Chrysler to cut as many as 12,000 jobs

With the ink barely dry on a new four-year labor contract, Chrysler said Thursday that it planned to cut as many as 12,000 jobs and remove four models from its lineup. The move stunned workers and suggested that the now-private Chrysler wouldn’t hesitate to cut production and jettison vehicles that weren’t selling well.

Chrysler said it would cut 8,500 to 10,000 hourly jobs and 2,100 salaried jobs through 2008, or about 15% of its workforce. The cuts come on top of 13,000 Chrysler layoffs that were announced in February.

Chrysler also will eliminate shifts at five North American assembly plants and cut four models, including the slow-selling PT Cruiser convertible and Dodge Magnum wagon.

Chrysler executives said falling demand for vehicles in the U.S. market made the cuts necessary. Chrysler’s sales fell 3% in the first nine months of this year, according to Autodata Corp., and the company said it expected sluggish sales in 2008.

“We have to move now to adjust the way our company looks and acts to reflect a smaller market,” Chrysler Vice Chairman and President Tom LaSorda, who led the company through the recent contract talks, said in a statement. “That means a cost base that is right-sized and an appropriate level of plant utilization.”

Most workers will be offered buyout or early retirement packages. The details of those packages weren’t released Thursday. Workers also could be offered jobs at other plants. About 1,100 of the salaried workers affected are temporary workers, who don’t get severance packages.

“Our union will make sure our members receive all of the benefits and protections to which they are entitled under the contract,” UAW spokeswoman Christine Moroski said.

Industry analysts said the cuts were long overdue to avoid overproduction, which leads to high inventories, angry dealers and costly incentives to move cars off dealers’ lots.

Chrysler, which became a private company in August, is now better equipped to make those changes because it doesn’t report earnings and can afford to take a short-term hit paying for buyouts. Private equity firm Cerberus Capital Management became Chrysler’s majority owner after buying an 80.1% stake from the company’s former partner, German automaker Daimler.