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Oracle of Delphi

Chrysler cut costs to survive downturn, CEO says

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November 3, 2008 - 1:45 pm ET

DETROIT (Reuters) -- Chrysler LLC took recent cost-cutting moves to survive a steep sales downturn and the turmoil in financial markets, CEO Bob Nardelli said today.

There was some speculation that Chrysler was cutting costs to ready itself for a sale.

"The difficult actions we have taken in the past, and those that we have just announced, are for one purpose and one purpose only: helping Chrysler survive this economic trough," Nardelli said in a message to employees that Reuters obtained.

Chrysler is targeting about 5,000 white-collar job cuts and reducing capital spending even as owner Cerberus Capital Management LP is in merger talks with larger rival General Motors.

Nardelli said business conditions required a resizing of Chrysler again. "Rumors and speculation that these actions are being taken for any other purpose are simply not true," he added.

The No. 3 U.S.-based automaker had previously eliminated about 1,000 white-collar jobs at the end of September and has warned that it may be necessary to make involuntary job cuts at the end of December.

Chrysler's U.S. sales are down 25 percent for the year in a market where analysts expect sales to show a decline to nearly two-decade lows in October. The company and its domestic rivals have faced scrutiny over whether they have sufficient liquidity to survive the sales drop.

Nardelli referred to U.S. vehicle sales slump as "unprecedented." He reiterated that third parties interested in exploring future possibilities with Chrysler had approached the automaker.

He declined to give details on any talks. "Many times they may not come to fruition," he said.

Cerberus has been in talks with GM since September about a deal that would combine the operations of the struggling No. 1 and No. 3 U.S. automakers. Analysts have said such any such deal would result in tens of thousands of job cuts.

Ken Lewenza, the head of the Canadian Auto Workers union, said today that he remained "incredibly concerned" about the prospect of an acquisition of Chrysler by GM.

"We don't think a merger is in the interests of our members," Lewenza said on the sidelines of an event at Chrysler's minivan plant in Windsor. "I don't see how you can take two sick patients and turn them into a healthy one."

Nardelli expects U.S. industrywide sales to drop 31 percent in October from a year earlier, with the annualized sales rate slipping to 11 million units when automakers report sales today.

He said the industry was in discussions with the U.S. government to obtain assistance to deal with the liquidity issues in the near term and the need for technology investments in the long term.

Link: http://www.autonews.com/article/20081103/A.../311039868/1078

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