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The Detroit News

The new, privately held Chrysler LLC will be a smaller, leaner and more selective automaker than the expansion-driven division it was under the German management of DaimlerChrysler AG.

Chrysler drastically scaled back its North American operations Thursday with plans to cut shifts at five assembly plants, eliminate 12,000 more jobs and drop a handful of unpopular vehicles from its product lineup.

By shrinking Chrysler down to fit its sliding U.S. market share, the company's new private owner is seeking a fresh start after the failure of Chrysler's nine-year marriage with German luxury carmaker Daimler AG.
Chrysler is already in the midst of a "recovery and transformation" plan to slash 13,000 jobs, but that effort didn't go far enough for its new owner, the private-equity firm Cerberus Capital Management LP.

Instead, Cerberus will downsize Chrysler further to meet the reality of weaker market conditions and brutal competition that threatened to sink its turnaround before it got started.

Chrysler CEO Bob Nardelli said Thursday that the radical overhaul gives the smallest of Detroit's Big Three automakers a solid foundation to build on.

"I'm confident that we have the right team in place and a business plan that doesn't need to be rewritten," Nardelli said in a statement.

But even as Nardelli was expressing confidence about the future, Chrysler reported that its U.S. sales tumbled 9 percent in October and the company's market share fell below 12 percent. Sales for the year are down 4 percent.

The grim figures reflect Chrysler's steady decline since its heralded mega-merger with Daimler in 1998.

At the time, Chrysler had a 16 percent U.S. market share and was among the most profitable automakers in the world. Joining forces with Daimler was expected to provide Chrysler with the technology and resources to expand sales and operations.

Go-go strategy didn't work

Under the leadership of German executives Dieter Zetsche and Wolfgang Bernhard, Chrysler beefed up its production schedules and added several sport utility vehicles, crossovers and cars to its product lineup.

But the go-go strategy fell flat last year when dealers choked on heavy inventories of unsold vehicles, leading to an unexpected $1.5 billion loss in the third quarter. Its slide back into the red factored into DaimlerChrysler's decision in early 2007 to sell the U.S. automaker.

Since acquiring Chrysler for $7.4 billion in August, Cerberus has been unwinding the strategy of the automaker's previous management.

"So much of this has to be laid at the feet of the Zetsche-Bernhard team," said Joseph Phillippi of AutoTrends Consulting Inc. in Short Hills, N.J. "They signed off on this stuff the better part of three years ago."

Cerberus handpicked Nardelli, a longtime General Electric Co. executive and ex-Home Depot Inc. CEO, to streamline Chrysler's operations and vehicle portfolio.

The dramatic reconstruction kicked off Thursday with the announcement of substantial cuts in Chrysler's factories and white-collar ranks.

Chrysler said it will eliminate between 8,500 and 10,000 hourly jobs by the end of 2008 and drop shifts at five assembly plants in the United States and Canada.

The affected factories are in Detroit; Sterling Heights; Toledo; Belvidere, Ill.; and Brampton, Ontario. In addition, shifts will be downsized at the company's V-6 plant in the Mack Avenue Engine Complex in Detroit.

Chrysler spokesman Jason Vines said the total hourly job losses will include reductions at engine and stamping plants as well as other facilities that supply the assembly plants.

"This is all market-based," Vines said. "These production levels are what the market will bear."

People close to the company said Chrysler hopes to reduce the factory jobs through early retirement and buyout programs.

There was no immediate reaction to the cutbacks by the United Auto Workers, whose 45,000 Chrysler members on Saturday narrowly approved a new four-year labor pact with the company.

But the president of the Canadian Auto Workers lashed out Thursday at Chrysler, calling the job cuts an "absolute disaster" for workers in Brampton.

"This is a huge hit to us," CAW President Buzz Hargrove said at a news conference in Toronto.

Salary, hourly OT halted

The Chrysler cutbacks include sharp reductions in the automaker's white-collar ranks as well.

The company plans to eliminate 1,000 salaried jobs beginning this month and about 1,100 contract workers by the end of the year. Chrysler also will cease all salary and hourly overtime.

Dumping jobs will cut costs and improve financial results, but Chrysler still has a long road ahead for retooling its product lineup.

With former Toyota Motor Corp. executive James Press as its new product guru, Chrysler needs to make up for lost time in growing segments such as hybrids and midsize crossover vehicles.

On Thursday, the company took the first step toward revamping its lineup by killing some of its poorest-selling models.

Gone are the PT Cruiser convertible and three vehicles developed under the German executive team of Zetsche and Bernhard -- the Dodge Magnum wagon, Chrysler Pacifica crossover and Chrysler Crossfire roadster.

Industry analysts said that Chrysler likely will chop more models to make room for more relevant vehicles in the future.

"This is probably the tip of the iceberg in terms of product shifting," said John Wolkonowicz, senior market analyst for the forecasting firm Global Insight Inc. "A number of other products are likely to get the ax as they look at this with fresh eyes."

Chrysler is struggling in the massive midsize car market, where sales of the made-over Chrysler Sebring captured just 1.7 percent of the segment in October and the new Dodge Avenger accounted for 2.5 percent. Toyota's Camry leads the segment with 13.3 percent of sales. The Dodge Dakota small pickup is flailing as well; sales are down 33 percent through October.

Analysts say the automaker must move quickly to eliminate slow sellers and remedy shortfalls in key segments. Chrysler lags Ford Motor Co. and General Motors Corp. in the trendy crossover segment, and is one of the only major automakers without a gas-electric hybrid for the U.S. market.

Chrysler said Thursday that it plans to add two all-new vehicles next year -- the Dodge Journey crossover and Dodge Challenger sedan -- as well as hybrid versions of its large SUVs, the Chrysler Aspen and Dodge Durango.

"Either they didn't know a few years ago what was going to sell today, or they knew and just didn't act on it," Jesse Toprak, chief economist for Edmunds.com, an auto Web site.

Factory workers on Thursday found little solace in expectations that the drastic jobs cuts will help Chrysler survive. Many felt betrayed by the depth of the cuts and the timing of the announcement.

"We gave them a lower wage structure," said Mark Mitchell, who works at Chrysler's Sterling Heights Assembly plant. "They should be moving work here from foreign plants, not laying us off."

Calvin Smith, another Sterling Heights worker, wouldn't have voted for the new UAW contract had he known what was coming.

"I don't like that we signed a contract, and then they come out with layoffs immediately," he said. "Many of us wouldn't have signed that contract."
 
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