Chrysler offers buyouts to 23,000

October 31, 2009 http://detnews.com/article/20091031/AUTO01/910310355

Chrysler offers buyouts to 23,000

ALISA PRIDDLE
The Detroit News

Chrysler Group LLC is again offering factory workers buyouts or early retirement as the automaker continues to restructure to cut costs.

Chrysler confirmed Friday that the offers went out this week to 23,000 workers. Terms vary by plant but largely mirror offers made earlier this year during Chrysler’s bankruptcy.

Only hourly employees represented by the United Auto Workers are eligible; skilled workers and union salaried workers are excluded.

Workers have until Nov. 13 to accept a package, which combines cash, vehicle vouchers plus some level of pension benefits and health care coverage, depending on age, years of service and work location.

Special offers apply to plants that are slated to close as part of Chrysler’s restructuring, such as Sterling Heights assembly.

Chrysler spokeswoman Shawn Morgan said the offers are a continuation of a program rolled out earlier this year as a condition of Chrysler’s loan agreement with the U.S. Treasury. She declined to say how many workers Chrysler hopes will accept the offers.

News of the buyout and retirement offers comes less than a week before the company will provide details about its five-year business plan.

The plan is expected to combine a lineup of new and refreshed vehicles, more efficient manufacturing, focused marketing, a better dealer experience, collaboration with suppliers and sharing engines, technology and vehicles with Italian partner Fiat SpA to return to profitability in two years — a target set by CEO Sergio Marchionne.

Adam Jonas of Morgan Stanley recently forecast operating profit for Chrysler of $841 million in 2010 and overall profit in 2011.

It is a task analysts describe as Herculean for a company that needed $15 billion in government loans to exit bankruptcy and form a new company with Fiat. Marchionne has been restructuring everything from top management to the makeup of the shop floor.

The Auburn Hills automaker will formally outline its plan Wednesday in six hours of presentations by Chrysler Chairman Robert Kidder, Marchionne, and other senior executives. Details of the plan cannot come soon enough for employees, dealers, suppliers and taxpayers, who now have a nearly 10 percent a stake in Chrysler. The company has been quiet since emerging from bankruptcy in June.

Many of the presentations will follow the model used in 2006 when Marchionne staged a similar overview of where the Fiat Group was going after he took the helm there, though that event lasted for two days.

Marchionne has already fired some managers, promoted others, and realigned a team of 24 top executives around five brands: Chrysler, Jeep, Dodge Car, Dodge Ram truck and Mopar. Each brand is responsible for its own profits. Executives next week will outline plans to take Chrysler upscale, make Dodge cars more performance oriented, Ram more capable and brutish and Jeep more international.

To get there, marginal products in the lineup will be eliminated, but many will be replaced by Fiat-engineered vehicles including an emphasis on small cars where Chrysler has been mostly absent from the market.

New vehicles can be developed in as little as 18 months under the Fiat engineering system instead of the three-year norm at Chrysler.

A session on manufacturing will outline how Fiat’s system has been implemented in all Chrysler plants to improve quality and productivity — two areas that will be emphasized next week. .

The automaker also is expected to outline plans for better use of capacity at its plants, which will include production of Fiat and Alfa Romeo brand vehicles. First up will be assembling the tiny Fiat 500 at Chrysler’s Toluca, Mexico, plant starting next year, followed by a version of the new Jeep Grand Cherokee/Dodge Durango for Alfa to be build at Jefferson North.

Still to be approved are plans to add an Alfa sedan at the Brampton, Ont., plant that will make the all-new Chrysler 300 and Dodge Charger next year.

Even with additional product, Chrysler may need to reduce capacity by as many as two plants, said Michael Robinet, vice president-global vehicle forecasts for CSM Worldwide in Northville.

Key to meeting financial targets is cutting material costs and nurturing a supply base of global companies that make large, standardized components under long-term contracts. Those were Marchionne’s goals for Fiat, where he implemented a centralized purchasing organization and increased sourcing from lower-cost countries.

The goal is to bring Chrysler purchasing into the fold, a melding that reduces cost by increasing economies of scale, and an initiative that works well for a global supplier like Federal-Mogul Corp. of Southfield. Federal-Mogul supplies Fiat and Chrysler and has already increased its business by coming up with ways to supply them with more standard components, said CEO Jose Maria Alapont.

Chrysler and Fiat "are doing a good job collaborating with their strategic suppliers," Alapont said.

Dealers not consulted

Conversely, members of the Chrysler Dealer Council say their advice has not been sought. "We’ve not been consulted on dealer plans at all," said Jim Arrigo, co-chair of the dealer council.

Dealers are anxious to hear more product details Wednesday.

"Chrysler needs to pare down its portfolio so it can build it back up," Robinet said. "With so much to work on, it is better to eliminate marginal vehicles quickly."

That includes new mid-size sedans to replace the Chrysler Sebring and Dodge Avenger from Fiat’s C-Evo family of mid-size vehicles. Because the all-new sedans are still a few years out, the Sebring and Avenger will go on sale next year with improved interiors and exteriors.Also getting an upgrade for next year are the Jeep Compass (with a front end similar to the new Grand Cherokee), Patriot and Dodge Caliber. As Fiat reduces the number of basic architectures upon which vehicles are built, the underpinnings of this family will go away, insiders say.

Replacing the Caliber will be a compact sedan — essentially returning to the more successful days of the Dodge Neon that preceded the hatchback Caliber.

Insiders say while the Compass will run its course in the next couple years, management is trying to find a chassis within the Chrysler/Fiat family to still offer a small, car-like Jeep.

Fiat also will provide a chassis for Chrysler to build a version of the Dodge Hornet subcompact car.

An overhaul is coming next year to further differentiate the two minivans to hold them over until the next-generation around 2013.

Sources say the new designs were locked in over the past couple weeks and there is high praise for the updated interiors. Down the road a mini minivan, the size of the Mazda5, could be added.

The Jeep Liberty and Dodge Journey will be marketed globally but the slower-selling Dodge Nitro and Jeep Commander will be killed.

Discontinuing models is fine with Chuck Eddy, an Ohio dealer and member of the Chrysler Dealer Council as the automaker consolidates brands at each dealership.

"We don’t need duplicates," Eddy said. "We had too many and were top heavy."

What dealers don’t want is to lose unique vehicles or sole entries in any given segment. For example, to fill the vacancy left by the Dodge Sprinter commercial van which is now sold as a Mercedes-Benz, Chrysler is looking to import the Fiat Ducato or Iveco Daily.

Chrysler is also now considering a second-generation of the Dodge Challenger.

Analysts and dealers said they believe the Dodge Viper has a secure future and will eventually merge with Ferrari and Maserati.

"No matter how big the hoopla on Wednesday, the amount of money to resurrect the portfolio and turn fortunes around is huge," Robinet said.

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