SOUTHFIELD, Michigan (Bloomberg) - Chrysler LLC, working to stem two years of losses, said it will shut down the entire company for two weeks in July during the period when it usually closes its assembly plants.

Salaried employees at the third-largest US automaker will be asked to take vacation time during the weeks beginning July 7 and July 14, CEO Robert Nardelli said in an e-mail to employees yesterday.

Chrysler's move expands on the auto industry's traditional manufacturing shutdowns in July. The closure will be the first since Cerberus Capital Management LP bought an 80.1 percent stake in Auburn Hills, Michigan-based Chrysler, which has posted more than $2 billion in losses since the start of 2006.

"This is a drastic cost-cutting step," said Dennis Virag, president of Automotive Consulting Group in Ann Arbor, Michigan. "Having the shutdown will be favourable to Chrysler's cash flow, but it's a drop in the bucket compared to what is required to stabilise Chrysler's financial footing."

Chrysler had 71,578 employees at the end of 2007, including about 42,000 represented by unions, according to the company. Most of the union workers are in manufacturing.

Chrysler announced in November it planned to cut 12,100 jobs by the end of this month, including as many as 10,000 manufacturing jobs. It also canceled four models and later announced a plan to consolidate dealerships and shrink its lineup further.

"In order to create better alignment and efficiency across organisational lines and boost productivity, Chrysler will use corporate-wide vacation shutdown" for the two weeks in July, Nardelli said. Some jobs may need to be staffed, he added.

Union-represented workers also take vacation during the shutdown period. The vacation time is typically included as part of local or national labor agreements with the automakers.

Ford Motor Co., the second-largest US automaker, has a two-week shutdown for US and Canadian plants, spokeswoman Marcey Evans said in an interview. This year that will be the weeks of July 7 and July 14, she said. Affected employees take vacation during that time.

The company also has a one-week designated break for some salaried employees, including research and engineering workers. That break will be the week of June 30, she said.

General Motors Corp., the biggest US automaker, also has historically scheduled manufacturing shutdowns in July.