• by Karl Greenberg , November 2, 2007

Chrysler is shaking up product and production to separate the wheat from the chaff in its vehicle portfolio while cutting costs. The company says next year it will cut some 10,000-12,000 jobs, partly by eliminating shifts at five North American assembly plants--amounting to a reduction of 8,500-10,000 hourly jobs.

The company will also cut salaried employment by 1,000, and rolls of contract workers by 37%. Chrysler also plans to eliminate hourly and salaried overtime.

Next year, Chrysler will kill the Dodge Magnum, Chrysler Pacifica, Chrysler Crossfire, and the convertible version of the Chrysler PT Cruiser. Next year, the company will add two new products--the Dodge Journey and Dodge Challenger--along with two new hybrid models, the Chrysler Aspen and Dodge Durango.

Jim Press, vice chairman/president of the company, suggested that the changes have a lot to do with dealer input. "These actions reflect our new customer-driven philosophy and allow us to focus our resources on new, more profitable and appealing products," he said in a release. "Further, these product actions are all in response to dealer requests."

Chrysler spokesperson Dave Elshoff says the discontinuation of the cars had nothing to do with poor performance. "They are nearing the end of their product cycle," he says. "We felt we have had great successes with each of the vehicles, but at this point the youngest of them is four years old. We can better use our resources to develop new products in new segment."

Todd Turner, president of Los Angeles-based Car Concepts, argues that the vehicles each had their cross to bear. "They were kind of slow-performing; Magnum was always in its own segment--they got as much as they could out of that vehicle," he says, adding that the Crossfire, a two-seat coupe, doesn't serve the purpose as a halo vehicle that sometimes justifies vehicles with big personality and little potential volume. "You don't need something in the sporty segment, and that vehicle was never accepted as a sporty car. It had great performance and looks, but the marketplace never accepted it. It never broke through."

Tom Libby, senior director of industry analysis at J.D. Power & Associates, points out that another issue for Crossfire is that the car wears Mercedes components, vestigial organs from DaimlerChrysler. He adds that when the vehicle first came out, it did very well. "Then it faded fairly quickly. They made a major price adjustment, lowering the price dramatically, and their margin was greatly reduced or eliminated."

The job cuts are on top of the 13,000 jobs announced when the company laid out its three-year Recovery and Transformation Plan (RTP), which continues.

In a statement, Chairman/CEO Bob Nardelli said the company had no choice. "The market situation has changed dramatically in the eight months since Chrysler established the [RTP] as its blueprint," he said. "Annual industry volume [U.S. market] then was running at a 17.2 million clip. Now, we expect a seasonally adjusted annual volume for 2007 to be significantly lower and carry over into 2008."

"We have to move now to adjust the way our company looks and acts to reflect a smaller market," added Tom LaSorda, vice chairman/president. "That means a cost base that is right-sized and an appropriate level of plant utilization."

Three of the five plants affected by this action are the result of elimination of third shifts in Belvidere, Illinois; Toledo, Ohio, and Brampton, Ontario.