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Chrysler to Cut 13,000 Jobs in Overhaul

Micheline Maynard

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hrysler loss compared with a profit of just more than $2 billion in 2005.

"It was a strong year at three of our divisions, but it's been a difficult and disappointing one here at the Chrysler Group," Dieter Zetsche, the chief executive of the German parent, said this morning.

The restructuring plan marked a dramatic swing for a company that had seemed to avoid the same declines as its Detroit rivals.

Chrysler said it would close its Newark, Del., assembly plant in 2009, as well as a parts distribution center in Cleveland.

It also will eliminate one shift of workers at truck plants in Warren, Mich., and St. Louis.

In all, Chrysler said 13,000 employees, or 16 percent of its work force, would lose their jobs by the end of 2009, including 11,000 hourly workers.

Of those hourly workers, 9,000 will lose their jobs in the United States and 2,000 in Canada. Another 2,000 white-collar workers will see their jobs eliminated over the next two years.

The Chrysler restructuring plan was approved by the DaimlerChrysler supervisory board, which met at Chrysler's headquarters here. In a statement, the board left Chrysler's future wide open amid calls by some shareholders for the company to spin off the money-losing American unit.

"The board of management intends to consider other, more far-reaching strategic options with partners" as part of the restructuring, the company said in a statement.

It went on, "No option is being excluded in the interest of arriving at the best possible solution for the Chrysler Group and DaimlerChrysler as a whole."

In morning trading on the New York Stock Exchange, shares of DaimlerChrysler had gained $2.74, or about 4.3 percent, to $67.19.The statement came about four months after DaimlerChrysler sent the first signals that Chrysler's future might not be secure.

In October, DaimlerChrysler's chief financial officer, Bodo Uebber, said the company would not rule out spinning off Chrysler, which merged with Daimler-Benz in 1998 to form DaimlerChrysler.

Company executives, including Mr. Zetsche, quickly insisted that that scenario was not under consideration.

But the suggestion has been raised a number of times by DaimlerChrysler shareholders and industry analysts. They have said DaimlerChrysler would be better off focusing primarily on Mercedes-Benz, its commercial truck group and the Smart division, which makes small cars.

For now, Chrysler will embark on its second major restructuring since the year 2000.

"Over all, the status quo is unacceptable," Chrysler's chief executive, Thomas W. LaSorda, said this morning.

In a statement released early today, Mr. LaSorda said the program had two parts.

"First, the Chrysler Group needs to solidify its position in the North American marketplace," Mr. LaSorda said in the statement. "In addition, the key to our long-term success will be our ability to transform the organization into a different company to achieve and sustain long-term profitability."

Chrysler said it would explore partnerships beyond its current arrangements, which include a deal to build minivans for Volkswagen and a tentative agreement for Chinese manufacturer Chery to build small cars that Chrysler would sell in North America.

European analysts, however, said they viewed the Chrysler restructuring plan as an effort to streamline the company and make it attractive to a merger partner or for an outright sale.

Chrysler said the three-year plan was expected to create $4.5 billion in financial improvements, meaning the company would earn a 2.5 percent return on sales in 2009.

As part of the plan, Chrysler said it would reduce its manufacturing capacity by 400,000 vehicles, mainly in big sport-utility vehicles, like those built at the plant in Newark, north of Wilmington, Del., and pickups, built at the factories in Warren and St. Louis.

Chrysler said it would take a restructuring charge of up to $1.3 billion. Like other Detroit companies, Chrysler was caught short when gasoline prices spiked in 2005 and 2006, accelerating a shift by consumers to more fuel-efficient vehicles. Until last fall, when it introduced new car models, about three-quarters of Chrysler's lineup was concentrated on pickups, S.U.V.'s and minivans, marking the heaviest reliance of any Detroit company on light trucks.

Chrysler's problems were compounded last year when its inventories of unsold cars and trucks swelled as much as 50 percent above the level that dealers like to keep on hand at any time during the year. On top of that, Chrysler raised eyebrows when it disclosed that it had as many as 100,000 vehicles built on spec for which it did not have dealer orders.

Many of those vehicles have since been sold, but Chrysler said Wednesday it would take more steps to slim its inventory, resulting in a charge of $300 million.

Asked whether he thought the manufacturing cuts would be deep enough, Mr. LaSorda said he felt they were, given that Chrysler is introducing another new wave of vehicles this year that it hopes will reverse its sales decline.

Added Mr. Zetsche, “It is realistic to plan for growth and not the opposite.”

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Nick Bunkley contributed reporting.