Chrysler and General Motors Cut Jobs, Retire Vehicles

Posted on November 14, 2007 by LCT Staff - Also by this author - About the author

DETROIT, Mich. — Over the last two years, the three American auto companies have vowed that their plans to slash nearly 80,000 jobs and close more than two dozen plants would be enough to transform them into leaner and nimbler competitors.

But the housing downturn and soaring oil prices have forced Chrysler and General Motors to make another round of surprising cuts, with no guarantees that these will be the last.

Chrysler announced it would eliminate 11,000 hourly and salaried jobs in the United States and Canada, and cut shifts of workers at five plants. The decision comes on top of a plan, announced in February, to eliminate 13,000 jobs and close a factory in Newark, Del.

Taken together, Chrysler will be reducing its 2006 work force of about 80,000 employees by 30%.

General Motors also recently said that it would eliminate shifts at three assembly plants in Michigan. The moves, announced after GM union workers approved their new contract, will most likely cut 3,000 jobs, though GM has not confirmed the total. Two years ago, GM announced 30,000 job cuts as part of a broad revamping.

"It does take one's breath away to realize that the auto industry in the U.S., having gone through so much turmoil and so many rounds of cuts, is going through them yet again," said Michael Useem, a professor of management at the Wharton School of the University of Pennsylvania.

The current wave of cuts shows that the United Automobile Workers contract, passed after brief strikes at GM and Chrysler, and approved earlier today at Ford, has offered little protection against the sagging auto market, despite union leaders insisting they got the best deal they could for workers.

Chrysler's new chief executive, Robert L. Nardelli, blamed sagging auto sales for the company's steps. Chrysler developed its earlier plan in a stronger car market, Nardelli said, while still under the wing of Daimler, its former German parent.

Now, given the economic uncertainty, auto sales this year are expected to be the weakest since 1998. And Nardelli said the soft environment is expected to continue through next year.

"The market situation has changed dramatically," he said in a statement.

Chrysler also said, that it would retire four models, including the convertible version of the PT Cruiser and two models, the Dodge Magnum and Chrysler Crossfire, that were it developed during its failed merger with Daimler. Chrysler said the eliminations were based on suggestions from dealers.

The cuts at the automaker were twice as deep as some had expected and came with little warning to the factories affected by them.

"This is a huge shock for us," said Basil E. Hargrove, president of the Canadian Auto Workers union.

The Canadian union represents workers at plants in Windsor and Brampton, Ontario, where shifts will be cut. Other factories to lose shifts are in Belvidere, Ill., Toledo, Ohio, and two plants in Detroit. Chrysler said some of the work might be restored when it introduces new models.

The UAW did not comment. But one dissident union leader, Gregg Shotwell, said Chrysler's actions threatened to create general distrust and divisiveness within the union.

Union leaders "certainly deserve to be distrusted because they misled people," said Mr. Shotwell, whose group, Soldiers of Solidarity, campaigned against the versions of the UAW contract that passed at Chrysler and GM. "This has opened up people's eyes."

The cuts are an example of the new way of doing business at Chrysler, bought in August by Cerberus Capital Management, a private equity firm. Since then, the new owners have hired Nardelli, the former Home Depot chief executive, as well as James Press, a Toyota executive who is now Chrysler's president.

Professor Useem said the steps showed Cerberus would not hesitate to take quick action that might take months or even years at other automakers.

"Private equity is much better equipped to take the Draconian cuts" than public companies such as GM and Ford, he added. "It's in their DNA to be able to make these kinds of decisions. They don't owe anything to anybody."

Many industry analysts have said that Cerberus's turnaround efforts are intended to ready it for another global alliance or possibly a sale, although Nardelli has said he intends to run Chrysler as an independent player.

Long term, however, Chrysler can only survive with low costs and respectable profits, a formula that its two Detroit rivals also are trying to carry out.

The cuts are putting the UAW's president, Ron Gettelfinger, in a difficult political position. After all, he backed Cerberus despite warning that private equity owners would "strip and flip" Chrysler.

With the cuts announced, "that's stripping," said Gary Chaison, professor of industrial relations at Clark University in Worcester, Mass.

Yet, Chrysler's owners may not have much choice. The company said its sales in October fell 12.5% on an adjusted basis compared with 2006. For the year, Chrysler sales are down 3%, and it ranks as the country's fourth-biggest auto company, behind GM, Toyota and Ford.

Chrysler has long depended heavily on big pickups, sport utilities and minivans for the bulk of its sales, shifting its lineup only recently to build more small cars and small sport utilities, as well as crossover vehicles, which are SUVs based on car underpinnings.

This announcement has showed that even plants building some of its newest and more-efficient models were not immune from cuts. The Belvidere factory, for example, builds the small Dodge Caliber.

Chrysler reiterated plans to build the Dodge Journey, a crossover, as well as the Dodge Challenger sports coupe, marking the return of the muscle car. It also said it would build hybrid-electric versions of two SUVs, the Dodge Aspen and Dodge Durango.

SOURCE: New York Times

View comments or post a comment on this story. (0 Comments)

More News

NLA Supports, Celebrates Charities At LCT East

Early bird and group discounts end today, so don’t miss your chance to attend this event at the show!

Attention To Detail Sets California Operator Apart

WebXclusive: Millennial operator Aaron Schiff of Ascot Limousine uses his talents to maintain the stellar reputation of his godfather’s company.

Uber's Creepy Drones And Drivers

TNC Travesties Of The Week: The company's marketing techniques prove to be just as aggressive as their independent contractors. 

70 Defining Moments In Luxury Industry History

From the 1970s to the present, check out these incredible events that affect the wider luxury services and products sector. 

Do You Provide Customer Service Or Experience?

Companies may be tempted to stick with the former, but clients can almost immediately notice when the focus isn’t on the latter.

See More News

Facebook Comments ()

Comments (0)

Post a Comment



See More

See More

See More

See More

LCT Store

LCT Magazine - October 2016 $12.95 COVER STORY: * Leverage Tech To Levitate Your Operations * *


Experience the three annual industry events for networking for business, showcasing vehicles and products, and getting the tools for success.

Read About Your Region

What’s Happening Near You?
Click on any state to see the latest industry news and events in that region.

More From The World's Largest Fleet Publisher

Automotive Fleet

The Car and truck fleet and leasing management magazine

Business Fleet

managing 10-50 company vehicles

Fleet Financials

Executive vehicle management

Government Fleet

managing public sector vehicles & equipment



Work Truck Magazine

The number 1 resource for vocational truck fleets

Metro Magazine

Serving the bus and passenger rail industries for more than a century

Schoolbus Fleet

Serving school transportation professionals in the U.S. and Canada

Please sign in or register to .    Close