Chrysler Financial reduces its work force by about 9%, or more than 300 employees, as it restructures operations after losing its preferred lender status with the automaker
June 30, 2009
– Chrysler's former financial arm said Tuesday that it will reduce its work force by about 9 percent, or more than 300 employees, as it restructures operations after losing its preferred lender status with the automaker.
GMAC Financial Services is now Chrysler's leading lender for financing Chrysler vehicle purchases and dealer inventories, a move prompted by President Barack Obama's auto task force.
From the beginning of the 2008 fourth quarter, Farmington Hills, Michigan-based Chrysler Financial -- which is separate from Chrysler Group -- provided loans for about 62 percent of Chrysler dealers and about 50 percent of its customers. Privately held Chrysler Financial is owned by Cerberus Capital Management.
The company said Chrysler's switch to GMAC, tight capital markets and a continued decline in auto sales have hurt the company's business portfolio, leading to the work force reductions, said the company in a statement.
Chrysler Financial employs about 3,900 people. About 111 of the cuts were made Tuesday at the company's headquarters and eight business centers. A customer service center in Overland Park, Kansas will close Aug. 31, eliminating 240. The company's retail credit acquisition activities will be consolidated into a business center in Auburn Hills, Michigan.
"While these were difficult decisions to make, they are necessary in light of our declining portfolio," said Chrysler Financial Chairman and CEO Tom Gilman, in a written statement. "We have made every effort to limit the number of job losses and to ensure the affected employees are treated fairly."
This is the second time in recent months Chrysler Financial has cut its work force. In March, the company eliminated 80 people.
According to Chrysler bankruptcy court filings, the level of financing provided by Chrysler Financial began to tumble in October 2008. Chrysler Financial received a $1.5 billion loan from the bank bailout program in January and said it would use the money to provide low-rate financing to more car buyers.
Although Chrysler Financial said its place in the auto financing market was hurt by GMAC taking over most of Chrysler's financing, it stopped financing dealer inventories in May after Chrysler LLC filed for bankruptcy protection. Chrysler Financial said the automaker's bankruptcy filing triggered a provision in its own lending agreement, making it unable to access funds for dealers' loans.
GMAC is allowed to provide showroom financing to Chrysler dealers and has the right to exclusively offer certain discounted financing rates to Chrysler customers.
Chrysler Financial said it would continue to offer dealership insurance and financial products to consumers. It has a loan portfolio of $45 billion.
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