DaimlerChrysler is planning to make as many as 10,000 workers redundant and close up to three North American factories in a round of job cuts dubbed the “Valentine’s Day Massacre” by union bosses.
The carmaker’s latest round of cuts, part of a wider strategic review called Project X by management, is to be announced on February 14, when workers might expect a more loving gesture than a redundancy notice. Investors are unlikely to be sending DaimlerChrsyler any love letters, either, as the plans will accompany the company’s fourth-quarter and full-year financial results for 2006, which are likely to disappoint.
The German-American carmaker surprised Wall Street in the third quarter with a $1.5 billion (£770 million) loss at its Chrysler division. Analysts expect the arm to show a loss of about $1 billion for the full year, with DaimlerChrysler as a whole remaining profitable.
Chrysler made $1.8 billion of profits in 2005, but last year’s massive increase in the price of petrol, especially in America, so slowed sales of its trademark trucks and SUVs that the company had a backlog of more than 100,000 unsold vehicles at one point last year.
The redundancies in America come after much wider job cuts and plant closures at Ford and General Motors, other members of America’s Big Three carmakers, all of which are suffering dwindling profits and slumping sales as more efficient Asian producers have taken the US market by storm.
The American companies are beset by ballooning employment costs, which include high union rates of hourly pay, big pension liabilities and massive healthcare contracts. The Chrysler Group has 62,300 US employees, about 26,000 of them in the Detroit area.
DaimlerChrysler in Germany declined to comment about the expected redundancies, calling reports that leaked out of a car show in Las Vegas over the weekend “rumour and speculation”. However, most analysts covering the North American car market believe that between 8,000 and 10,000 Chrysler jobs will be cut next week. Buyout packages offered to workers are expected to cost the company about $100,000 an employee, for a total cost of about $1 billion.
Project X is not the first big restructuring to have affected Chrysler. In 2001 the company announced plans to eliminate 26,000 jobs. Since then it has shed 40,000 jobs and closed 16 plants.
This round of cuts is relatively small compared with those of DaimlerChrysler’s Detroit-based rivals. In the past year about 38,000 Ford workers and 34,000 GM employees have been made redundant.