Chrysler losses mount

Pressure grows for restructuring as profits slip

By JOSEPH SZCZESNY
Press Automotive Editor

The Chrysler Group faces a major restructuring in the wake of mounting losses flowing from a combination of high labor costs and a truck-oriented product portfolio that has lost appeal for consumers.

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Mike Aberlich, Daimler-Chrysler spokesman, said seven separate studies, covering every facet of the Chrysler Group's operation, are now under way. The results are to be announced in early 2007.

"We're studying everything," Aberlich said. "We wouldn't expect anything to break until we complete the studies. The studies were launched last month shortly after Chrysler reported a $1.5 billion operating loss for the third quarter.

With sales slowing, Chrysler is expected to post another large operating loss for the fourth quarter.

Laurie Harbour-Felax of the Royal Oak-based Harbour-Felax Group said Wednesday that the Chrysler Group's losses are mounting.

"The fourth quarter is going to be a killer," said Harbour-Felax, who estimated that the Chrysler Group has gone from making a profit of $150 a vehicle last year to losing $1,144 a vehicle through the first three quarters of 2006.

Another analyst, who asked not to be identified, suggested that the Chrysler Group's losses could reach $2 billion in the fourth quarter.

Harbour-Felax said the losses are putting enormous pressure on Chrysler to launch a major restructuring similar to those already under way at GM and Ford. "They have got to do something," she said.

Sean McAlinden, vice president of research at the Center for Automotive Research in Ann Arbor, said the speculation is that Chrysler could be forced to close three and possibly more plants as part of the restructuring. The company's assembly plants in Newark, Del., and the St. Louis North truck plant as well as the Detroit Axle plant could all be on the chopping block, said McAlinden. He suggested Chrysler may have to eliminate as many as 10,000 jobs.

The Mount Elliott tool and die plant and Detroit transportation hub also could be targeted by DaimlerChrysler cost cutters, he said.

Meanwhile, Daimler-Chrysler AG has made little progress in its efforts to win health-care concessions from the United Auto Workers. In September, UAW president Ron Gettelfinger vetoed concessions at Chrysler, saying it was impossible to get them approved by union members.

Gettelfinger said last month that the union planned to take another look at the company's financial data. So far there has been no indication the union has changed its position.

McAlinden said the impasse leaves Chrysler with high labor costs. "Chrysler's got to make a move. Clearly they have the most expensive labor in the auto industry," he said.

Dale Hunt, president of UAW Local 7 in Detroit, said the last word from union headquarters was no concessions.

In addition, the UAW's council, which is made up of local union presidents and bargaining chairs, sent a clear and unambiguous message to company management when it selected Bill Parker, president of UAW Local 1700, as chairman of union bargaining for 2007 negotiations.

Parker, whose local represents workers at Chrysler's Sterling Heights assembly plant, was one of the leaders who shot down the healthcare concessions. A long-time union activist, Parker has been an outspoken critic of company policies and clashed frequently with the late Nate Gooden, who ran the UAW Chrysler department until last summer.

Gooden had been noted for reaching an accommodation with Chrysler's management. There is no way that Parker would have become chairman of the bargaining committee if Gooden were still running the UAW Chrysler department, said one activist.

Gooden's replacement, UAW Vice President Major Holifield, was quite comfortable with Parker's election.

Harbour-Felax said one of the problems Chrysler faces is that it had done a lot of things right in the past few years to no great change. The product line has been improved substantially and more new products are due out in 2007.

"It's going to be interesting to see what DaimlerChrysler does," she said.