In the next three years, 13,000 Chrysler workers will lose their jobs under a wrenching restructuring announced Wednesday that eventually may lead to a DaimlerChrysler divorce.
The Chrysler unit of the German-American automaker announced its long-awaited plan at its Auburn Hills headquarters, saying it would cut 16 percent of the U.S. division's worldwide work force, a move it hoped would return its U.S. operations to profitability by next year.
The plan was announced only hours after Chrysler's parent, DaimlerChrysler AG, said it was considering "far-reaching strategic options with partners" for Chrysler and that "no option is being excluded" as it reported a 40 percent drop in company-wide profit for the fourth quarter.
The plan calls for closing the company's Newark, Del., assembly plant, and reducing shifts at plants in Warren, Mich., and St. Louis. A parts distribution center near Cleveland also will be closed, and reductions could occur at other plants that make components for those factories.
Under the plan, 11,000 production workers -- 9,000 in the U.S. and 2,000 in Canada -- will lose their jobs over the next three years, and 2,000 salaried jobs also will be cut -- 1,000 this year and 1,000 in 2008.
"Today's action by DaimlerChrysler is devastating news for thousands of workers, their families and their communities," United Auto Workers President Ron Gettelfinger and Vice President General Holiefield said in a joint statement. "While Chrysler Group's recent losses are not the fault of UAW members, they will suffer because of the reductions announced today."
The job losses are the latest in a yearlong series of devastating cuts in the ailing domestic auto industry, which likely will lose more than 100,000 jobs in all.
"We believe that this represents a solid plan to return to profitability and lay the groundwork for a solid future," Chrysler CEO Tom LaSorda said at a news conference.
DaimlerChrysler Chairman Dieter Zetsche said the company was looking into "further strategic options with partners" for Chrysler, but he would not give details about what has been discussed for the ailing U.S. operation.
"In this regard we do not exclude any option in order to find the best solution for both the Chrysler Group and DaimlerChrysler," Zetsche said.
Analyst Georg Stuerzer with UniCredit, when asked if the wording in the statement was a sign that the company was mulling a spinoff of Chrysler, said, "the impression was right. This is what people are thinking it could mean."
He added that the restructuring could be the first step, likely followed by a push by DaimlerChrysler to find a partner with which to operate the Chrysler unit, or even find a suitable buyer for it.
Bank of America auto analyst Ron Tadross said in a note to investors that DaimlerChrysler "did not rule out disposing of its money-losing Chrysler division."
Tadross said he "would not be surprised if there is good interest in Chrysler. We see Chrysler as a decent business, at least relative to the other U.S. domestic manufacturers."
DaimlerChrysler said Wednesday that its fourth-quarter earnings plunged on weaker demand at the Chrysler unit, where sales fell 7 percent. DaimlerChrysler's profit fell to $761 million, or 74 cents per share, as revenue slipped to $53.7 billion.
The job cuts at Chrysler will reduce by 400,000 the number of vehicles that operations can produce each year.
The Delaware plant, which makes the slow-selling Dodge Durango and Chrysler Aspen mid-sized sport utility vehicles, employs about 2,100 workers. Chrysler plans to close it in 2009, with a shift reduction this year.
Dean Almuwalld, who works in painting on the Newark plant's assembly line and has worked at the plant for 13 years, learned its future from news reports.
"I'll take a transfer," the 33-year-old said as he walked into the local United Auto Workers hall. Almuwalld said he has relatives in Detroit. "I've got family there, so I'm ready to go."
The Warren truck plant, with 3,313 hourly employees, makes the Dodge Ram and Dakota pickups, which saw sales decline last year. Chrysler plans to eliminate a shift there this year.
Harbert Jones said he likely would keep his job at the Warren plant. Still, he said, these are "terrible times" for his fellow Chrysler workers.
"It's going to mean a lot of hard times for people working in the plant," said Jones, who has worked at the suburban Detroit facility for 22 years.
The other plant to lose a shift is the St. Louis South assembly plant, which makes Chrysler and Dodge minivans. It has 2,850 workers and will lose the shift in 2008.
The Cleveland-area parts distribution center, which employs 95, will close sometime this year, Chrysler said.
LaSorda said after the plant cuts, Chrysler will be using 100 percent of its factory capacity going into 2008.
He also said the company will double production of four-cylinder engines at its new Dundee, Mich., plant, and it also plans to build a new V-6 engine at a plant location to be announced later.
DaimlerChrysler shares rose $2.70, or 4.2 percent, to $67.15 in morning trading on the New York Stock Exchange.