DaimlerChrysler announced plans Monday to cut 26,000 jobs over three years at its US-based Chrysler division.
The cuts, part of a restructuring that's designed to pull Chrysler out of the red, amount to about 20 percent of DaimlerChrysler's North American workforce.
It is further evidence of a slowing US economy - particularly in the manufacturing sector. Coming on top of other recent major layoffs, the move could put further pressure on the Federal Reserve Board to lower interest rates by half a percentage point, instead of a quarter point or not at all, when it meets today and tomorrow.
In just the past week, three big US companies - Lucent Technologies, AOL Time Warner, and Whirlpool - announced layoffs totaling 24,000 workers. Reports indicate that WorldCom may cut its workforce by more than 8,000.
The plan at DaimlerChrysler calls for six manufacturing plants to be idled through 2002. Chrysler says it expects a large part of the job-cutting to be done through retirement programs, achieved within the framework of existing union contracts.
"To be competitive, the Chrysler group needs to be a more nimble company," Chrysler group president and chief executive Dieter Zetsche said in a statement. "Along with exciting products, this will establish a sound basis for future growth."
The company says the job cuts will involve 19,000 hourly workers and 6,800 salaried employees. United Auto Workers union spokesman Paul Krell declined to comment immediately Monday. The union represents Chrysler's hourly workers.
All of the job cuts will be through a combination of retirements, special programs, layoffs, and attrition. Chrysler expects that three-quarters of the overall reduction will be achieved this year.
Chrysler posted a third-quarter loss of $512 million and has warned that its fourth-quarter loss could be more than double that, given a soft US auto market. On Saturday, Germany's Stuttgarter Zeitung newspaper reported the Chrysler unit could lose $1.3 billion in the fourth quarter.
Daimlerchrysler has insisted it has no plans to spin off or sell Chrysler, which Daimler bought in 1998 as part of its plan to extend the company's global reach.
Plants slated to be idled include the Toluca transmission plant in Mexico, and assembly plants in Cordoba, Argentina, and Parana, Brazil. Production will be scaled back at plants in four states and Canada, including Detroit, Belvidere, Ill.; Toledo, Ohio; Newark, Del.; Brampton, Ontario; and two sites in Windsor, Ontario.
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