DaimlerChrysler axes 26,000 jobs

New launches are too late to save jobs

Chrysler Group has confirmed it is to cut 26,000 jobs - equivalent to one in five of its workforce - in a drive to pull out of the red.

Dr Dieter Zetsche, appointed in November to turn around the US arm of DaimlerChrysler, on Monday revealed a shake-up designed to make the company "more nimble".

Six plants, mainly in South and Central America, will be mothballed next year, with shifts cut at some US and Canadian factories, the firm said.

The announcement comes at a difficult time for major US carmakers, all of which have reduced output in response to shrinking sales and growing competition from Asian and European rivals.

'Adapting cost structure'

"Only by adapting our overall cost structure, workforce and production levels to the realities of the marketplace... can we establish a sound basis to ensure the long-term health of the Chrysler Group," Dr Zetsche said in a statement.

Dr Dieter Zetsche: job cuts "may prove painful"

"We are taking these actions at this time in order to accelerate improvement in Chrysler Group's financial performance."

The firm aims to achive three quarters of the job losses this year, with enhanced retirement programmes to be offered as one incentive for reducing staff numbers.

The firm said it had maintained "open and continuous dialogue" with leaders of US and Canadian unions.

But Dr Zetsche admitted the job cuts process may prove "painful for many people".

Record losses

The firm promised, on appointing Dr Zetsche as Chrysler president, to unveil early this year a shake-up designed to "improve cost positioning, product line-up and market performance".

Further announcements on the restructuring are set to be announced on 26 February.

Dr Zetsche's appointment followed an admission by DaimlerChrysler that it had run up a record loss of 579m euros between July and September last year.

And it has warned that the losses for the final three months of 2000 could be even higher.

Reports on Monday said Chrysler alone will reveal losses of $1.75bn for the second half of 2000.

'Brutal competition'

While the firm's major US rivals, Ford and General Motors, have also suffered as car sales have fallen with the slowdown in the US economy, Chrysler has been particularly badly affected, having wrongly forecast further growth in trade and prices.

"The markets are deteriorating... and our company's performance even more so," Dr Zetsche told a news conference on Monday.

"Competion is brutal, the North American manufacturers are coming under pressure from imports, and an incentives war is on."

One of Dr Zetsche's first actions on taking charge was to ask suppliers to shave 5% off the prices they charge Chrysler and work with it to cut another 10% from the company's $40bn annual materials budget in the next two years.

Some suppliers have refused to comply with the request and say they are in talks with Chrysler, hoping to agree what they see as more realistic targets.

Shares slide

DaimlerChrysler's shares quoted in the US have lost more than 40% of their value since the company was formed in a $36bn merger of Germany's Daimler-Benz with US-based Chrysler in late 1998.

The merger was largely designed to avoid the kind of financial crises which saw Chrysler face bankruptcy in 1980 and the early 1990s.

In New York, DaimlerChrysler shares closed $0.95 lower at $47.20. In Frankfurt, the shares ended 1.75% down at 51.60 euros.

The company is due to report earnings in late February.