Negotiations for the potential sale or merger of Chrysler LLC withstanding, the automaker announced Friday that it will cut 25 percent of its white-collared work force – that is, 5,000 jobs - to deal with a continued downward spiral in US auto sales.

The announcement of the cut is a blow for Detroit, as it implies that Chrysler, which has about 18,500 white-collar workers, will remove about 5,000 salaried workers and employees who work for other companies under contract with the automaker.

Chrysler’s Chief Executive, Bob Nardelli, in an email to employees, obtained by The Associated Press, warned that more restructuring would come at an accelerated pace. He said: “These are truly unimaginable times for our industry. Never before have auto industry sales contracted at such a fast rate. In the near future, we will be making organizational announcements as a result of restructuring actions reflecting the need to find new ways to operate.”

Chrysler – one of the carmakers hammered by rise in fuel prices, low sales, and tightened lender conditions – is especially vulnerable to financial turmoil because nine-tenths of its sales are in North America. In spite of generous discounts and buyer incentives, its sales volumes were 30 per cent lower last month than a year earlier.

Industry analysts opine that Nardelli’s comments likely mean further plant closures and layoffs, as the company shrinks itself to be acquired or perhaps signs deals for other automakers to design and even produce its new vehicles.

Towards this end, a GM takeover of Chrysler was currently the preferred option, ahead of Chrysler’s mooted deal with the Renault-Nissan group on a limited partnership.