Chrysler on Monday announced it is trimming production at two assembly plants in the face of a steep decline in sales, following similar moves by rival US automakers Ford and General Motors.
Chrysler vice chairman and chief operating officer Tom LaSorda said the cuts will idle 2,400 employees beginning in September and also said that the shutdown of its minivan plant in St. Louis, Missouri was probably indefinite.
“It's not likely it will come back. We see no need for the capacity in the future,” LaSorda said.
“The thing that keeps these places running (is) what happens in the market place.”
Some 1,500 employees from the St. Louis South plant where minivans are made and 900 employees from the St. Louis North plant where Dodge Ram pick-ups are built will be idled by the cuts, LaSorda said.
“It is unfortunate, but these are the decisions we have to make,” he said.
LsSorda added that the US auto industry “is going through some turbulent times,” with Chrysler sales having dropped 14 percent this year despite increases in Canada, Mexico and other international markets.
Jim Press, the company's vice chairman and president, said the decisions were driven by abrupt changes in the US market.
“The market is fairly slow and consumer confidence has been down. If we want to meet our financial targets, it is important to match our production to demand,” Press said.
He also said Chrysler is shifting production as quickly as possible to meet consumer demand for greater fuel efficiency.
“We are making the shift to smaller vehicles,” he said.
At the beginning of the year, less than 30 percent of the company's sales were passenger cars, Press said. Now 42 percent of sales involve cars and other vehicles such as the small Dodge Journey crossover, while 58 percent of Chrysler's sales involve pickup trucks and truck-based sport-utility vehicles (SUVs) and minivans, he said.
LaSorda also dismissed speculation that private equity fund Cerberus Capital Management, which bought the US automaker from Germany's DaimlerChrysler last August, was preparing to break up Chrysler and sell off its units to other carmakers.
“It's not being considered at all,” he said, noting that Chrysler is meeting its financial targets and has succeeded in reducing its fixed costs and improving its cash position.
Fitch Ratings said in a new report that Chrysler's liquidity “remains adequate for the short term, but could reach minimum required levels in late 2009” if the market remains flat.
GM and Ford also ordered major cuts in truck production earlier this month.
GM also has rolled out major new incentives in an effort to boost sales of its full-sized SUVs, which have faltered as the price of gasoline has soared past four dollars per gallon.
In mid-June Ford announced its third-quarter production of big trucks and SUVs will decline by 25 percent compared with the 2007 third quarter.
