Chrysler to cut 5,000 jobs amid sale talks

DETROIT — As talks over the potential sale of Chrysler continued, the struggling automaker told workers Friday that it would slash 25% of its salaried workforce and make further cuts to deal with a continued downward spiral in U.S. auto sales.

Negotiations for Chrysler’s sale or merger, which involve majority owner Cerberus Capital Management, General Motors Corp. and the combined Nissan Motor Co.-Renault, were to continue into the weekend. But they are snagged on items such as tax liabilities, tight credit and the slowing economy, according to a person briefed on the talks.

The person, who asked not to be identified because the discussions are private, said multiple parties were involved in the complex talks, which involve several configurations that could include the sale of Chrysler in its entirety or a partial sale of the company.

Under the job cuts announced Friday, Chrysler, which has about 18,500 white-collar workers, will get rid of about 5,000 salaried workers and contract employees -- those who work for other companies under contract with the automaker.

Chief Executive Bob Nardelli, in a memo to employees, warned that more restructuring was coming at a pace faster than before.

“We recognize that in order to strengthen our competitive capability and reduce the time and cost to achieve our objectives, we cannot operate as we have in the past,” he wrote. “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.”

Industry analysts say Nardelli’s comments probably mean further plant closures and layoffs as the company shrinks itself to be acquired or perhaps signs deals for other automakers to design and even produce its new vehicles.

The cuts are so dramatic that they are likely to spell the end for Chrysler as an independent company and indicate that it is preparing to be sold, said Aaron Bragman, an auto analyst with the consulting company IHS Global Insight.

“Cutting fully one-quarter of your staff is not the way to develop future vehicles,” he said.

GM and Chrysler have declined to comment on the sale talks except to say discussions between automakers are routine.

Cash-starved GM would benefit by gaining access to Chrysler’s roughly $11-billion stockpile. Nissan-Renault may be interested in forming an alliance with Chrysler to give it a stronger North American presence, and it may even take an equity stake in the company.

GM, the nation’s largest automaker, is burning through more than $1 billion in cash each month and is trying to stay afloat until the U.S. auto market recovers. Industry analysts say that may not happen until 2010, and without a recovery, GM could burn up so much cash that it could reach the minimum required to run the company sometime next year.

GM shares fell 15 cents, or 2.5%, to $5.95 on Friday.

A GM acquisition may involve going to Congress for cash, another person involved in the financing discussions said. The person also asked not to be identified because the talks are confidential.

The government may get involved to preserve jobs in the industry and protect Chrysler’s pension plan, which has about 125,000 people receiving benefits. Chrysler employs about 49,000 people in the U.S.