The Detroit News
AUBURN HILLS, Mich. — DaimlerChrysler’s announcement yesterday that it will slash 26,000 Chrysler jobs — 20 percent of its worldwide work force — within the next three years, close six plants and reduce production capacity by 15 percent is a key step in a sweeping restructuring that will shake the company, the industry and its hometown.
But will it work?
That is a question that will be debated and answered in the coming months. Although DaimlerChrysler is confident that this medicine will cure money-losing Chrysler, others are less certain.
"I think there is a strong message in all of this: Today is our turning point," said Chrysler President Dieter Zetsche. "Starting from this point, we can look upward again."
David Cole, director of the Environmental Research Institute of Michigan’s Center for Automotive Research, said DaimlerChrysler faces a difficult task.
"They have a huge challenge ahead of them," he said. "Their competitive situation is absolutely heinous. To pull it together is going to be a real feat."
Chrysler’s wrenching cutbacks, which portend difficult times for a recently prosperous U.S. auto industry, come as the nation’s vehicle market is slowing dramatically and Japanese, German and South Korean competitors are taking market share by targeting the profitable pickup truck and sport-utility vehicle strongholds of Detroit’s automakers.
The layoffs also are likely to force cutbacks by suppliers and filter down into small businesses that depend on the auto sector.
Leaders of the United Auto Workers and the Canadian Auto Workers can do little to stop plans to drop shifts at plants in Detroit, Windsor, Ontario, and elsewhere in the Chrysler system.
The next weeks and months will be telling. Chrysler posted a $512 million third-quarter operating loss last year and is expected to report losing another $1.25 billion when it announces its 2000 financial results Feb. 26. Analysts predict that Chrysler could lose another $2 billion this year.
"They had to stop the bleeding and get the company headed in the right direction," said David Healy, an analyst with Burnham Securities. "The theory is get all the pain over at once."
Chrysler said it will soften the blow by offering early retirement bonus packages to many white- and blue-collar worker, but thousands of workers still face layoffs.
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