Chrysler Announces Big Cuts

The new management at Chrysler hasn’t wasted any time putting forward plans to return the automaker to good health and profitability. Only months since the Recovery and Transformation Plan was announced with the reduction of 13,000 workers, phase two was announced yesterday by Chrysler’s new CEO Bob Nardelli. It will continue to see Chrysler trim down in order to eventually shape up.

Although many cuts were already made, the soft American economy coupled with a weakening US dollar and high fuel prices have hurt total vehicle sales dramatically, which has seriously affected the wellbeing of the domestic auto industry in general and Chrysler in particular. To cope with decreased demand, many of Chrysler’s plants will reduce production by dropping shifts, which will in-turn reduce the size of its hourly labor force. Plants axing shifts include Belvidere, IL (Caliber, Compass, Patriot), Brampton, ON (300, Magnum, Charger), Toledo, OH (Jeep Liberty, Dodge Nitro), and two facilities in Detroit, Michigan. These will account for roughly 4,000 jobs, but the reductions will have a wider effect that will account for 8,000 to 10,000 hourly job cuts in total. Some of the employees being dropped work third shifts, which are usually introduced at vehicle launch in order to meet initial demand. According to Chrysler, these cuts were planned from the beginning, however they have been lumped together with this latest Recovery and Transformation Plan announcement.

It isn’t just blue-collar jobs that are on the line either, with 1,000 salaried white-collar jobs also being eliminated, as well as 37-percent of contracted workers.

Beyond 2008, there will be additional changes made to Chrysler’s product lineup. The four vehicles that Chrysler will send to the chopping block include one from Dodge, the Magnum station wagon, and three Chrysler branded products, the PT Cruiser Convertible (but not the wagon), the Crossfire and the Pacifica crossover. Chrysler obviously wouldn’t be dropping big sellers, and the PT Cruiser Convertible, Pacifica and Crossfire are not only lethargic off dealer lots but at the end of their respective life cycles (the Crossfire has been the slowest car to leave dealer lots in the entire U.S.). The Magnum, on the other hand has
just received a facelift for model year 2008, a reality that could make the even rarer SRT8 version a future collectible. Many expected the Jeep Commander, the 4×4 brand’s flagship SUV and one of the most stagnant sellers to be removed first.

If you’re lamenting the loss of any axed models, take heart as some will be replaced by new vehicles. The Dodge Journey will fill the shoes left by the Chrysler Pacifica and in some respects the Magnum, while that last car’s spot at Brampton will be replaced by the low-volume but high-interest Dodge Challenger. Meanwhile, Chrysler will invest in its large SUV production facility to adopt the hybrid-electric Dodge Durango and Chrysler Aspen SUVs, vehicles that Chrysler believes have a bright future.

Chrysler’s big announcements follow the same pattern of logic as similar announcement made by the other two members of the Big Three. With the proper cuts and the introduction of products that customers want, Chrysler will hopefully be able turn its ebbing market share and sagging profits around and return to being in the black. With turnaround being Chrysler’s middle name, few question whether or not it will succeed. As to what the company will look like and who will be working for it when it does come around, mind you, is anyone’s guess.