Auto job losses continue as Chrysler, GM make cuts

[October 24, 2008]  DETROIT (AP) -- The employment carnage in the ever-shrinking U.S. auto industry continued Thursday as Chrysler LLC announced it would get rid of 1,825 factory jobs and General Motors Corp. trimmed some benefits and said it would make further white-collar cuts.

As the shaky U.S. economy speeds the industry's out-of-control slide, and tight credit cuts into sales, Auburn Hills-based Chrysler said the jobs will be eliminated at the end of the year when it closes a Newark, Del., sport utility vehicle plant ahead of schedule and eliminates a shift at a Toledo, Ohio, Jeep plant.

At GM, senior managers sent a memo to executives Wednesday saying early retirement and buyout offers to white-collar workers had been well-received but that the company still would have to make involuntary layoffs.

More job cuts are likely if the U.S. auto sales volume continues to decline into 2009, said Laurie Harbour-Felax, president of the Harbour-Felax Group, a Detroit-area auto industry consulting company.

"If volume continues to fall through the tank as we go into 2009, then they're going to be left with a whole bunch more people," she said.

If recent talk about a potential acquisition of Chrysler by GM comes true, even more job losses are likely, she said.

"The whole thing becomes somewhat scary of a concept to think about, more job losses, especially in Michigan," she said.

GM, Ford Motor Co. and Chrysler together employ about 230,000 people in the U.S. As of June, the Detroit Three had announced the shutdown of 35 plants since 2005, according to Sean McAlinden, chief economist with the Center for Automotive Research in Ann Arbor. Along with 35 additional closures at GM and Ford's chief suppliers, about 149,000 hourly and salaried jobs have been eliminated in that time.

Chrysler's job cuts Thursday amount to about 6 percent of its U.S. hourly work force. They include the indefinite layoff of about 825 workers at the Toledo North Assembly Plant, where the company makes the Jeep Liberty and Dodge Nitro.

The Newark Assembly plant, where 1,000 people make Dodge Durango and Chrysler Aspen SUVs, originally was expected to shut down at the end of 2009, and its hastened closure puts in doubt whether the company will keep making the large truck-based SUVs.

Newark is the only plant that makes the Durango and Aspen, and Chrysler spokesmen wouldn't say if production would be sent to another factory. They said, however, that a plant in Detroit was being retooled to make several sport utility vehicles.

Employees at the Newark plant said they were told Durango production will shift to Michigan, but the model design will change.

Chrysler said in a statement that the changes will adjust inventory to better match consumer demand. Through the first nine months of the year, the company's U.S. sales have fallen 25 percent from the same period last year, the largest decline of any major automaker. U.S. sales industrywide are down 13 percent from a year earlier.

"The markets are facing unprecedented turmoil and we are in a time of historic change in the auto industry," said Frank Ewasyshyn, Chrysler's executive vice president of manufacturing. "These tough but necessary steps are vital to our long-term viability."

The company said it would work with the United Auto Workers union to handle the layoffs in a "socially responsible manner." In the past, it has offered buyout and early retirement programs to workers affected by plant slowdowns and closures.

At the Toledo plant, the second shift will be eliminated, said Jeep UAW leader Dan Henneman

.

"We pretty much knew it was coming," he said. "The orders since June have drastically gone down."

Through September, Nitro sales were down 46 percent from the same period last year, while Liberty sales were off 21 percent, according to Autodata Corp. Durango sales were down 54 percent and Aspen sales dropped 21 percent.

At the Newark plant, workers who had just returned Monday from a three-week layoff to scale back production were told Thursday morning that their last day would be Dec. 19, less than a week before Christmas.

"It was just sad to look around and see the faces of so many people and how it's going to affect them," said Donna Branch-Jones, 43, a 15-year veteran who works on the door assembly line. "We've been expecting it, but it's just kind of a slap in the face to hear it today. The reality is finally here."

Chrysler ran into difficulty earlier this year with its truck-heavy lineup as gas prices approached $4 per gallon and consumers switched to smaller cars. The company's car offerings have not sold well, even when other manufacturers have seen sales increases.

The sales slump showed up on the bottom line Thursday. Daimler AG's third-quarter earnings release showed a $154.5 million operating loss for its 19.9 percent share of Chrysler Holding LLC, indicating that Chrysler lost about $772.5 million in the second quarter as its U.S. sales slumped.

Chrysler is privately owned and does not have to report its earnings, but issued a statement saying its second-quarter loss totaled $660 million when taking into account the differences between international and U.S. accounting standards. Chrysler said its automotive operations lost $570 million, with the rest of the loss attributable to Chrysler Financial.

Chrysler's majority owner, New York private equity firm Cerberus Capital Management LP, has been talking to GM, the combined Nissan Motor Co.-Renault SA, and others about a possible sale or merger, or Chrysler could be sold in pieces to other companies, according to people briefed on the talks. The people have asked not to be identified because the talks are private.

Meanwhile, Cerberus has said it's in talks with Daimler to buy the German company's stake in the struggling U.S. automaker. On a conference call Thursday, Daimler Chief Financial Officer Bodo Uebber said those negotiations continue.

At GM, the company decided it will temporarily stop matching salaried employees' 401(k) contributions as of Nov. 1, and it suspend tuition reimbursement and adoption assistance programs at the end of this year.

Spokesman Tom Wilkinson would not say how many white-collar workers had accepted offers to leave, nor would he say if the company has a goal for reducing their ranks.

Detroit-based GM has been working to slash its costs this year as it tries to save money to outlast a prolonged economic downturn. In August, the automaker began offering buyouts to some salaried workers to cut 15 percent of white-collar costs.

GM had 44,000 U.S. salaried workers in 2000. That dropped to 32,000 by the end of last year.

Earlier in the year, GM laid out a vast, $15 billion restructuring plan involving cost cuts, asset sales and borrowing. As part of the plan, the automaker said it would cut thousands of salaried and hourly jobs, sell assets, suspend its dividend and eliminate health care for salaried retirees over age 65.

GM has reported losing $57.5 billion in the last 20 months, including a $15.5 billion loss in the second quarter. Its vehicle sales declined 18 percent in the first nine months of this year, and it is burning through $1 billion in cash per month.

In Newark, Delaware AFL-CIO president Samuel Lathem, who worked at the Chrysler plant for about 25 years, said U.S. automakers got too complacent over the years and finally are getting the message that Americans want smaller, more efficient cars.

"In that respect, we're way behind," he said, adding that American manufacturing workers are a dying breed. "We're becoming a servicing country."

Lathem paid a visit Thursday afternoon to the local UAW hall, where flags were flying at half mast in honor of a former state legislator who died recently.

"It might as well be for us," joked Lathem, a retired UAW leader.

[Associated Press; By TOM KRISHER]

AP Business Writers Matt Moore in Frankfurt, Germany; Randall Chase in Newark, Del.; and Dan Strumpf in New York contributed to this report. Associated Press writer John Seewer in Toledo, Ohio, also contributed.

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