GERMAN AUTO MAKER DaimlerChrysler's (DCX) plan to revive its loss-making Chrysler unit could involve cutting 20,000 jobs and closing six plants, The Wall Street Journal reported on Monday.
Citing people familiar with the company's thinking, the paper reported that over time as many as 6,000 of 20,000 white-collar jobs would probably disappear, along with as many as 15,000 of Chrysler's 95,000 manufacturing workers.
While DaimlerChrysler declined to comment Monday on the Journal report, Chrysler shares gained 3% to $47.07 on speculation over the turnaround plans.
"We can make no comment until we have presented our restructuring plan," said a company spokesman.
The company is due to announce a sweeping restructuring plan for Chrysler on Feb. 26.
Escalating losses at Chrysler have sent DaimlerChrysler's stock into a downward spiral, culminating in a four-year low at the end of December and have led to questions about the strategic sense of the 1998 merger between Germany's Daimler-Benz and the then-highly profitable Chrysler.
At the time, Chairman Juergen Schrempp promised massive cost savings that he has been unable to deliver. What he tagged a "marriage made in heaven" has turned sour and some investors are calling for him to resign.
Some watchers give Schrempp as little as six months to prove he can return the unit to profit. To do so, he will depend on Dieter Zetsche, the head of a rescue mission sent by Schrempp in November to replace U.S. executives at Chrysler.
Losses at Chrysler could amount to $1.25 billion in the fourth quarter and the company has declined to say when it expects the unit to return to profit.
The Journal said DaimlerChrysler would report at least one earnings charge this year to pay for restructuring costs. Most analysts expect that to amount to $2 billion to $3 billion.
It also said blue-collar job cuts would come in the main through attrition and early retirement while shutdowns of up to six of the group's 41 plants could be disguised as indefinite "idlings."
Chrysler's hands are somewhat tied, due to long-term union agreements that would make redundancies very costly.
Some analysts have called for a spinoff of Chrysler or at least of its car operations, which are widely viewed as having less earnings potential than its minivan and truck activities.
But the company has denied that it is considering such drastic measures.
"[We will use] all resources to put Chrysler back on the profitable level we have seen in the past," Schrempp told reporters two weeks ago, stressing that Chrysler was an important part of the group's strategy.
Analysts say the company may consider ending production of some models and paring back future production plans.
It has already tried to cut costs. Zetsche told its suppliers they had to cut prices by 5% at the start of 2001 and, in addition, the company aims to cut materials' costs by a further 10% in the next two years.
A deeper cooperation between Chrysler and Japan's Mitsubishi Motors, in which DaimlerChrysler has a 34% stake, is also possible. That may lead to platform sharing between Mitsubishi and Chrysler vehicles.
Last week the stock staged a brief rally as some investors viewed it as oversold and it broke through several technical resistance levels.
Happy trading
Stox
Citing people familiar with the company's thinking, the paper reported that over time as many as 6,000 of 20,000 white-collar jobs would probably disappear, along with as many as 15,000 of Chrysler's 95,000 manufacturing workers.
While DaimlerChrysler declined to comment Monday on the Journal report, Chrysler shares gained 3% to $47.07 on speculation over the turnaround plans.
"We can make no comment until we have presented our restructuring plan," said a company spokesman.
The company is due to announce a sweeping restructuring plan for Chrysler on Feb. 26.
Escalating losses at Chrysler have sent DaimlerChrysler's stock into a downward spiral, culminating in a four-year low at the end of December and have led to questions about the strategic sense of the 1998 merger between Germany's Daimler-Benz and the then-highly profitable Chrysler.
At the time, Chairman Juergen Schrempp promised massive cost savings that he has been unable to deliver. What he tagged a "marriage made in heaven" has turned sour and some investors are calling for him to resign.
Some watchers give Schrempp as little as six months to prove he can return the unit to profit. To do so, he will depend on Dieter Zetsche, the head of a rescue mission sent by Schrempp in November to replace U.S. executives at Chrysler.
Losses at Chrysler could amount to $1.25 billion in the fourth quarter and the company has declined to say when it expects the unit to return to profit.
The Journal said DaimlerChrysler would report at least one earnings charge this year to pay for restructuring costs. Most analysts expect that to amount to $2 billion to $3 billion.
It also said blue-collar job cuts would come in the main through attrition and early retirement while shutdowns of up to six of the group's 41 plants could be disguised as indefinite "idlings."
Chrysler's hands are somewhat tied, due to long-term union agreements that would make redundancies very costly.
Some analysts have called for a spinoff of Chrysler or at least of its car operations, which are widely viewed as having less earnings potential than its minivan and truck activities.
But the company has denied that it is considering such drastic measures.
"[We will use] all resources to put Chrysler back on the profitable level we have seen in the past," Schrempp told reporters two weeks ago, stressing that Chrysler was an important part of the group's strategy.
Analysts say the company may consider ending production of some models and paring back future production plans.
It has already tried to cut costs. Zetsche told its suppliers they had to cut prices by 5% at the start of 2001 and, in addition, the company aims to cut materials' costs by a further 10% in the next two years.
A deeper cooperation between Chrysler and Japan's Mitsubishi Motors, in which DaimlerChrysler has a 34% stake, is also possible. That may lead to platform sharing between Mitsubishi and Chrysler vehicles.
Last week the stock staged a brief rally as some investors viewed it as oversold and it broke through several technical resistance levels.
Happy trading
Stox
