DaimlerChrysler's shares rose almost five per cent after the announcement to $67.60 in late morning trading on the New York Stock Exchange.
 
Under the plan, 11,000 production workers, 9,000 in the US and 2,000 in Canada, will lose their jobs over the next three years, and 2,000 salaried jobs also will be cut - 1,000 this year and 1,000 in 2008.
 
Drop in profits
 
The company reported a 40 per cent drop in company-wide profit for the fourth quarter of the year, reflecting weakening demand for Chrysler products.
 

"While Chrysler Group's recent losses are not the fault of UAW members, they will suffer because of the reductions announced today"

Ron Gettelfinger and General Holiefield,
president and vice president of UAW

High fuel prices have prompted a shift away from the profitable but gasoline inefficient trucks and sports utility vehicles (SUV) Chrysler produces.
 
Tom LaSorda, Chrysler CEO, said the unit can no longer rely on its strengths in the minivan, truck and SUV market and must expand beyond North America, which represents some 90 per cent of the group's business.
 
The plan calls for closing the company's Newark, Delaware assembly plant and reducing shifts at plants in Warren, Michigan, and St. Louis.
 
A parts distribution center near Cleveland also will be closed.
 
"We believe that this represents a solid plan to return to profitability and lay the groundwork for a solid future," LaSorda said at a press conference.
 
Dieter Zetsche, the DaimlerChrysler chairman, said the company was looking into "further strategic options with partners".
 
He said: "In this regard, we do not exclude any option in order to find the best solution for both the Chrysler Group and DaimlerChrysler."
 
"Devastating news"
 
The cuts will reduce the number of vehicles 
produce yearly by 400,000 [GALLO/GETTY]
But Ron Gettelfinger, United Auto Workers (UAW) president, and General Holiefield, UAW's vice president, said in a joint statement: "Today's action by DaimlerChrysler is devastating news for thousands of workers, their families and their communities."
 
They said: "While Chrysler Group's recent losses are not the fault of UAW members, they will suffer because of the reductions announced today."
 
The job cuts at Chrysler will reduce the number of vehicles that operations can produce each year by 400,000.
 
The US auto industry has suffered a series of job cuts over the last year and some estimates suggest it is likely to see another 100,000 redundancies in total.
 
Georg Stuerzer, an analyst with UniCredit, said the restructuring could be the first step to finding a partner with which to operate the Chrysler unit, or even find a suitable buyer for it.
 
Ron Tadross, an auto analyst with Bank of America, said in a note to investors that DaimlerChrysler "did not rule out disposing of its money-losing Chrysler division."
 
He said he "would not be surprised if there is good interest in Chrysler", which he said was "a decent business, at least relative to the other US domestic manufacturers".