Chrysler to cut 25 percent of white-collar jobs

By Poornima Gupta

DETROIT (Reuters) - Chrysler LLC is targeting about 5,000 white-collar job cuts, reducing capital spending and planning additional restructuring steps due to the deepening slump in the U.S. auto industry and weak economic conditions.

The continuing decline in business conditions prompted the move to cut 25 percent of its salaried and contract workforce, Chrysler Chief Executive Bob Nardelli said in a letter to employees on Friday.

"The combination of troubled financial markets, difficult credit, volatile commodity prices, the housing crisis and declining consumer confidence continues to weigh on the economy," he said in the letter.

"Never before have auto industry sales contracted at such a fast rate," he added.

U.S. auto sales decline to near 15-year lows in September amid the financial markets turmoil and declining consumer confidence.

The job cuts and reduction in spending comes as Chrysler's owner Cerberus Capital Management CBS.UL is in merger talks with larger rival General Motors Corp GM.N.

GM has intensified talks to buy Chrysler's auto operations from Cerberus in a deal that would also involve a transfer of ownership of GM's finance arm, GMAC, people familiar with the talks said on Friday.

A Chrysler spokesman said buyout offers will be available to all eligible employees in November.