By David Bailey and Helen Massy-Beresford
DETROIT/PARIS (Reuters) - A worsening global auto downturn has forced deep salaried job cuts at Chrysler, where merger talks with General Motors Corp intensified on Friday, and a warning at France's PSA Peugeot Citroen.
Shares of U.S. automakers and parts suppliers also fell under a broader stock market decline on Friday, including a 26-year low at No. 2 U.S.-based automaker Ford Motor Co which is also cutting back due to the industrywide slowdown.
Chrysler aims to cut about 5,000 salaried and contract workers, or 25 percent of the white-collar staff, amid the auto industry downturn, including extending buyout offers starting in November and involuntary cuts by year end.
However, a combination of GM and Chrysler, and its potential wide-ranging impact on the auto-parts supply base that encompasses thousands of companies and millions of workers, holds center stage in North America.
The core of the discussions between GM and Chrysler owner Cerberus Capital Management would be an asset exchange that leaves Cerberus with all of GMAC LLC and a stake in the automaker itself, sources told Reuters.
Cerberus owns a 51 percent stake in GMAC, GM's former captive finance arm, and would retain ownership of Chrysler Financial, the captive finance arm for Chrysler.
Sources also told Reuters that GM is exploring other plans if the talks fail, including approaching outside investors and the U.S. government, while Cerberus remains in talks with other parties, including Nissan Motor Co Ltd.
In Europe, PSA became the latest to join a growing list of European carmakers to issue warnings, leaving investors wondering whether Volkswagen could hit its own unambitious 2008 targets.
The PSA profit warning came less than a day after German luxury carmaker Daimler cut its targets for a second straight quarter and French rival Renault all but junked its long-held 2009 guidance.
Volkswagen, the world's third-largest carmaker, reaffirmed on Friday that it still expects to deliver more cars to customers than last year. Volkswagen reports quarterly results next Thursday.
SALES DECLINES WIDESPREAD
Toyota, still considered the healthiest of all carmakers as reflected by its AAA debt rating, itself saw global vehicle sales fall 4 percent in the three months to September to 2.23 million, according to a company source.
This would mark the first quarterly fall in seven years for the Japanese carmaker. Media reports also speculated that it would back away from its 2009 volume target.
GM, which has been vying with Toyota for world's largest automaker based on sales volume, plans to report third-quarter global sales results next week.
U.S. auto industry sales have fallen to rates unseen since the early 1990s in October amid weak consumer confidence and a slowing economy. The downturn has hit U.S.-based automakers harder than rivals due to their weaker financial footing.
Ford and GM are thought to have sufficient liquidity through 2008, but the global industry downturn could pose challenges for both in 2009, according to ratings agency Standard & Poor's.
GM, Ford and Chrysler all have been shedding assets to raise cash and paring production and closing plants in North America to match capacity with declining demand.
Chrysler said on Friday that it was reviewing multiple bids on its Viper sports car business, but did not disclose a sale timeline for the low-volume unit.
In Europe, analysts already inured to a string of bad news from the industry were stunned by the magnitude of problems at PSA and Renault, in part since both have benefited from a French car market propped up by government incentives to buy smaller cars built by its two domestic manufacturers.
Citigroup's Stuart Pearson warned that the French carmakers "might have to start thinking the unthinkable" in the event of a prolonged recession.
"Why shouldn't what happened in the UK car industry happen in France? France does not need two very large car manufacturers," he said.
PSA and Renault are insulated from a crumbling U.S. market, which has forced both Daimler and BMW to charge against their earnings a combined sum of more than 1 billion euros for losses related to their leasing businesses.
Renault's Japanese ally, Nissan, gives it exposure to the U.S. market, while PSA has no exposure at all.
"We are simply shocked that -- despite the very high level of savings -- the company has to issue such a severe reduction of its 2008 outlook," brokerage Sal. Oppenheim said of PSA in a letter to clients.
Nomura analyst Michael Tyndall said the severity of the situation was pretty clear given PSA's new guidance and liquidity is the first thing on management's mind.
Compared with their cash-strapped U.S. peers, many European carmakers still enjoy a comfortable financial cushion in their core industrial businesses but "this can change very quickly," WestLB's Oliver Kaemmerer said.
While not exposed to fickle shifts in consumer taste like auto manufacturers, truckmakers are highly dependent on global trade, which is expected to slow dramatically in the face of the current credit crunch.
Volvo, world No. 2 heavy truckmaker behind Daimler, and fellow Swedish manufacturer Scania reported a sharp decline in European orders which also sent their shares tumbling heavily.
GM shares were off 14.59 percent at $5.21, Ford shares were down 8 cents at $1.92, both on the New York Stock Exchange.
Renault shares were off 12.55 percent, after dropping as much as 22 percent during the session. Volkswagen shares fell 7.93 percent and PSA shares slid as much as 16 percent.
(Reporting by Jui Chakravorty Das, Kevin Krolicki, Poornima Gupta, Soyoung Kim, Chang-Ran Kim in Tokyo and Niklas Pollard in Stockholm; writing by David Bailey and Christiaan Hetzner, editing by Marcel Michelson, Victoria Main and Matthew Lewis)
