Chrysler Cuts 25% Of It's White Collar Workforce

Chrysler to cut 5,000 white-collar workers

Alisa Priddle and David Shepardson / The Detroit News

Chrysler LLC plans to cut 5,000 of its 17,300 salaried and contract workers worldwide by Jan. 1, a deep cut that cannot be done without some involuntary layoffs, say company officials and Michigan congressional aides briefed on the matter.

The employees, about 95 percent of them in North America, will receive details starting today of the three packages, including a rare cash buyout option that could prove welcome as 29 percent of the company's salaried workers find themselves unemployed heading into the holiday season.

Spokeswoman Shawn Morgan said the cuts to the white-collar ranks include an undisclosed number of supplemental or contract workers. There is no guidance as to whether some departments have been targeted more heavily, or spared, as Chrysler works to dramatically cut capital spending. But the focus will be on cutting or eliminating overhead and discretionary expenses that are not connected to major product programs. She could not say if the overall product capital budget will be reduced.

Chrysler LLC Chairman and CEO Robert Nardelli broke the news in a letter to employees this morning, beginning with: "These are truly unimaginable times for our industry." Troubled economic markers have led to a contraction of auto sales at "such a fast rate," Nardelli said, forcing the automaker to rightsize its operations.

Voluntary severance programs will be available starting in November, and take effect Nov. 30. Involuntary measures would follow, taking place by year's end.

The basic Separation Incentive Program (SIP) consists of $50,000 in cash and a vehicle voucher valued up to $25,000, as well as 100 percent health-care eligibility credits. The SIP is offered to employees aged 60 or older with 10 or more years of service as of Nov. 30.

A Special Early Retirement (SER) plan is available to white-collar workers aged 51 to 62 (previous plans started at age 53) who have 10 or more years of service, making less than $100,000, as well as to select employees aged 53 to 62 (previous plans started at age 55) with 10 or more years of service who earn more than $100,000. This plan offers full retirement benefits (not reduced for age) and 100 percent health care eligibility credits.

In an unusual step, Chrysler is offering Voluntary Incentive Buyouts (VTIPs) for employees with less than 10 years of service as of Nov. 30. They still can leave with $50,000 in cash, a voucher worth $25,000 towards the purchase of a vehicle, and six months of health-care coverage.

Employees with more than 10 years of service who are not eligible for the separation or early retirement programs can leave the automaker with $75,000 in cash, the vehicle voucher, and six months of health-care coverage.

The voluntary incentive program is being offered for the first time since 1991 -- previously considered the worst year ever for the domestic auto industry, with reported Big Three losses of $7.5 billion.

While the programs have been enhanced, involuntary layoffs are considered inevitable. Chrysler last announced 1,000 white-collar cuts in July, an action that was completed at the end of September, but which required 15 percent to 20 percent involuntary cuts to reach the company's goal.

Chrysler's majority owner, Cerberus Capital Management LP, has been in talks with General Motors Corp. and Renault-Nissan about strategic alternatives for Chrysler, including a GM-Chrysler merger.

Chrysler's statement Friday was the strongest acknowledgement to date that changes are coming, adding "that Chrysler would make additional organizational and restructuring announcements in the near future as the Company works to find new ways to operate." Nardelli's memo to employees conceded, "we cannot operate as we have in the past."




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