DETROIT (AP) – Chrysler LLC, whose owner has been in talks to sell the automaker to General Motors Corp., said Friday it will cut 25 percent of its salaried work force starting next month and warned that it will make more restructuring announcements soon.

CEO Robert Nardelli said the moves are being made as the company “works to find new ways to operate.”

Chrysler, which has about 18,500 white-collar workers, said Friday it also will cut a quarter of its contract employees – those who work for other companies under contract with the automaker.

About 5,000 people are likely to lose their jobs, although the company would not say how many contract workers it has.

Vice Chairman and President Tom LaSorda said Friday that sales projections for the rest of this year and in 2009 aren’t looking good, and he indicated that more factory closures could be coming.

Chrysler’s sales are down 25 percent through the first nine months of the year, the worst decline of any major automaker.

“We have to align our (factory) capacity with what’s going on at retail,” LaSorda said in an interview with Detroit radio station WWJ-AM. “And that’s the tough decisions that we make. And of course, there’s probably going to be more if it stays at this level.”

On Thursday, Chrysler announced it will cut 1,825 jobs by eliminating one shift at a Toledo, Ohio, Jeep plant and accelerating the closure of its sport utility vehicle factory in Newark, Del., because of the slowing global economy and a shift toward smaller vehicles.

The cuts are so dramatic that they likely spell the end for Chrysler as in independent company and could indicate it is preparing itself for sale, said Aaron Bragman, an auto analyst with the consulting company IHS Global Insight.

“Cutting fully one quarter of your staff is not the way to develop future vehicles,” he said.

In a memo to employees, Chrysler CEO Bob Nardelli said the company will reduce capital expenditures and cut discretionary spending while protecting “all major product programs.”

But Bragman said the size of the cuts likely means new product expenditures will be cut.

The company already has signed an agreement with Nissan Motor Co. to build a subcompact car for Chrysler and may be discussing a new midsize product with Nissan, Bragman said. Chrysler also has a deal with Chinese automaker Chery Automobile Co. to build a small cars.

“You can eliminate a large group of people if you’re simply going to be buying it from someone else,” Bragman said.

In a statement, Nardelli said the auto industry is going through “truly unimaginable” times.

“We continue to be in the most difficult economic period most of us can remember. 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,” he said.

The sales slump in the U.S., where Chrysler sells the bulk of its vehicles, showed up on the bottom line Thursday. Daimler AG’s third-quarter earnings release showed a $154.5 million operating loss for its 19.9 percent share of Chrysler Holding LLC, indicating that Chrysler lost about $772.5 million in the second quarter.

Auburn Hills-based Chrysler is privately owned and does not have to report its earnings, but it issued a statement saying its second-quarter loss totaled $660 million when taking into account the differences between international and U.S. accounting standards. Chrysler said its automotive operations lost $570 million, with the rest of the loss attributable to Chrysler Financial.

In a memo to employees obtained by The Associated Press, Nardelli urged them to work hard to control expenses and said the company will have to move faster than it has in the past to restructure.

“We recognize that in order to strengthen our competitive capability, and reduce the time and cost to achieve our objectives, we cannot operate as we have in the past,” he wrote. “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’s majority owner, New York private equity firm Cerberus Capital Management LP, has been talking to GM, the combined Nissan Motor Co.-Renault SA, and others about a possible sale or merger, or Chrysler could be sold in pieces to other companies, according to people briefed on the discussions. The people have asked not to be identified because the talks are private.

Meanwhile, Cerberus has said it’s in talks with Daimler to buy the German company’s remaining stake in Chrysler.

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