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Wednesday November 22 9:51 AM ET DaimlerChrysler to Idle Three N. American Plants

By Michael Ellis

DETROIT (Reuters) - DaimlerChrysler AG's Chrysler group, placed under new German management, said on Wednesday that it will idle three North American vehicle assembly plants next week to reduce growing inventories.

The temporary plant shutdown comes as the former Chrysler Corp. struggles to return to profitability following a disastrous third quarter and amid signs of a slowing U.S. economy. It follows a one-week shutdown of seven of DaimlerChrysler's 13 North American assembly operations four weeks ago.

The affected plants are in Bramalea, Ontario, where the Chrysler Concorde, 300M, LHS and the Chrysler and Dodge Intrepid sedans are manufactured; Jefferson North in Detroit, home of the Jeep Grand Cherokee sport utility vehicle; and Toledo, Ohio, where the Jeep Cherokee and Wrangler are made.

The shutdown will affect 13,600 unionized workers, DaimlerChrysler spokesman Trevor Hale said.

The move, which was widely expected, comes after DaimlerChrysler dispatched German management to Chrysler on Monday to try to revive the struggling U.S. operations, which lost $512 million in the third quarter and is expected to report another loss in the fourth.

The Chrysler group includes the Chrysler, Jeep and Dodge brands.

Plant shutdowns directly affect earnings because automakers count revenues from new vehicles when they are built rather than when they are sold by dealerships.

DaimlerChrysler idled its Belvidere, Ill., plant, where it makes the Chrysler and Dodge Neon compact car, for three days this week, in addition to the Thursday and Friday holidays for Thanksgiving.

``One of the old laws of the auto industry is when Chrysler sneezes, GM and Ford catch cold,'' said Salomon Smith Barney analyst Michael Ward. ``At some point, I think the whole industry has to confront the issues that Chrysler is confronting. Your inventories are too high, you keep producing out of whack, and somewhere or other, you have to get these (consumer) incentives down. Until you do that, profitability continues to erode.''

General Motors Corp., which on Monday said it expects its November U.S. vehicle sales to drop 4 to 7 percent, also idled five North American vehicle assembly plants this week, four to reduce inventories.

Ford Motor Co. shut down two North American plants this week; one because of a parts shortage and the second to prepare for a changeover to a new product.

-- Rachel Gibson (rgibson@hotmail.com), November 22, 2000