Chrysler Plans to Shut Down Company for Two Weeks

Employees encouraged to take vacation in July.

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By Frank Ahrens

Chrysler, which is restructuring a troubled business under private ownership, told its workers in an e-mail yesterday that almost all of the company will shut down for two weeks in July to save money.

"This year, in order to create better alignment and efficiency across organizational lines and boost productivity, Chrysler will use a corporate-wide vacation shutdown for the weeks of July 7 and July 14," chief executive Robert L. Nardelli wrote to Chrysler's 71,578 employees.

Sales of new autos are down 5.4 percent this year, as the economy flags and the national average price of gasoline tops $3 per gallon. Chrysler's sales are down 13 percent for the first two months of this year compared with last year. Toyota Motor said yesterday that it would cut production of its Tundra pickup trucks at plants in Texas and Indiana.

Automakers in recent years have selectively shut down plants or entire manufacturing units, usually during the summer, to save money. General Motors and Ford plan two-week plant shutdowns this summer. During the technology crash of 2001, several Silicon Valley companies, such as Adobe Systems and Sun Microsystems, ordered employees to take a week off to save money.

But Chrysler's shutdown is notable for two reasons: It will include all of Chrysler's employees except for minimal staff needed for what Nardelli called "business critical operations." It's also notable because of the company's current state of play - executing tough cuts in a turbulent economy to prepare it for sale, likely to another automaker.

"They want to use the urgency that comes with the crisis atmosphere" in the current economy, said David Cole, an analyst at the nonprofit Center for Automotive Research.

Cerberus Capital Management bought an 80 percent stake in Chrysler from Daimler for $7.4 billion last May, taking the automaker private. Cerberus has been paring the company to make it attractive to a buyer, possibly Volkswagen or the Nissan-Renault alliance, Cole said.

The current economic volatility - retail sales fell and jobs were lost in February, according to government reports - gives Chrysler extra leverage to make the cost-savings cuts it wants, including the July shutdown, Cole said.

Nardelli encouraged Chrysler workers to take vacation during the shutdown, during which they will be paid. The cost-savings result in temporarily idling Chrylser's 27 manufacturing plants. Employees who will have to work during the shutdown include those that deal with customers and dealers, said Chrysler spokeswoman Mary Beth Halprin.

Last year, Chrysler negotiated a contract with the United Auto Workers that changes the benefits structure for the company's employees, significantly lightening Chrysler's long-term obligations. Also, the company announced last year that it would lay off as many as 12,000 workers and discontinue several slow-selling vehicles, including the Crossfire sports coupe and Magnum muscle sedan.