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Saturday, February 17, 2007

Chrysler to cut 13,000 jobs under restructuring plan

Chrysler said it will cut 13,000 jobs over the next three years under a restructuring plan that eventually may lead to a DaimlerChrysler divorce.

The Chrysler unit of the German-American automaker announced the long-awaited plan Wednesday at its Auburn Hills headquarters, saying it would cut 16 percent of the U.S. division's worldwide work force, a move it hoped would return its U.S. operations to profitability by next year.

"We believe that this represents a solid plan to return to profitability and lay the groundwork for a solid future,'' Chrysler CEO Tom LaSorda said at a news conference.

Chrysler's German parent, DaimlerChrysler AG, said it is looking at all options to revive its fortunes, including partners for the troubled Chrysler.

Its chairman would not rule out a possible sale of the U.S. operation.

"I cannot and will not go into any further detail about the announcement we made today,'' DaimlerChrysler Chairman Dieter Zetsche, said during a news conference.

"In this regard we do not exclude any option in order to find the best solution for both the Chrysler Group and DaimlerChrysler,'' Zetsche said.

Zetsche acknowledged feeling pressure about Chrysler, which the company said was a drag on its parent's earnings.

Under the Chrysler plan, 11,000 production workers - 9,000 in the U.S. and 2,000 in Canada - will lose their jobs over the next three years, and 2,000 salaried jobs also will be cut - 1,000 this year and 1,000 in 2008.

"Today's action by DaimlerChrysler is devastating news for thousands of workers, their families and their communities,'' United Auto Workers President Ron Gettelfinger and Vice President General Holiefield said in a joint statement.

"While Chrysler Group's recent losses are not the fault of UAW members, they will suffer because of the reductions announced today.''

The restructuring plan calls for closing the company's assembly plant in Newark, Delaware, and reducing shifts at other U.S. plants.

Chrysler blamed the wrenching restructuring on poor sales after a shift in consumer taste from sport utility vehicles and trucks to more fuel-efficient vehicles.

Workers blamed management.

With Chrysler's job losses, the U.S. auto industry has eliminated or proposed cutting 132,000 manufacturing jobs at 64 U.S. plants since May 2005, said Sean McAlinden, chief economist and vice president of research at the nonprofit Center for Automotive Research in Ann Arbor, Michigan.

The devastation was partially offset by foreign brands expanding their manufacturing operations in the U.S. During that same period, foreign brands, such as Japan's Toyota Motor Corp., and their suppliers have created 30,000 to 40,000 factory jobs in the U.S.

That should rise to 50,000 to 60,000 by 2009, McAlinden said.

Like the other U.S. automakers - Ford Motor Co. and General Motors Corp. - DaimlerChrysler's earnings have been hit hard by rising labor costs and slumping sales as American consumers have turned to foreign models.

For years, the so-called Big Three pinned their fortunes on higher-priced sport utility vehicles and trucks, but that strategy soured when gas prices climbed to near $3 a gallon.

Chrysler said Wednesday that its fourth-quarter earnings plunged on weaker demand at the Chrysler unit, where sales fell 7 percent.

DaimlerChrysler's profit fell to $761 million (euro581.7 million), or 74 cents per share, as revenue slipped to $53.7 billion.

DaimlerChrysler earned $4.26 billion (euro3.26 billion), or $4.17 per share, in 2006 compared with 2005 earnings of $3.76 billion (euro2.87 billion), or $3.70 per share.

The job cuts at Chrysler will reduce by 400,000 the number of vehicles that operations can produce each year.

DaimlerChrysler shares rose $5.33, or 8.3 percent, to close at $69.78 on the New York Stock Exchange. - AP

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