Doing Fine? Chrysler To Cut 25% of Workforce, Daimler Says Stake Is Worthless
October 24, 2008
Despite positive reassurances from his subordinate, Chrysler CEO Bob Nardelli announced in a letter to employees today that the company is going to eliminate 25% of its salaried and supplemental workforce over the next few months.
"Due to the unprecedented conditions in the auto industry, both in our home and international markets, we are targeting a 25% reduction in our salaried and supplemental work force," Nardelli said in the letter. "In the near future, we will be making organizational announcements as a result of restructuring actions reflecting the need to find new ways to operate."
Nardelli stressed that the company cannot operate like it has in the past and that cuts could begin as soon as next month. Beginning in November, Chrysler will offer voluntary buyouts, but mandatory cuts will likely begin in December.
Meanwhile, minority Chrysler owner Daimler AG announced today that it has devalued its 19.9% stake in Chrysler to $0. That's no typo, the automaker has declared its share in the troubled U.S. automaker absolutely worthless. Daimler has been devaluing its share of Chrysler rapidly over the past year. Just over a year ago, it valued the share at $2.2 billion, which was cut back to $268 million at the end of June this year. While Daimler says it's losing money on its stake in Chrysler, Chrysler and Daimler use different accounting practices, so it's not clear exactly how much was lost. Daimler's third-quarter filings show a $528 million loss attributed to its share of Chrysler, while Chrysler claims the losses are closer to $132 million. It's not yet clear what effect this devaluation will have on negotiations for Daimler to sell its stake in Chrysler to Cerberus.
While those talks continue, new reports are coming out today about the status of talks between Cerberus and GM. Sources told Reuters today that the rumored talks have accelerated and that GM COO Fritz Henderson has been meeting with senior representatives from Cerberus. Sources say that both sides are interested in making a deal, but that GM is concerned about Chrysler's pension liabilities and the effect the demise of Chrysler would have on its suppliers.