Daimler-Chrylser

["Charles Brown" <CharlesB@xxxxxxxxxxxxxxxxxxxxx>]

 Grim year still ahead; projections questioned

February 27, 2001




BY JEFFREY McCRACKEN
and JAMIE BUTTERS
DETROIT FREE PRESS BUSINESS WRITERS



STUTTGART, Germany -- Workers and Wall Street met the Chrysler Group's reorganization plan Monday with a solid dose of skepticism that the U.S. arm of DaimlerChrysler AG can return to profitability anytime soon.


The 3-year financial projections -- which even at their best indicate a Chrysler far less profitable than the one in place a year ago -- offered little comfort to U.S. workers waiting to see whether they'll be part of the massive layoffs expected in coming months.


By mid-March the company will likely announce it is laying off more than 3,000 white-collar workers as fewer than expected take advantage of the automaker's early-retirement offer.


Salaried workers also are on edge by a delay in merit raises while their blue-collar colleagues are mulling their relatively paltry $375 average profit-sharing check, also announced Monday by the automaker. Just a year ago, Chrysler's workers were the envy of the industry with record average profit-sharing checks of $8,100.


"I'm not really happy with it," said Steve Freeman, an assembly line worker at the Mound Road Engine plant in Detroit. "But I figure anything right now is better than nothing. Really, I don't think anybody is happy here."


Dissatisfaction was tempered by the knowledge that nearly 26,000 workers will be without jobs in the near future. The company plans to close six plants and eliminate shifts at four others.


Wall Street analysts, who make investment and lending recommendations, expressed skepticism that the automaker will achieve the goals it set for itself.


Standard & Poors, an influential Wall Street credit-rating agency, lowered its rating on DaimlerChrysler AG for the second time in three months, effectively making it more expensive for the company to borrow money. Its credit-worthiness, which was lowered from A-plus to A in December, was further lowered to A-minus Monday.


Analysts said they were surprised at the extent of the automaker's projected losses for this year and divided on how realistic the financial projections for next year and 2003 are.


Chrysler Group officials say the restructuring plan -- which includes sharing basic vehicle structures between Chrysler and Mitsubishi, and the previously announced job cuts and plant closings -- is expected to save the company $16.9 billion during the next three years.


The Chrysler Group said it lost $1.29 billion in the final three months of 2000 and more than $1.8 billion for the last half of the year. For all of 2000 it made $470 million, compared with $5.2 billion in 1999.


Beset by slow U.S. vehicle sales, high incentives and overproduction, the maker of Chrysler, Dodge, Plymouth and Jeep vehicles is projected to lose another $2 billion to $2.5 billion this year, said Chief Executive Officer Dieter Zetsche.


The best-case scenario has the automaker making a small profit in 2002 with profits growing to more than $2 billion in 2003.


"I thought the leadership laid out a pretty cogent analysis of the steps they need to take," said David Healy, auto analyst for Burnham Securities in New York. "I think it's a realistic plan. I mean all they're talking about is $2 billion in profits in 2003, which isn't much compared to what they made two years ago. I think they kept the projections conservative so Schrempp would look better and keep his job." Juergen Schrempp is the chairman of DaimlerChrysler.


1,400 white-collar workers take deal

White-collar workers in Auburn Hills were worried about keeping their jobs as well.

Of the approximately 4,000 eligible for early retirement, only 50 percent had responded to the offer as of Monday. Of those 2,000, 70 percent or about 1,400 accepted a deal, said Megan Giles, a DaimlerChrysler spokeswoman.

But eligible workers have until the end of Wednesday to respond or change their minds which could change the figure substantially.

"This is really a moving target," Giles said, noting that final figures aren't expected until Friday at the earliest.

At that point, the company will be able to evaluate how many additional layoffs will be necessary to meet the 6,800 white-collar staff reduction number, which includes 1,800 contract workers.

"The waiting can be tough," said one DaimlerChrysler employee in the information-technology department who requested anonymity.

"I'm a little concerned. We get a lot of reassurances, but I'm preparing for it," he said, adding he's had resumes out for weeks.

"I think a lot of people feel like they were sold out by the merger."

At least 50 DaimlerChrysler workers were approached at restaurants near the Auburn Hills headquarters Monday to comment on the state of the company and not one person was willing to talk.

Many said they are just not comfortable discussing the current situation at the automaker.

Giles said instead of getting merit raises in April, which is usually the case among white-collar workers, they will have to wait until July. Giles said this is a small cost-cutting effort since no retroactive pay will be paid. No savings estimates were available.

But Giles insisted workers will get raises. "They are going to get merits," she said.

Workers and Chrysler Group executives say evaluations from the last three years will be used to decide who stays and who goes among white-collar workers.

While workers were talking about a mid-March date to learn their fates, Chrysler Group officials said the word won't come down until the end of March.

"The bulk of the layoff announcements will be made by the end of March," Giles said.

Workers with the company for more than a year will receive severance packages and health care benefits, she said.