Chrysler may be next to announce production cuts

With truck and sport utility vehicle sales tumbling and its U.S.-based competitors either closing factories or cutting production, Chrysler LLC may be the next automaker to announce further cuts.

While workers are anxious and industry analysts say additional measures are inevitable, Chrysler says that moves announced late last year are sufficient for now to deal with the declining U.S. auto market.

"We read the headlines just like everyone else," said Melvin Thompson, president of a United Auto Workers local at a pickup truck factory in Warren. "We're just in a holding pattern. The best thing we can do is just build a high-quality truck."

Chrysler's sales were down 25 percent in May, a month in which the whole market dropped 11 percent compared with May of last year. Through the first five months of 2008, Chrysler's sales were off 19 percent, with huge drops in larger vehicles that make up most of its lineup.

For instance, the sales of the Dodge Durango SUV are down 44 percent through May when compared with the same period last year. Dodge Ram sales are down 27 percent, while sales of Chrysler 300 large sedans are off nearly 31 percent.

All of this means further cuts are inevitable, said David Cole, chairman of the Center for Automotive Research in Ann Arbor.

"You can't just have fields full of cars and trucks," said Cole, referring to 2007, when Chrysler manufactured too many slow-selling vehicles, storing them in empty lots near factories. Later the company angered dealers by forcing them into taking the unwanted cars and trucks.

In November, Chrysler announced it would cut 8,500 to 10,000 hourly jobs and 2,100 salaried jobs through the end of 2008, or about 15 percent of its work force. In the past year, the company has cut shifts at seven vehicle assembly factories in Detroit, Sterling Heights and Warren, Mich.; Belvidere, Ill.; Toledo, Ohio; Brampton, Ontario; and St. Louis.

Company spokesman Ed Saenz said some of those cuts didn't take place until March and helped prepare the company for the latest downturn in the U.S. market.

"It's a pretty broad cut," Saenz said. "When we're talking about a whole shift, that's a lot of impact," he said, declining to detail how many fewer vehicles the privately held company produced.

"We believe we saw a little bit of this coming earlier in the first quarter," Steven Landry, executive vice president for North American sales, said Tuesday. "We made adjustments at that time and at this moment, at this time, we don't have any plans for adjustments."

Chrysler has extended the normal two-week model year shut down at its Warren truck plant, which makes the Ram pickup, to five weeks starting in late June, Thompson said.

Saenz would not comment on the move but said the company will build vehicles to match market demand.

Chrysler so far has kept its inventories at a reasonable level, with the exception of the Ram, said Burnham Securities analyst David Healy.

"I think they've basically already done what GM and Ford have done," Healy said, adding that Chrysler has made a huge cut in production of the slow-selling Durango SUV.

Still, he says the company may have to make further adjustments on products like the Ram, which has a relatively high level of inventory.

Cole said it will be much harder for Chrysler to close factories like GM announced Tuesday, because often a single plant is the only producer of some products.

GM announced Tuesday that it would close four pickup truck and SUV factories and shift more of its efforts to smaller, more fuel-efficient cars.

Ford announced last month that it was cutting North American production for the rest of this year and no longer expects to return to profitability by 2009 due to the rapidly deteriorating U.S. market. The company said it would release more details about its cost-cutting efforts in July.

Thompson said workers no longer worry about plant closures and instead are focusing on their jobs.

"We've just been through so much," he said. "We know not to worry about things that are outside our control."