Chrysler Group Announces Next Initiative In Turnaround Plan

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News of January 31, 2001

Chrysler Group Announces Next Initiative In Turnaround Plan

Chrysler Group President Dieter Zetsche, left, Wolfgang Bernhard, chief operating officer, and Nancy Rae, senior vice president - Human Resources, right, announce a part of the Chrysler Group's turnaround plan at the U.S.corporate headquarters.
(Photo: DaimlerChrysler)
.

Workforce reduction of 26,000 - 20 percent - over next three years
Large part of goal expected to be reached through retirement programs; achieved within the framework of existing union contracts
Six manufacturing plants to be idled through 2002
Dieter Zetsche: "To be competitive, the Chrysler Group needs to be a more nimble company. Along with exciting products, this will establish a sound basis for future growth."
Juergen Schrempp: "I have full confidence in the management team under the leadership of Dieter Zetsche. These measures will substantially help to turn around the Chrysler Group."

Auburn Hills, Mich. - Chrysler Group yesterday announced the next major part of its turnaround plan to regain competitiveness under difficult business circumstances.

Over the course of the next three years, the Chrysler Group will reduce its workforce by approximately 20 percent. The reduction will be approximately the same percentage for both salaried and hourly employees. This will affect about 26,000 people - 19,000 hourly and 6,800 salaried (including 1,800 supplemental employees) - through a combination of retirements, special programs, layoffs and attrition.

It is expected that 75 percent of the overall reduction will be achieved in 2001. This is being done within the framework of existing union contracts.

"Today's actions will help remove the uncertainty many of our employees have been feeling," said Chrysler Group President and Chief Executive Officer Dieter Zetsche. "Part of this process may be painful for many people. However, to be truly competitive in today's auto industry environment, we need to be a more nimble company, more closely aligned with current and future market conditions."

Zetsche said: "Only by adapting our overall cost structure, workforce and production levels to the realities of the marketplace, while maintaining our investments in exciting products, can we establish a sound basis to ensure the long-term health of the Chrysler Group for its numerous stakeholders and be in strong position for future growth."

"We are taking these actions at this time, in order to accelerate improvement in Chrysler Group's financial performance," said Zetsche. The full Chrysler turnaround plan will be presented to the public at the DaimlerChrysler Annual Press Conference on February 26, 2001.

A series of manufacturing actions will be necessary to attain the objectives, including reducing shifts and line speeds, as well as idling selected plants to adjust production capacity at Chrysler manufacturing operations around the world. At this point in time, the company plans to reduce excess capacity by idling six manufacturing facilities over the next two years.

The company also will adjust component, stamping and power train volumes commensurate with the reductions in assembly capacities. Overall, the workforce reduction proportionately greater in Canada than in the United States due to the higher number of employees in assembly operations whose products are impacted.

In addition, all facilities have new targets to accelerate quality levels and productivity , so that the company can operate more efficiently and at a much improved cost structure over the mid to long term.

Retirement Programs: 28,620 Employees Eligible

Some 23,700 hourly (U.S.: 21,000; Canada: 2,700) and 4,920 salaried (U.S.: 4,600; Canada: 320) employees in the U.S. and Canada are eligible for regular retirement or for one of the special programs. The number of layoffs necessary to meet the workforce reduction goals in the near term will depend on participation rates in these programs. As the company manages its way through this reduction, it will provide retirement planning services to counsel eligible employees through their transition.

"Our management team has maintained an open and continuous dialogue with the leadership of the United Auto Workers (UAW) and the Canadian Auto Workers (CAW), as well as with other employee representatives," said Zetsche. "In that process of discussion, solutions were found that are in line with the framework of our current labor contracts."

These actions are a crucial part of the company's latest initiative in its turnaround plan, following a material cost reduction program that was put in place at the start of this year.

Manufacturing Actions: The Chrysler Group manufacturing actions include the following:

2001

United States

Belvidere (Illinois) will eliminate one shift of operation
Jefferson North (Detroit, Michigan) will eliminate one shift of operation
Toledo II (Ohio) Assembly Plant will eliminate one shift of operation
Newark (Delaware) Assembly Plant will reduce line speed

Canada

Bramalea (Brampton, Ontario) will eliminate one shift of operation
Pillette Road (Windsor, Ontario) will eliminate one shift of operation
Windsor (Ontario) Assembly Plant will reduce line speed

Mexico

Toluca Transmission Plant will close

South America

Cordoba (Argentina) Assembly Plant will close
Campo Largo (Parana, Brazil) Assembly Plant will discontinue production and be idled; an evaluation will be made on any future production possibility at that facility

2002

United States

Engine production will be shifted from the Mound Road (Detroit, Michigan) Engine Plant to Mack I and Mack II (Detroit, Michigan)

Mexico

Lago Alberto Assembly Plant will shift production to the Saltillo Assembly Plant
Toluca Engine Plant will close

(Jan. 29, 2001)

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