Analysts say more cuts in future for Chrysler

DETROIT - With sales of trucks and sport-utility vehicles tumbling and its U.S. competitors either closing factories or cutting production, Chrysler L.L.C. may soon be forced to announce its own cutbacks.

While workers are anxious and industry analysts say additional measures are inevitable, Chrysler says the moves it announced late last year are sufficient for now to deal with the declining U.S. auto market.

Chrysler's sales were down 25 percent in May, a month in which the whole market dropped 11 percent compared with May of last year. Through the first five months of 2008, Chrysler's sales were off 19 percent, with huge drops in larger vehicles that make up most of its lineup.

For instance, the sales of the Dodge Durango SUV were down 44 percent through May when compared with the same period a year ago. Dodge Ram sales were off 27 percent, while sales of Chrysler 300 large sedans fell nearly 31 percent.

All of this means further cuts are inevitable, said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich.

"You can't just have fields full of cars and trucks," said Cole, referring to 2007, when Chrysler manufactured too many slow-selling vehicles, storing them in empty lots near factories. The company then angered dealers by forcing them into taking the unwanted cars and trucks.

Last November, Chrysler announced it would cut 8,500 to 10,000 hourly jobs and 2,100 salaried jobs through the end of 2008, or about 15 percent of its workforce. In the last year, the company has cut out some shifts at seven vehicle-assembly factories - in Detroit, Sterling Heights and Warren, Mich.; Belvidere, Ill.; Toledo, Ohio; Brampton, Ontario; and St. Louis.

Company spokesman Ed Saenz said some of those cuts did not take place until March and helped prepare the company for the latest downturn in the U.S. market.

"It's a pretty broad cut," Saenz said. "When we're talking about a whole shift, that's a lot of impact."

Steven Landy, Chrysler's executive vice president for North American sales, said there were no current plans for further cuts.

However, Chrysler has extended the normal two-week model-year shutdown at its Warren truck plant, which makes the Ram pickup, to five weeks starting in late June, said Melvin Thompson, president of a United Auto Workers local union at the plant.

Saenz would not comment on the move, but said the company would build vehicles to match market demand.

Chrysler so far has kept its inventories at a reasonable level, with the exception of the Ram, said Burnham Securities Inc. analyst David Healy.

"I think they've basically already done what GM and Ford have done," Healy said, adding that Chrysler has made a huge cut in production of the slow-selling Durango SUV.

Still, he said the company might have to make further adjustments on products such as the Ram, which has a relatively high level of inventory.

Cole said it would be much harder for Chrysler to close factories such as GM announced Tuesday because often a single plant is the only producer of some products. GM announced Tuesday that it would close four pickup truck and SUV factories and shift more of its efforts to smaller, more fuel-efficient cars.