Weekly News: February 5, 2001

February 5, 2001

DAIMLERCHRYSLER CUTS 26,000 JOBS DaimlerChrysler announced a plan to cut more than 26,000 jobs and scale back or completely close 13 of the company's plants. Dieter Zetsche, CEO for Chrysler operations, said that about 75 percent of the job cuts will be done this year, while the remainder will be done within three years. While financial details of Chrysler's restructuring plan will be revealed on February 26, DaimlerChrysler decided to reveal the extent of related job cuts today to end negative speculation by some analysts who predicted the cuts to be even more extensive. Six plants will be scheduled to close, although only one of them, Detroit's Mound Road facility, is in the U.S. Chrysler hopes to take care of most of the cuts through early retirement incentives. Later in the week, DaimlerChrysler employees in Brazil went on strike in protest of the automaker’s intent to halt production of Dodge Dakota pickup trucks at its Campo Largo, Brazil, assembly plant. Chrysler officials say that the plant will not be permanently shut down.

To read more about the Chrysler cutbacks, click here.

DC CUTS PINCH CHRYSLER DEALERS Chrysler will drastically cut dealer showroom subsidies to reduce division losses. According to one report, the cuts could save DaimlerChrysler more than $500 million. The cuts include the elimination of a 15-day grace period to pay for vehicles, eliminating a compensation program for fueling of vehicles, and reducing dealer prep time.

DC SEEKS DEFENSE FOR POSSIBLE TAKEOVER BID DaimlerChrysler has reportedly hired Deutsche Bank and J.P. Morgan Chase & Co. to advise the company on how to avoid a possible takeover bid by Toyota. A consistently low share price has caused the company to be worth less now (about $46 billion) than the sum of its parts at the time of the 1998 merger. Toyota has denied interest in the company, although frustrated shareholders could press the company to look for a buyer for part or all of the company.

CA KEEPS ZEV REQUIREMENT California's Air Resources Board has decided to keep current requirements that call for production and mass marketing of zero-emissions vehicles beginning in 2003, despite ongoing objections from automakers. Environmentalists consider the decision to be a victory, although they are dissatisfied with the number of ZEVs required. Advocates argue that the revitalization and strengthening of an electric-vehicle requirement will channel more money into the advancement of battery technology, the main handicap of electric vehicles. Most automakers continue to insist that the market and demand should determine electric-vehicle production.

TOYOTA EXPANDS WV ENGINE PLANT Toyota announced that it will soon begin a $50 million expansion to its Buffalo, West Virginia, powertrain plant. The expansion will allow production of V-6 engines for Lexus vehicles and increased capacity for four-cylinder engines, including those for the upcoming Toyota Matrix and Pontiac Vibe. Total engine production will rise from 500,000 to 540,000 annually, and 200 jobs will be added by the expansion.

ALFA COMING BACK TO STATES IN 2005 Upon its return to the U.S., Italian marque Alfa Romeo will be sold mainly through existing Cadillac and Saab dealerships, although some other dealerships may also be included in the network. The brand will return to the U.S. for the 2005 model year, starting with the next-generation Alfa Spider roadster. Eventually, Alfa will sell three models in the U.S. Alfa withdrew from the U.S. market in 1995, due to slow sales and a poor dealer/service reputation. An alliance agreement made last year with GM will enable access to the auto giant's dealership network.

JUDGE ORDERS COMPENSATION IN FORD IGNITION CASE The same California judge who late last year ordered Ford Motor Company to recall up to two million cars for an ignition-system flaw is now ordering Ford to reimburse owners the cost of fixing the problem. Ford is still in the process of contesting the first ruling of Justice Michael Ballachey, and a court-appointed referee has been appointed to work out details on how the cars will be recalled. Several other states have class action suits against Ford for the same issue, contingent on a settlement in California. The California case is the first ever in which a judge has ordered a recall. The repair order could potentially cost Ford hundreds of dollars to fix each of up to 800,000 cars with the ignition system that are still on the road.

DC TO SOON CHOOSE PT CRUISER PLANT DaimlerChrysler is due to decide which Chrysler plant will get additional PT Cruiser production. The primary plant where the PT Cruiser is assembled, in Toluca, Mexico, has been running at capacity. According to a Ward's Auto World report, the company is considering moving European minivan production back to the Windsor, Ontario, assembly plant so that it can free extra capacity at the Graz, Austria, plant. Tooling and supply problems would complicate any move, but the automaker needs to soon choose a higher-capacity plant for the PT.

SUPPLY PROBLEM IDLES GM SUV PLANT General Motors has temporarily idled the Moraine, Ohio, assembly plant that is producing the company's new 2002 mid-size sport-utility vehicles, due to a lack of parts from a supplier. The closure at the assembly plant, which assembles Chevrolet TrailBlazer, GMC Envoy, and Oldsmobile Bravada models, has affected about 2000 workers. GM has not disclosed the supplier nor the part that caused the temporary shutdown.

EXPLORER V-8 DELAYED Ford Motor Company is now planning to launch its redesigned 2002 Ford Explorer SUV without its new V-8 engine, at least for the first month or so, due to unresolved "plant issues," says Ward's AutoWorld. Ford is trying for better build quality and less early build flaws than with its Escape compact SUV, which was recalled several times after its introduction last year. The 2002 Explorer should begin to arrive at dealerships in late February, with V-8 models arriving in April.

FREIGHTLINER CUTS JOBS, HALVES PRODUCTION Portland, Oregon, based truckmaker Freightliner has announced that it will cut 1085 employees and halve production. The cuts are attributed to high fuel prices, the economic slowdown, and higher loan rates. Freightliner is owned by DaimlerChrysler, although company representatives said that the timing with DC's announced cuts was coincidental. Freightliner is the country's largest heavy-duty truck manufacturer.

CARSDIRECT ACQUIRES GREENLIGHT CarsDirect.com has acquired online car-buying service Greenlight.com. The merger of the two companies will bring all Greenlight.com operations under CarsDirect.com. Since last year, Greenlight has partnered with Amazon.com. The merger will also boost CarsDirect's dealer network to nearly 3000, through new partner and Greenlight founder Asbury Automotive, a privately held dealer group. CarsDirect will also become the preferred partner of Amazon.com, in addition to existing partnerships with Edmunds and Kelley Blue Book. Financial terms of the transaction have not been disclosed.

TENNECO ANNOUNCES CUTS Tenneco Automotive has announced that it will cut another 405 salaried jobs worldwide, including 215 jobs that will immediately be eliminated. The move is a follow-up to the company's cost reduction plan, announced in October, that will cut 700 salaried jobs by the end of this year. Tenneco hopes to save about $27 million upon completion of the cost reduction plan next year.

FORD AND GETRAG FORM VENTURE Ford Motor Company and Getrag GmbH have announced a new $511 million joint venture that is aimed at cutting transmission costs in Europe. The venture, called Getrag Ford, will run Ford's former manual transmission plants in Bordeaux, France; Cologne, Germany; and Halewood, U.K. Ford says that the move is part of its European turnaround strategy, as it will give better utilization of assets. The venture, headquartered in Cologne, will begin operations immediately.

CHRYSLER BUILDING PLAN NIXED DaimlerChrysler has decided to scrap plans to create a symbolic headquarters in New York's Chrysler Building, attributing poor financial performance, according to the Detroit News. Chrysler would have refurbished several of the top floors of the landmark building, which was to be used for board of directors meetings and other high executive functions.

 

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