- The Washington Times - Tuesday, January 30, 2001

DaimlerChrysler's struggling Chrysler Group will cut 26,000 jobs over the next three years to counter an oversupply of vehicles caused by its declining market share.

The changes affect about 20 percent of the work force at Chrysler, purchased by Daimler-Benz in 1998. Chrysler's models include Dodge, Jeep, Eagle and Plymouth. It will eliminate the latter this year.

Chrysler's restructuring plan affects 16 plants worldwide. In North America, Chrysler will cut jobs at four U.S. plants and three Canadian plants by slowing production of cars and trucks made at the facilities or by eliminating a single shift at some plants.

"I want to assure you that these decisions are absolutely necessary to be kept competitive and in fact to survive. It is important that they take place as quickly as possible," Chrysler group President and Chief Executive Officer Dieter Zetsche said yesterday.

The Chrysler division of DaimlerChrysler lost $512 million in the third quarter last year on revenue of $13.4 billion. In the third quarter of 1999, Chrysler reported a net income of $1 billion, also on revenue of $13.4 billion.

Declining car sales were responsible for the company's troubles in the second half of last year. Chrysler sold 2.39 million vehicles during the first nine months of 2000, down from the 2.41 vehicles sold during the first nine months in 1999.

Chrysler is losing its share of the U.S. market for sport utility vehicles and minivans.

"They used to dominate and they don't anymore," said Jim Collins, auto analyst at investment banker UBS Warburg.

Chrysler is the third-leading U.S. automaker with a 14 percent share of the market, analysts said, behind General Motors Corp. and Ford Motor Co. The company has long relied on the sale of light trucks trucks, minivans and SUVs rather than cars to make money.

But its share of the U.S. market for minivans fell from 50 percent in December 1998 to 32 percent in December 2000. Japanese automakers have edged their way into the market for U.S. minivans with popular entries like the Honda Odyssey.

"The minivan was a key source of profit for Chrysler," said Merrill Lynch Global Securities auto analyst Michael Dean.

Plants producing minivans and SUVs are targeted by the company's sweeping plan to cut costs. Chrysler will cut one shift each from plants making the Neon car, Grand Cherokee, Cherokee and Wrangler sport utility vehicles, and Chrysler Concorde and Dodge Intrepid sedans.

It will slow production at plants making the Dodge Durango sport utility vehicle and the company's minivans.

The changes will cut Chrysler's production by 15 percent.

"We kind of expected it, but it could have been worse. There were rumors they would shut the plant down," said Clyde Quillen, president of United Auto Workers Local 1183 in Newark, Del., where Chrysler produces the Dodge Durango.

About 500 of the 2,400 members of UAW Local 1183 could lose their jobs, Mr. Quillen said.

Just one U.S. plant will close, but that facility an engine plant in Detroit already was scheduled to stop production. Five other plants Chrysler will close are in Mexico and South America.

"That was surprising. Conventional wisdom was that two or three [U.S.] plants would be shut down," Mr. Collins said.

Current labor agreements with the UAW and the Canadian Auto Workers prohibit Chrysler from shutting any facilities in North America. In addition, Chrysler must continue to pay laid-off UAW workers 95 percent of their wages until the current labor contract expires in September 2003.

"It will cost them because they will have to continue to pay workers. It's a good thing to do to cut costs, but it won't really reduce their costs for two or three years," Mr. Dean said.

About 19,000 unionized workers are among the 26,000 whose positions Chrysler will eliminate. About 6,800 of those being targeted for layoff are salaried workers, and those employees will lose their jobs by March 31, the company said.

An estimated 29,000 of Chrysler's union and salaried workers in the United States and Canada are eligible for early retirement, the company said.

Mr. Zetsche said he expects Chrysler to cut many jobs through retirement programs, but the company will make the rest of the cuts through layoffs.

DaimlerChrysler's announcement comes after last week's news that Lucent Technologies, based in New Jersey, would lay off 16,000 of its 123,000 workers and after Mississippi-based telecommunications company WorldCom said it would fire up to 10,000 of its 77,000 workers.

Yesterday, copier giant Xerox Corp. said it would lay off 4,000 workers, and Hewlett-Packard said it would cut 1,700 jobs.

DaimlerChrysler closed lower yesterday on the New York Stock Exchange, falling 95 cents to close at $47.20 a share.

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