Chrysler to cut 13,000 jobs, including 2,000 in Canada, close Delaware plant

Published: Wednesday, February 14, 2007 | 4:19 PM ET

Canadian Press: TOM KRISHER

AUBURN HILLS, Mich. (AP) - In the next three years, 13,000 Chrysler workers will lose their jobs - including 2,000 in Canada - under a wrenching restructuring announced Wednesday that eventually may lead to a DaimlerChrysler divorce.

The Chrysler unit of the German-American automaker announced its long-awaited plan at its Auburn Hills headquarters, saying it would cut 16 per cent of the U.S. division's worldwide work force, a move it hoped would return its U.S. operations to profitability next year.

The plan was announced only hours after Chrysler's parent, DaimlerChrysler AG, said it was considering "far-reaching strategic options with partners" for Chrysler and that "no option is being excluded" as it reported a 40 per cent drop in companywide profit for the fourth quarter. DaimlerChrysler's U.S. shares rose nearly seven per cent by early afternoon.

The plan calls for closing the company's Newark, Del., assembly plant, and reducing shifts at plants in Warren, Mich., and St. Louis. A parts distribution centre near Cleveland also will be closed, and reductions could occur at other plants that make components for those factories.

Under the plan, 11,000 production workers - 9,000 in the U.S. and 2,000 in Canada - will lose their jobs over the next three years, and 2,000 salaried jobs also will be cut - 1,000 this year and 1,000 in 2008.

"Today's action by DaimlerChrysler is devastating news for thousands of workers, their families and their communities," United Auto Workers president Ron Gettelfinger and vice-president General Holiefield said in a joint statement. "While Chrysler Group's recent losses are not the fault of UAW members, they will suffer because of the reductions announced today."


At Chrysler's Canadian operations, 1,100 cuts will fall in 2007 alone, the automaker said.

"It is no coincidence that Canada became a net importer in the auto industry last year, at the same time as we face unprecedented job cuts at North American-based auto manufacturers," said Canadian Auto Workers president Buzz Hargrove.

"The one-way street in global automotive trade has to end."

The job losses are the latest in a yearlong series of devastating cuts in the ailing domestic auto industry, which likely will lose more than 100,000 jobs in all.

"We believe that this represents a solid plan to return to profitability and lay the groundwork for a solid future," Chrysler CEO Tom LaSorda said at a news conference.

DaimlerChrysler chairman Dieter Zetsche said the company was looking into "further strategic options with partners" for Chrysler, but he would not give details about what has been discussed for the ailing U.S. operation.

"In this regard we do not exclude any option in order to find the best solution for both the Chrysler Group and DaimlerChrysler," Zetsche said.

Analyst Georg Stuerzer with UniCredit, when asked if the wording in the statement was a sign that the company was mulling a spinoff of Chrysler, said, "the impression was right. This is what people are thinking it could mean."

He added that the restructuring could be the first step, likely followed by a push by DaimlerChrysler to find a partner with which to operate the Chrysler unit, or even find a suitable buyer for it.

Bank of America auto analyst Ron Tadross said in a note to investors that DaimlerChrysler "did not rule out disposing of its money-losing Chrysler division."

Tadross said he "would not be surprised if there is good interest in Chrysler. We see Chrysler as a decent business, at least relative to the other U.S. domestic manufacturers."

DaimlerChrysler's U.S. shares rose $4.33, or 6.7 per cent, to $68.78 in afternoon trading on the New York Stock Exchange.