AUBURN HILLS, Mich. -- DaimlerChrysler announced Monday it will cut 26,000 jobs over three years at its U.S.-based Chrysler division, part of a restructuring designed to pull the automaker out of the red.
The cuts amount to about 20 percent of DaimlerChrysler's North American work force.
The plan also calls for six manufacturing plants to be idled through 2002. Production capability will be reduced by 15 percent.
Chrysler said it expects a large part of the job-cutting to be done through retirement programs. Other jobs will be cut through special programs, layoffs and attrition.
"These decisions are absolutely necessary to be kept competitive and in fact to survive," Chrysler group president and chief executive Dieter Zetsche said at a news conference. "They must be made as soon as possible to take control of costs and end uncertainty that many people are feeling."
Chrysler said the job cuts will involve 19,000 hourly workers and 6,800 salaried employees. U.S. workers covered by the United Auto Workers union will receive 95 percent of their regular pay.
Chrysler expects that three-quarters of the overall reduction will be achieved this year.
Company officials would not comment on how much the automaker will save as a result of the job cuts.
Zetsche said Chrysler will unveil its complete plan to turn around the loss-making division on Feb. 26.
Chrysler's performance hasn't met Stuttgart-based DaimlerChrysler's expectations, with sales incentives erasing profits and production of the hot new PT Cruiser falling short of demand. Daimler and Chrysler also have been reluctant to share parts to cut costs, which might change with a new emphasis on saving money.
In the long run, what matters most is Chrysler's ability to develop and make vehicles that people want to buy, said analyst David Garrity of Dresdner Kleinwort Benson in New York.
He said he was encouraged that the company was leaving its product development budget relatively untouched.
But he said it was shortsighted for the company to cut production the most in Mexico and Canada, where costs are lower, while shielding higher-paying jobs in the United States. The Chrysler-UAW national contract contains safeguards against job cuts.
"You have a company that in some respects had been hamstrung by the UAW agreement, that has limited their ability to reduce costs," Garrity said.
Chrysler posted a third-quarter loss of $512 million and has warned that its fourth-quarter loss could more than double that, given the soft U.S. auto market. Germany's Stuttgarter Zeitung newspaper reported Saturday 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 it 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.
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