del. and Windsor, Ont.

The changes announced yesterday are not expected to help Chrysler very much in the short term. Cutting production when sales are already down is a sensible thing to do, but Chrysler will be giving away market share, which is where the profit is. There is scuttlebutt from Germany that Juergen Schrempp needs short term fixes, not just long term ones. For instance, an article in this week' edition of Der Spiegel says "Several people in charge of Deutsche Bank have given Schrempp only until the next meeting of the supervisory board" to prove the efficacy of his strategy. In another European report, this one from the Sunday Times of London, DaimlerChrysler's two largest stockholders -- Deutsche Bank and Kuwait -- are losing patience with Schrempp and may insist on Chrysler being sold if it cannot be fixed within six months. Such an idea would favor Kirk Korkorian, still believed to be the company's third largest stockholder, even after selling off a third of his Chrysler holdings.