Rough road for Chrysler, GM

Chrysler LLC, now in merger talks with General Motors Corp., said it will cut 1,825 jobs as it shuts a Delaware factory a year early and reduces output at an Ohio plant.

Meanwhile, GM, the largest U.S. automaker, plans to eliminate more than the 5,000 salaried jobs it has already targeted and said it will stop contributing to some retirement-savings plans.

Automakers are under pressure to trim costs as the global credit crunch threatens to push 2009 U.S. auto sales to a 27-year low. Closely held Chrysler, which isn’t required to report financial results, indicated that it had a loss of about $565 million in the second quarter as it announced its downsizing Thursday.

Chrysler’s Delaware-made sport utility vehicles “are simply not selling,” said Aaron Bragman, a product analyst at Global Insight Inc. in Troy, Mich. “It reached a certain point where it simply doesn’t make sense to keep the plant open.”

Auburn Hills, Mich.-based Chrysler will make both moves by Dec. 31. Cerberus Capital Management LP, which bought most of Chrysler last year, is in talks with GM and Nissan Motor Co. about a merger for the automaker, according to people familiar with the matter.

Chrysler is still 19.9 percent owned by Daimler AG, which said Thursday that it reduced the book value of that stake to zero from $220 million at the end of the second quarter.

There is “no new news” in talks on selling the rest of that holding to New York-based Cerberus, Daimler Chief Executive Officer Dieter Zetsche said on a conference call. GM, Chrysler and Cerberus have declined to comment on merger discussions.

Chrysler’s Newark, Del., factory makes the Dodge Durango and Chrysler Aspen sport utility vehicles and has 1,000 workers. It was scheduled to close by the end of 2009. At the Toledo, Ohio, plant, Chrysler will drop one production shift, leaving the factory with just the daily shift building Dodge Nitro and Jeep Liberty SUVs. The plant employs 2,100 people.

Stuart Schorr, a Chrysler spokesman, declined to comment on whether the Durango and Aspen would be canceled, whether the Delaware production would be shifted elsewhere, or how output at the Ohio factory might be affected.

U.S. sales of SUVs are down 19 percent this year through September, according to Autodata Corp., in Woodcliff Lake, N.J. Durango sales are off 54 percent, and Aspen sales are down 21 percent.

At GM, slower-than-predicted sales in U.S. and Europe are forcing deeper cuts, according to a letter to executives. Detroit-based GM will temporarily halt matching payments of as much as 4 percent to nonunion employees’ 401(k) savings plans on Nov. 1 and end programs to assist with tuition and adoptions in January, spokesman Tom Wilkinson said Thursday.

“This just reflects the severe global slowdown in demand,” Pete Hastings, a Morgan Keegan Inc. fixed-income analyst in Memphis, Tenn., said in an interview. “Cutting workers and the 401(k) match is pretty severe, but you have to do what you have to do to preserve cash.”