February 15, 2007

Chrysler Group to lay off 13,000 as part of Recovery and Transformation Plan

Auburn Hills, Michigan – DaimlerChrysler AG’s Chrysler Group has announced a three-year Recovery and Transformation Plan that seeks a return to profitability by 2008, while also taking steps to change its business model for the long run. Under the plan, employees will be reduced by 13,000 people from 2007 and 2009.

“The Chrysler Team worked out a comprehensive Recovery and Transformation Plan using all resources within DaimlerChrysler,” says Dr. Dieter Zetsche, Chairman of the Board of Management of DaimlerChrysler. “In addition to that, and in order to optimize and accelerate the presented plan, we are looking into further strategic options with partners beyond the business cooperation partners mentioned. In this regard, we do not exclude any option in order to find the best solution for both the Chrysler Group and DaimlerChrysler.”

The plan is intended to result in a target of 3.5 billion Euros (US$4.5 billion) of financial improvements, or a return on sales of 2.5 per cent, by 2009. The program will be supported by a 2.3 billion Euro (US $3 billion) investment in new engines, transmissions and axles, which will set the table for a product offensive of more than 20 all-new and 13 refreshed vehicles from 2007 to 2009.

Among the points of the plan:

  • The company will continue its product offensive with eight new and five refreshed products in 2007; key products include the new Chrysler and Dodge minivans, Dodge Avenger, Chrysler Sebring Convertible and Jeep Liberty.
  • Reduce material costs by up to 1.15 billion Euros (US$1.5 billion) by 2009, and explore the sale of support operations, including transportation services.
  • Reduce total production capacity by 400,000 units per year; eliminate a shift at Newark, Delaware Assembly Plant and Warren, Michigan Truck Plant in 2007; eliminate a shift at St. Louis, Missouri Assembly Plant in 2009; idle the Cleveland, Ohio Parts Distribution Center in December 2007; and adjust powertrain, stamping and component operations to reflect reduced capacity.

  • Reduce employees by 13,000, including a reduction of hourly employment by 11,000 over three years, with 2,000 in Canada, and salaried employment by 2,000 over the next two years, with 1,000 each in 2007 and 2008.

Previous to this announcement, the company closed, idled or sold five assembly and eleven component plants and reduced its workforce by one-third. In 2007, the Chrysler Group expects to further reduce dealer inventories to align with market demand, which will result in a reduction in operating profit of approximately 230 million Euros (US$300 million).

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