UPDATE 1-Chrysler to continue zero percent financing

By Soyoung Kim

DETROIT, April 1 (Reuters) - Chrysler LLC said on Tuesday it would continue to offer customers zero percent financing in April and cut production if necessary as the embattled No. 3 U.S. automaker struggles with sluggish consumer demand.

Chrysler, which lost $1.6 billion in 2007, posted a 13 percent adjusted decline in March sales, hit by turbulent credit markets that have restricted consumer financing of cars and trucks and record gasoline prices.

Chrysler, the most aggressive of the major automakers in discounting at its dealerships, said it would offer zero percent financing for up to five years for 2008 models and six years for remaining 2007 models. It also said it would reach out to less credit-worthy borrowers.

"It's not business as usual for customers. It requires something extra for consumers to go out of their way to consider a major purchase like a vehicle," Michael Manley, executive vice president of international sales and marketing, said on a conference call.

Manley said the credit markets have turned dramatically tighter from a year ago, when banks had been far more aggressive in competing to finance vehicles.

Chrysler has accelerated its restructuring efforts since Cerberus Capital Management LP CBS.UL acquired an 80 percent stake from Daimler AG (DAIGn.DE) last summer. It has announced plans to cut some vehicles and pare its dealership ranks, and has offered buyouts to its 44,000 U.S. hourly workers.

It has set a target of getting between 8,500 and 10,000 U.S. factory workers to accept buyouts or early retirement this year.

Manley said Chrysler was looking at its production plans every week and would adjust to weak demand to control inventory and alleviate pressure on its dealers.

Chrysler's inventory at the end of March stood at 423,607 vehicles, or 66 days of supply, down 76,000 units from a year earlier.

U.S. auto sales fell by a steep margin in March, with Detroit-based automakers Chrysler, General Motors Corp GM.N and Ford Motor Co (F.N) hit hardest.

While Chrysler has discussed cutting underperforming models and those that tend to compete with other Chrysler vehicles, Manley dismissed speculation that it would halt production of the Jeep Compass, the only car-based crossover vehicle Jeep offers.

"We don't have any plans to cancel Compass," Manley said. "It's going to be a vehicle in our lineup for quite a while."

Chrysler sales were adjusted for two fewer selling days in March compared with a year earlier. On an unadjusted basis, Chrysler sales were down 19 percent. (Reporting by Soyoung Kim; editing by Jeffrey Benkoe)