Chrysler to cut 25 percent of salaried work force

DETROIT — Chrysler LLC, whose owner has been in talks to sell the automaker to General Motors Corp., said Friday it will cut 25 percent of its salaried work force starting next month and warned that it will make more restructuring announcements soon.

CEO Robert Nardelli said the moves are being made as the company "works to find new ways to operate."

Chrysler, which has about 18,500 white-collar workers, said Friday it also will cut a quarter of its contract employees — those who work for other companies under contract with the automaker.

About 5,000 people are likely to lose their jobs, although the company would not say how many contract workers it has.

Vice Chairman and President Tom LaSorda said Friday that sales projections for the rest of this year and in 2009 aren't looking good, and he indicated that more factory closures could be coming.

Chrysler's sales are down 25 percent through the first nine months of the year, the worst decline of any major automaker.

"We have to align our (factory) capacity with what's going on at retail," LaSorda said in an interview with Detroit radio station WWJ-AM. "And that's the tough decisions that we make. And of course, there's probably going to be more if it stays at this level."

On Thursday, Chrysler announced it will cut 1,825 jobs by eliminating one shift at a Toledo, Ohio, Jeep plant and accelerating the closure of its sport utility vehicle factory in Newark, Del., because of the slowing global economy and a shift toward smaller vehicles.

The cuts are so dramatic that they likely spell the end for Chrysler as in independent company and could indicate it is preparing itself for sale, said Aaron Bragman, an auto analyst with the consulting company IHS Global Insight.

"Cutting fully one quarter of your staff is not the way to develop future vehicles," he said.

In a memo to employees, Chrysler CEO Bob Nardelli said the company will reduce capital expenditures and cut discretionary spending while protecting "all major product programs."

But Bragman said the size of the cuts likely means new product expenditures will be cut.

The company already has signed an agreement with Nissan Motor Co. to build a subcompact car for Chrysler and may be discussing a new midsize product with Nissan, Bragman said. Chrysler also has a deal with Chinese automaker Chery Automobile Co. to build a small cars.