Chrysler to cut 26,000 jobs as U.S. economy dips

Chrysler to cut 26,000 jobs as U.S. economy dips

AUBURN HILLS, Mich. (Reuters): DaimlerChrysler AG's Chrysler
group on Monday announced plans to cut 26,000 jobs over three
years and close or cut production at 13 plants to staunch its
financial bleeding.

The massive job cuts, amounting to 20 percent of Chrysler's
global work force, are part of a wider plan the automaker will
unveil on Feb. 26 to reverse course from losses expected to total
around $1.75 billion for the second half of 2000.

"The markets are ... deteriorating and our company's
performance even more so," Chrysler Chief Executive Dieter
Zetsche told a news conference at Chrysler headquarters.

Zetsche, dispatched from Germany in November to rescue the
ailing Chrysler, said about 75 percent of the job cuts would come
this year, most through retirement and attrition.

Of the 26,000 jobs to be cut, all but 3,100 will come from
Chrysler's workforce in the United States and Canada. About 2,600
will come from closing Mexican plants, while 500 jobs will be
eliminated in South America.

Despite record U.S. industry-wide vehicle sales last year,
Chrysler's fortunes have worsened in the past few months as the
U.S. economy slowed faster than expected. The cuts at Chrysler
come amid major job cuts at Lucent Technologies Inc, General
Electric Co and AOL Time Warner Inc.

While General Motors Corp. and Ford Motor Co. have also been
hurt by a slowdown in the industry, Chrysler's problems have been
worse. Executives have said the company was assuming growth in
prices and sales, when both have been down in recent months.

The company also stumbled in launching new versions of its key
Dodge and Chrysler minivans, forcing it to spend hundreds of
millions of dollars on incentives.

As is the case with GM and Ford, Zetsche said Chrysler also
suffered from a perception that its leading competitors build
higher-quality vehicles than it does.

"The markets are shrinking, competition is brutal, the North
American manufacturers are under pressure from imports, and an
incentive war is on," Zetsche said.

Chrysler's problems have led investors to question the $36
billion 1998 merger between Germany's prestigious Daimler-Benz
and the then highly profitable U.S. group, and the capability of
DaimlerChrysler Chief Executive Juergen Schrempp.

Zetsche told reporters that Chrysler's very survival depended
on the rescue plan. Chrysler previously had struggled to narrowly
avoid bankruptcy, most recently in 1980 and the early 1990s.
Those brushes with disaster were among the driving reasons for
the merger. At the time of the deal, Schrempp described the
partnership as a "marriage made in heaven," but his future could
now depend on success of the restructuring plan.

Restructuring charges and the amount the job cuts are expected
to save will be revealed on Feb. 26, Chrysler officials said.
Schrempp said in a weekend newspaper interview in Germany that he
expected Chrysler to post a loss for 2001.

Analysts said they expected the company to post charges of $2
billion to $3 billion to cover the restructuring.