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Chrysler to shut minivan plant

Detroit, July 1, 2008

Chrysler will shut its St Louis minivan plant, cutting production of its top-selling vehicle and 2,400 factory jobs in a sign of the automaker's troubles with a market reeling from record gas prices.

Chrysler said it would close the assembly plant -- one of two North American facilities dedicated to the Dodge Caravan and Chrysler Town & Country -- and eliminate a shift at a nearby assembly plant that makes the Dodge Ram pickup truck.

 The third largest U.S automaker, which relied on sales of trucks (which include minivans) and SUVs for almost 70 percent of its sales, said it expected to post a significant decline in sales in June.

Chrysler's production cuts follow similar steps from larger rivals General Motors Corp and Ford Motor Co, both of which have cut truck production in response to weaker sales in recent weeks.

Chrysler, now controlled by private equity group Cerberus Capital Management, has seen US sales drop 19 percent in 2008, the largest drop for any major automaker.

"This environment forces us to make some very difficult decisions," Tom LaSorda, Chrysler's senior executive in charge of manufacturing said on Monday.

"The auto industry is going through some turbulent times -- slow economy, including mortgage crisis and the weak housing market, escalating oil prices and the rapid consumer shift from trucks and SUVs to smaller, more fuel efficient vehicles," he said.

LaSorda, like other Chrysler executives, said the automaker was meeting and exceeding its financial targets, in part because executives had been more cautious early on about the risk for a sales downturn this year.

"Chrysler was aggressively conservative late last year in planning for 2008, allowing us to be better positioned for the slowdown than some of our rivals," LaSorda said.

Cerberus is "absolutely not" considering a breakup of the company, LaSorda said, calling the suggestion "hogwash" on a call with reporters.

Chrysler pioneered the market for family-friendly minivans in the early 1980s when it was bouncing back from a brush with bankruptcy under then-chief executive Lee Iacocca.

To underscore the importance of the "bread and butter" minivans to Chrysler, LaSorda unveiled the new models in 2007 on a stage in Detroit decorated to look like a giant loaf of white bread.

But sales of minivans have declined in the past few years as US consumers shifted to crossovers and SUVs. More recently, the surge in gas prices, a slumping US housing market and tighter credit have pulled auto sales down for all categories of larger vehicles.

Total minivan sales in the US were down 20 percent in the first five months of 2007, according to Autodata Corp.

US sales of Chrysler's Town & Country minivans were down 13 percent through May while sales of its Dodge Caravan model fell 35 percent.

Ford and GM discontinued their minivans after a steady decline in sales of the vehicles. Chrysler had 30 percent of the US minivan market through May.

Chrysler competes mainly with Japan's Toyota Motor Corp and Honda Motor Co  in the segment. -Reuters




Tags: Chrysler | minivan |

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