Chrysler LLC will make deeper cuts in its white-collar work force than initially planned in a restructuring plan announced in February, according to CNBC’s Automotive Reporter Phil LeBeau.
The automaker, which is working to return to profitability by 2009, is expected to offer buyouts or early retirement to salaried employees and cut contract workers in an effort to reduce its white-collar work force by about 1,500 more people, according to news reports Tuesday. Most of the white-collar reductions will occur at Chrysler's Auburn Hills headquarters.
The reports of more layoffs comes with just over a day remaining until a strike deadline set by the United Auto Workers union, as union representatives and Chrysler bargained into Tuesday in a bid to reach a new labor contract for some 49,000 U.S. factory workers.
Chrysler has seen its U.S. sales drop 3 percent through the first nine months of the year, and it has idled five U.S. plants for anywhere from one to two weeks because of lower demand for its products.
Amid losses and slumping sales, Germany's Daimler AG sold 80.1 percent of Chrysler to private equity firm Cerberus Capital Management LP in a $7.4 billion transaction in August.
Chrysler announced in February that it would eliminate 13,000 positions, including 11,000 production jobs and 2,000 white-collar posts in an effort to return to profitability in 2008.
The new round of cuts will likely involve buyouts or early retirement packages similar to those made in February, reports said.
Word of the cuts comes as the company is involved in tense contract talks with the United Auto Workers union. The UAW has set a strike deadline of 11 a.m. ET Wednesday if no agreement is reached.
The white-collar cuts were reported late Monday by the Detroit Free Press.
At factories and union halls across the Detroit metro area Tuesday, workers filled out paperwork for strike pay and signed up for picket duty as the 11 a.m. Wednesday strike deadline approached.
Negotiators continued to talk at Chrysler’s Auburn Hills headquarters, working most of Monday night and into Tuesday with only a short break.
Setting a strike deadline doesn’t necessarily mean that workers will leave their jobs. The UAW could extend its old contract hour-by-hour as it did with General Motors Corp. before going on a two-day strike last month.
The UAW ended its strike and announced a tentative agreement with GM on Sept. 26. The company’s 74,000 UAW members were voting on the pact, with totals to be released on Wednesday.
The union normally settles with one U.S. automaker and then uses that deal as a pattern for an agreement with the other two Detroit-based automakers. But several industry analysts have said that Chrysler and Ford Motor Co. have different needs and therefore need different contracts.
Many industry analysts believe Cerberus will fix the money-losing Chrysler quickly, return it to profitability and sell it for a huge profit, perhaps to a foreign auto company that wants a stronger U.S. presence.
In August, Daimler transferred an 80.1 percent stake in Chrysler to the New York-based Cerberus in a $7.4 billion deal. The German automaker retained a 19.9 percent interest in Chrysler.
It would be to Cerberus’ advantage to settle some of Chrysler’s labor cost issues in the new contract without a lengthy strike, said Standard & Poor’s credit analyst Gregg Lemos-Stein.
“One would have to imagine if their return on investment would be superior if they were to achieve a contract that would address some of these very serious legacy cost issues,” he said.