Chrysler announced plans on Thursday to slash 8,500 to 10,000 production jobs and make other labor force reductions to deal with a "smaller market" in North America for automobiles.
Chrysler said its new plan would cut 1,000 more white-collar posts and reduce the use of outside contract employees by 37 percent. It will also eliminate overtime for all employees.
The cuts, the first under Chrysler's new private equity owners, come on top of a reduction announced in February of 13,000 jobs, including 11,000 production workers, or about 16 percent of its total labor force.
Chrysler, the No. 3 US automaker, said it was taking the actions in response to industrywide volume reductions and slower sales that call for "plant adjustments."
The company said it was also halting production of four Chrysler models while adding two new vehicles and two new hybrid autos to its lineup.
Chrysler will have around 59,000 employees when the two rounds of cuts are completed, spokesman Dave Elshoff said.
The actions mark a new reorganization under Chrysler LLC's new owners headed by Cerberus Capital Management, which bought the US automaker from Germany's DaimlerChrysler in August.
The announcement also comes days after a landmark contract with the United Auto Workers (UAW) union was ratified by a very narrow margin following rank-and-file dissent over lack of job security guarantees.
George Magliano, an analyst with Global Insight said the timing of the announcement shows "the UAW knew it was coming and agreed to it."
The actions come in addition to the reorganization announced in February aimed at restoring profitability to Chrysler through a three-year "Recovery and Transformation Plan."
"The market situation has changed dramatically in the eight months" since the earlier plan was announced, said Bob Nardelli, Chrysler's chairman and chief executive.
Chrysler will be cutting shifts at several US and Canadian plants as part of the streamlining. But it said it remains committed to its pledge to the UAW to spend more than US$15 billion on products, plants and engineering during the life of the latest contract through 2011.
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