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Chrysler CEO Says Restructuring Will Be Smaller Than at Ford, GM

Associated Press

If DaimlerChrysler's Chrysler Group shed as many people as Ford Motor and General Motors have done in the past year, the company would not be able to operate, its top executive said Sunday.

Chrysler, which lost $1.5 billion in the third quarter and saw only 1% sales growth for the year, is in the midst of studying all its variable costs in an effort to pare an average of $1,000 from the cost of each vehicle.

About 38,000 Ford hourly workers have signed up to take buyout or early retirement offers, and 34,000 unionized workers at GM have decided to take similar packages.

"There's no way we'd be able to operate the business to have the scale of reduction like that," Chrysler Chief Executive Tom LaSorda said in an interview at the North American International Auto Show in Detroit.

He said the company's cuts "will not be as dramatic" as in 2000 and 2001, when Chrysler went through a restructuring that ultimately cut its work force from 126,500 to the current 82,500. "With that we're still going to look at all aspects of our enterprise. All areas are open for review," he said. The company will announce its cost-cutting plans at the end of February, LaSorda said.

He also said he expects to have an agreement on health care concessions with the United Auto Workers before talks begin on a master contract with the union this summer.

The automaker turned over financial records to a company hired by the union to analyze them, and both sides have been talking since then. LaSorda said he expected talks to begin in earnest after the auto show ends Jan. 21.

UAW President Ron Gettelfinger said in September that it would not grant the same health care concessions to Chrysler that it gave to Ford and GM in 2005. But the union agreed to reconsider when Chrysler began to struggle financially.

LaSorda said he hoped that the third-quarter loss was not what influenced the union. "I think it's all about pattern bargaining. It's been around for decades and decades," he said, reiterating that Chrysler is at a competitive disadvantage compared to its unionized U.S. counterparts.

Under the 2005 agreement with GM, hourly workers would contribute $1 per hour in future pay increases to a new fund to help pay for retirees' health coverage. Single retirees pay up to $370 a year in deductibles and fees for their coverage. And most retirees and all active hourly workers pay higher co-payments for their prescription drugs.

In the deal with Ford, retired autoworkers will start paying monthly contributions, annual deductibles and co-payments for some medical services up to a maximum of $370 a year for individuals and $752 for a family.

Hourly workers will be required to pay deductibles or monthly contributions, but they will have to contribute part of their future wage increases to a trust for future health care expenses. The agreement also raises the cost of prescription drugs and institutes a $50 emergency room fee for retirees.

LaSorda also said he did not expect Gettelfinger to separate the three Detroit automakers in master contract talks because it would be too difficult to manage. "If he gives me a better deal than the others, I'm OK with that," he joked.

He also said he expects U.S. sales overall to be slightly down from last year.