Car industry faces meltdown

Car makers are unveiling drastic cutbacks as the collapse in the new car market accelerates.

Chrysler CEO Bob Nardelli has announced plans to slash Chrysler’s white-collar workforce by a quarter between now and the end of the year. Around 4500 jobs will be cut via voluntary redundancies and "buy outs".

In an email to employees, Nardelli described the current economic climate as "truly unimaginable times for our industry".

Chrysler also announced plans to close its SUV factory in Delaware a year early and cut a production shift at the Jeep plant in Toledo. Around 1800 jobs will be lost as a result.

Meanwhile, the talks between General Motors and Chrysler owner Cerberus are reportedly "intensifying" as Cerberus looks to end its short experience of car making.

Any merger of GM and Chrysler is likely to involve government aid and could see as many 30,000 jobs cut over the next 12 months.

As part of the negotiations, Cerberus is in the midst of buying Daimler-Benz’s stake in Chrysler. When Daimler sold Chrysler in 2007, it retained a 20 per cent share of the new company.

However, the purchase is unlikely to be a costly operation. A Daimler finance boss has been quoted as saying the 20 per cent shareholding is now regarded as "worthless" in the Germany company’s accounts.

Meanwhile, in Europe both Peugeot-Citroen announced plans for "massive" cuts in production and Renault ordered temporary closures of up to a fortnight at all its plants in France and a number of overseas facilities.

Peugeot predicts a 17 per cent fall in new car sales in the last quarter of 2008 and Renault is looking to cut production by 20 per cent in the final quarter. Both companies want to avoid stockpiling unsold vehicles.