The move will entail closing one of the company's four existing car assembly plants and result in a 20% reduction in production capacity.
The announcement came ahead of a press conference on Monday where DaimlerChrysler announced details of a far-reaching corporate shake-up and a group-wide 49% fall in underlying profits to 5.2bn euros ($4.8bn).
The conference also revealed that the lion's share of the previously announced 26,000 job losses in the US will happen this year.
Chrysler's troubled year
Operating profits at the troubled US Chrysler unit are down 90% to 0.5bn euros compared to 5.2bn euros the previous year, with the company forecasting losses of between 2.2bn and 2.6bn euros this year.
DaimlerChrysler's Chief Executive, Jurgen Schrempp called Chrysler's year "extremely difficult," adding that the situation in the US had "dramatically worsened," due to the combination of intense competition in the US, higher spending on incentives and costs associated with new model launches.
But Mr Schrempp says that the restructuring will see Chrysler return to "modest profitability" by 2002.
The cost of change
Mr Schrempp expects the restructuring measures to bring annual benefits of 7.2bn euros ($8.1bn) by 2003.
But the cost of turning around the company could rise to up to 4bn euros.
The turnaround plan aims to generate additional benefits of profit improvements of 3.3bn euros in 2001, rising to 5.2bn euros in 2002 and 7.2bn euros in 2003.
Board meeting
The company's board had earlier held a seven-hour meeting on Friday to discuss a shake-up of senior management.
The committee would oversee many of the group's divisions.
"There is full support from the board," one source said.
As part of the plan, Mr Schrempp will take control of the new "executive automotive committee".
Jürgen Hubbert, who currently heads the Mercedes-Benz and Smart passenger division, will serve as Mr Schrempp's deputy.
The committee would oversee the group's Mercedes-Benz and Chrysler divisions, and supervise the group's new product strategy.
The new centralised committee would replace a previous system of management with separate automotive, sales and marketing councils.
Previous job cuts
Last month the group confirmed it was cutting 26,000 jobs - equivalent to one in five of its workforce - in a drive to pull out of the red.
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 came 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.
The DaimlerChrysler group announced a 49% fall in underlying profits to 5.2bn euros ($4.8bn) last year.