DETROIT Chrysler LLC is targeting about 5,000 white-collar job cuts, reducing capital spending and planning additional restructuring steps due to the deepening slump in the U.S. auto industry and weak economic conditions.
The continuing decline in business conditions prompted the move to cut 25 percent of its salaried and contract workforce, Chrysler Chief Executive Bob Nardelli said in a letter to employees on Friday.
"The combination of troubled financial markets, difficult credit, volatile commodity prices, the housing crisis and declining consumer confidence continues to weigh on the economy," he said in the letter.
"Never before have auto industry sales contracted at such a fast rate," he added.
U.S. auto sales decline to near 15-year lows in September amid the financial markets turmoil and declining consumer confidence.
The job cuts and reduction in spending comes as Chrysler's owner Cerberus Capital Management is in merger talks with larger rival General Motors Corp.
GM has intensified talks to buy Chrysler's auto operations from Cerberus in a deal that would also involve a transfer of ownership of GM's finance arm, GMAC, people familiar with the talks said on Friday.
A Chrysler spokesman said buyout offers will be available to all eligible employees in November.
The company also warned that it may be necessary to make involuntary job cuts at the end of December.
Chrysler has 17,332 salaried workers but does not reveal the number of contract staff it employs.
The No.3 U.S.-based automaker had previously eliminated about 1,000 white-collar jobs at the end of September and has offered buyout programs to all of its union-represented workers in Michigan.
The announcement also came a day after Chrysler said it would cut 1,825 blue-collar jobs in Delaware and Ohio because of production cuts and a plant closing.
Nardelli said in the letter that the company could not operate as it had in the past and needs to control "every expense".
"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," he said.
He did not comment on talks with GM.
(Reporting by Poornima Gupta; Editing by Tim Dobbyn)