Amidst merger talks with General Motors, Chrysler has told its employees that it would lay-off 5,000 of its salaried and contract work force beginning next month over and above the 29,000 job cuts already announced over the past two years.

To soften the blow the automaker said it would offer buyouts and early retirement packages in the next two weeks even as the plans to make more restructuring announcements soon.

These announcements came when talks had intensified between the two sides and a GM takeover of Chrysler was seen as more favorable than the Chrysler's mooted deal with the Renault-Nissan group on a limited partnership.

Chrysler employs about 66,000 people globally out of which 33,000 are hourly workers and 15,871 salaried workers in the US.

The 5,000 employees who are likely to lose their jobs comprise 25 per cent of its salaried workforce and include engineers, accountants and finance personnel. The company will also be offering early retirement and buyout packages to its 17,300 salaried employees and an undisclosed number of contract workers.

Vice chairman and president, Tom LaSorda said that sales projections for the rest of this year and 2009 look bleak and indicated that the company would be closing more factories.

Auto manufacturers in the US have seen sales going over the cliff due to the steep rise in fuel prices that has raised the demand for smaller, fuel-efficient cars, while the ongoing credit crunch has hampered sales as consumers are vary of spending and credit companies now have stringent conditions on car finance.

Chrysler's has seen its worst decline in sales and are worse off than the other two auto giants with its sales down by 25 per cent for the first nine months and indicated net losses of more than $1 billion from its automotive business and finance arm while Ford Motor lost $8.6 billion and GM lost $18.8 billion during the first half of 2008.

Bob Nardelli, Chrysler's chairman and CEO, said in a statement "The combination of troubled financial markets, difficult credit, volatile commodity prices, the housing crisis and declining consumer confidence continues to weigh on the economy. Never before have auto industry sales contracted at such a fast rate."

The chairman has also said that the company would be reducing capital expenditures and cutting back on all discretionary and overhead expenses and in some cases elminating them totally and it would announce a restructuring of the company "reflecting the need to find new ways to operate."

A merger between GM and Chrysler is bound to have a direct impact on a number of areas in the auto industry, with the widespread expectations being job cuts, reduction in the number of plants on account of more streamlined operations, trimmed product lines and lesser number of models, and a reduction in the number of dealerships. (See: Unions to oppose GM-Chrysler alliance)  Analyst fear that if the merger goes through than more than 30,000 jobs would be lost in restructuring

Commentators feel that the present job cuts are done at the instance of GM so they don't have to take the unpleasant decision or it could be that some internal product decisions have been made which does not require these people.