Chrysler Restructuring Includes 13,000 Layoffs, Closing Of Plants

Company sees $4.5 billion in cost savings by 2009.

DaimlerChrysler Wednesday unveiled its eagerly anticipated restructuring program, announcing a reduction in employees of 13,000 over the next few years and the closing of it Newark Assembly Plant.

The struggling automaker also said it will reduce total capacity by 400,000 units, and explore further strategic options with partners.

"The Chrysler Team worked out a comprehensive Recovery and Transformation Plan using all resources within DaimlerChrysler," said Dr. Dieter Zetsche, Chairman of the Board of Management of DaimlerChrysler. "In addition to that and in order to optimize and accelerate the presented plan, we are looking into further strategic options with partners beyond the business cooperation partners mentioned. In this regard, we do not exclude any option in order to find the best solution for both the Chrysler Group and DaimlerChrysler."

The company said the plan is focused on getting the company back into the black, with the primary focus being cost controls. Chrysler is targeting $4.5 billion of savings by 2009.

"There are two integrated parts to the plan," said Chrysler Group President and CEO Tom LaSorda said. "First, the Chrysler Group needs to solidify its position in the North American marketplace. In addition, the key to our long-term success will be our ability to transform the organization into a different company to achieve and sustain long-term profitability."

The program will be supported by a $3 billion investment in new engines, transmissions and axles, leading up to more than 20 all-new and 13 refreshed vehicles from 2007 to 2009, the company said.

As part of the plan, Chrysler intends to reduce material costs by up to $1.5 billion by
2009. Also, the company will in 2007 eliminate a shift at Newark (Delaware) Assembly Plant and theWarren (Michigan) Truck Plant, and in 2008, eliminate a shift at St. Louis South Assembly Plant. The Newark plant will be idled in 2009, and the Cleveland Parts Distribution Center will be idled in December 2007.

The massive restructuring is a nod to the changing dynamics of the global auto market. For years, Chrysler’s bread and butter has been the North American market, mostly for minivans, SUVs and trucks.

"Those two factors were advantages for Chrysler Group once upon a time," said LaSorda, "but the rules of the global marketplace have changed. High fuel prices and other dramatic shifts in the market have driven a shift in consumer preferences to smaller, more fuel-efficient vehicles. We must make some strategic adjustments to build off our historic strengths, but not rely on them so much so that we are put at a competitive disadvantage" he said.

More in Operations