Chrysler cutbacks

CHRYSLER announced last week 2400 hourly jobs would be cut with the idling (and no expectation of a return to production) of its St Louis South assembly plant in the US from October 31 and with a scaleback from two shifts to one at its St Louis North plant, effective September 2.

Coming just days before the American manufacturer announced that it had signed a memorandum of understanding with Chinese manufacturer Great Wall Motor to investigate the feasibility of developing a long-term strategic relationship, Chrysler’s latest round of job cuts were described by company management as necessary for building long-term profitability.

St Louis South builds people-movers including the Chrysler Town & Country (aka Grand Voyager) and Dodge Grand Voyager, while St Louis North builds full-size pick-up trucks including the Dodge Ram – models Chrysler claims it remains “committed to”.

“The Chrysler and Dodge minivans have held a leadership share in a shrinking market and we believe in the long-term viability of the pick-up market,” said Chrysler LLC president and vice-chairman Jim Press.

“We are clearly in a challenging environment, but continue to be focused on building a profitable enterprise for the long term. These actions will help us achieve this goal.” In other Chrysler news, a JP Morgan automotive analyst last week said the third best selling Detroit-based US car-maker could face bankruptcy by the end of this year.

"The risk of a liquidity event at Chrysler during the second half of 2009 is fairly real," Himanshu Patel to Automotive News in a conference call on July 3.

"First and foremost, they have limited external fundraising options. The debt market is difficult for Chrysler to tap. They don't have a whole lot of high-value unencumbered operations," said Mr Patel, adding that "they don't have the benefit GM and Ford have of significant positive international cash flow".

Chrysler LLC CEO Bob Nardelli said the company lost about $US1.6 billion last year but Mr Patel estimated it could post an operating loss of $US4.5 billion in 2008.

He said in that in the event of a cash crisis Chrysler might have to sell assets, which could include its US distribution system and even its Chrysler, Jeep or Dodge brands.

According to AN, Chrysler executives have said they do not want to break up the company and that they are ahead of their financial targets.