Chrysler LLC plans to eliminate four different models next year as part of a broad cost-cutting effort that will lead to the elimination of an additional 12,000 jobs.
Robert Nardelli, Chrysler chairman and chief executive officer, said Thursday the impending cuts reflect worsening economic conditions, which are expected to reduce industry-wide sales again next year. The new round of cuts follows an earlier announcement that Chrysler planned to chop 85,000 units from its fourth-quarter production plans.
"Annual industry volume (U.S. market) then was running at a 17.2 million clip. Now, we expect a seasonally adjusted annual volume for 2007 to be significantly lower and carry over into 2008," he said. Industry-wide sales are expected to drop to between 15.5 million and 16 million units next year, according to recent forecasts prepared as the U.S. housing crisis worsened.
As part of the restructuring, the Dodge Magnum, the convertible version (only) of Chrysler PT Cruiser, Chrysler Pacifica, and Chrysler Crossfire will be dropped, according to Jim Press, vice chairman and president.
Chrysler will add two all-new products to its portfolio: the Dodge Journey and Dodge Challenger, along with two new hybrid models, the Chrysler Aspen and Dodge Durango, during 2008, Press said.
"These actions reflect our new customer-driven philosophy and allow us to focus our resources on new, more profitable and appealing products," Press added. "Further, these product actions are all in response to dealer requests."
As part of the cuts, Chrysler plans to eliminate the third shift, which had been added in anticipation of stronger demand, at plants in Toledo, Ohio; Belvidere, Ill.; and Brampton, Ont.
In addition, the company also is dropping second production shifts at the company's assembly plants in Sterling Heights and Detroit in response to the falling consumer demand. All shift reductions are expected to take place in the first quarter of 2008 and will lead to the elimination of between 8500 and 10,000 jobs, the Chrysler announcement said.
Many of the employees impacted by the cuts will be eligible for early retirement or extra unemployment protection under the new labor agreement that was ratifed only last week after a bitter internal fight inside the union. The extra unemployment benefits are limited to only two years, however, under the new contract.
As previously disclosed, Chrysler also will cut salaried employment by 1000 and cut contract employment by 37 percent.
The company also plans to eliminate hourly and salaried overtime and reduce purchased services due to the reduction in volume, Nardelli said.
Nardelli said the volume-related actions are in addition to 13,000 jobs eliminated by the three-year Recovery and Transformation Plan (RTP) announced in February.
"The market situation has changed dramatically in the eight months since Chrysler established the Recovery and Transformation Plan as its blueprint," he said.
"I'm confident that we have the right team in place and a business plan that doesn't need to be re-written," Nardelli added. "Like all good plans, the RTP has built-in flexibility that allows us to stay one step ahead of market change. And that is the way to long-term sustained profitability."
"We have to move now to adjust the way our company looks and acts to reflect a smaller market," added Tom LaSorda, vice chairman and president. "That means a cost base that is right-sized and an appropriate level of plant utilization."
In contract negotiations just concluded with the United Auto Workers, Chrysler committed to spending more than $15 billion on products, plants, and engineering during the life of the contract through 2011.
At Jefferson North, the plant will return to two shifts in first quarter of 2010 with the introduction of the next generation of a sport-utility vehicle. The addition of a third shift will remain an option, depending on market demand. Jefferson North currently builds the Jeep Grand Cherokee and Jeep Commander.