Automakers Cutting Back

The nation's car dealerships are filled with inventory, but these days there's very little traffic, CBS News Correspondent Randall Pinkston reports.

Not that car dealer Robert Engel is terribly fazed by it.

"I sort of take things in stride that all car companies go through cycles like this," said Engel, who works at the Tenafly Jeep Eagle Chrysler Plymouth dealership in Tenafly, N.J.

The sales staff at this New Jersey showroom is ready to make a deal, but few are shopping, so Engel hopes salesmanship will make a difference.

"I anticipate that Chrysler as well as other car companies are going to be running discounts throughout the year," he said.

But a sweet deal for buyers is bitter medicine for the auto industry. The nation's economic slowdown is forcing automakers to put the brakes on production. That's taking its toll throughout the business, from plant workers to car dealers to parts suppliers.

"We think that auto production is going to be down about 20 percent in the first quarter (compared to) last year," said Wendy Beale Needham of Credit Suisse First Boston Bank.

Compared to a year ago, GM's sales are off five percent, Ford Motor Co.'s are down 11 percent, and Chrysler, now owned by Daimler, dropped a stunning 16 percent.

Facing the biggest problem, Chrysler is taking the most drastic steps for recovery, cutting 26,000 jobs over the next three years, shutting down six plants, scaling back production in others and slashing millions in subsidies to dealers.

This is the turning point and from here the company will improve go upwards and become successful and profitable again," said Dieter Zetsche, head of Daimler-Chyrsler.

GM and Ford are also taking painful steps to get back on track. GM is phasing out the century-old Oldsmobile, and cutting nearly 14,000 jobs. Ford is trying to cut a billion in costs, and as a result of all the cutbacks, parts manufacturers could see a 50- to 80 percent reduction in earnings from last year.

While the industry is in for a bumpy ride in the months ahead, there is hope that recent interest rate cuts and new car models will help drive this business back up by next year.