Chrysler May Be Facing Huge Losses and Job Cuts

["Johannes Schneider" <Johannes.Schneider@xxxxxxxxxxx>]

>From todays Frankfurter Allgemeine Zeitung

www.faz.com

Chrysler May Be Facing Huge Losses and Job Cuts

By Holger Appel
and Carsten Knop

STUTTGART. Speculation that Chrysler is set to post a huge loss has led to
rumors about a takeover of the U.S. carmaker's parent company.

The announcement of the week-long closure of three Chrysler factories by
Dieter Zetsche, the newly appointed president of Chrysler, did not help the
rumors to abate. The move came as no surprise, as it is known that
farther-reaching measures to lower costs and reduce stocks are in the cards.

Meanwhile, the DaimlerChrysler share has again slipped. It fell a further
1.5 percent to under euro 46 ($39) Wednesday. The company is valued at only
euro 36 billion and could be regarded as a takeover candidate. This has
given rise to wild speculation, with just about every international carmaker
plus independent financing companies being forwarded as possible buyers.

Irrespective of whether DaimlerChrysler and major shareholders Deutsche Bank
and the State of Kuwait would agree to a takeover, DaimlerChrysler would be
a lucrative investment. The earning power of Mercedes-Benz alone would make
it worthwhile.

A potential buyer could also try to restructure Chrysler. If this succeeded,
Chrysler could be listed separately on the stock exchange, if not, the
company could be sold or closed. One analyst compared the scenario to that
of BMW and Rover.

Investors and observers are nervous, fired by Mr. Zetsche's announcement
that there would be painful cuts. Mr. Zetsche would not reveal how he came
to his conclusion, why the situation in the United States came as such a
surprise to DaimlerChrysler, or what concrete measures he planned to take.
Some observers believe Chrysler is about to post large losses. The speed of
the company's decline is worrying, as competitors Ford and GM seem to be
better able to cushion the onsetting market downturn in the United States.

Mr. Zetsche also has the difficult task of stopping the discount policy of
Chrysler dealers which is proving ruinous to the brand name.

He must also come up with a convincing restructuring concept for Chrysler's
shareholders and yet not lower the morale of Chrysler's 125,000 employees
even further. This will be hard, for it will not suffice to lay off a few
managers and enforce saving drives among suppliers. Nor is his acceptance as
a German manager replacing his U.S. predecessors by any means ensured.

There is every indication that Mr. Zetsche will have to meet with
representatives of the United Auto Workers (UAW) union to discuss drastic
measures which would affect all employees.

Under the long-standing agreement with UAW, Mr. Zetsche cannot simply lay
off workers. For the first 42 weeks after a factory closes, they remain on
the payroll and get 95 percent of their wages. After that, they enter
"protected status," whereby they receive preferential treatment if a vacancy
arises in the company. Chrysler can more easily let white-collar workers go,
but it is assumed that it will try to reach a compromise with the UAW.