GM to close plants, cut 70,000 workers Troubled carmaker doubts it will ever regain old stature

December 19, 1991|By Doron P. Levin | Doron P. Levin,New York Times News Service

DETROIT -- General Motors Corp., which has dominated the world automotive industry for generations, acknowledged yesterday that it would probably never regain the huge share of the market that it enjoyed more than a decade ago.

In a wide retrenchment, GM said that it would close 21 of its 125 assembly and parts-making plants in North America over the next few years and eliminate more than 70,000 jobs, or nearly 18 percent of its employees in the United States and Canada.

GM's steps, which the company signaled with a brief announcement last week, effectively pares 22 percent of the No. 1 automaker's capacity to make cars and light trucks in North America.

Ever since the 1970s, when oil prices climbed and small foreign cars surged in popularity, GM has been struggling, with little success, to halt the erosion of its share of the U.S. car market. Quality problems plagued some of its early redesigned cars, which only fueled the sales of foreign manufacturers, many of which started selling larger cars and set up assembly plants in the United States.

While GM, Ford Motor Co. and Chrysler Corp. all closed plants and reduced their work forces during the 1980s, GM's steps up until now, while painful to thousands who lost their jobs, were considered modest by automotive experts, given the magnitude the company's problems.

GM closed 11 older plants in 1986 and trimmed eight more assembly plants in October 1990. Still, it continued to have the plants and workers to build far more cars than the market wanted.

Such excess capacity in a depressed sales year like 1991 gave the company losses on the order of $500 million a month.

Robert C. Stempel, GM's chairman and chief executive, said that the immediate goal of the cutbacks was to restore profitability in North America, where GM faces an estimated $6 billion to $8 billion loss this year, its largest ever.

But financial analysts said the changes would not help GM turn a profit before 1993.

Mr. Stempel did not specify yesterday which of the 21 plants would be closed, which put the lives of thousands of workers in limbo.

But he put some plants in a competition for survival against others that make identical products.

For example, the plant in Arlington, Texas, near Fort Worth, that makes big Chevrolets, Buicks and Cadillacs, could be closed in favor of a plant that makes most of the same cars in Ypsilanti, Mich., near Ann Arbor. Mr. Stempel said a decision would not be made for months.

The nation's biggest automaker becomes the latest U.S. corporation to be forced to scale back its operations because of the recession and a fundamental restructuring of industries like transportation, computers and financial services.

In GM's case, the recession aggravated the unpleasant consequences of an inefficient organization that uses more workers to make a car than any other automaker.

"As I told our stockholders, we cannot blame our problems totally on the [Persian Gulf] war, the plunge in consumer confidence or the recession," Mr. Stempel said. "Rather, we must make fundamental changes in the way GM does business if we are to improve our performance."

He spoke over GM's closed-circuit television network to approximately 400,000 workers in the United States and Canada. Afterward, a news conference was broadcast over the radio in some cities where GM has plants.

In Detroit, the United Automobile Workers union, which represents most of GM's production workers, expressed skepticism at the urgency of the automaker's travails, which it attributed to GM executives running scared of Wall Street.

Owen Bieber, the UAW president, said, "The proper answer to the insatiable demands of the Ebenezer Scrooge types who run Wall Street is not a snappy 'Yes, sir!' salute."

He said GM, by cutting capacity, had chosen a "self-defeating path." Mr. Bieber rejected the idea of granting GM concessions, and a spokesman said GM had not asked to reopen the three-year labor agreement, which expires in the fall of 1993.

On the New York Stock Exchange, GM's common stock closed at $27.75 a share yesterday, down 12 1/2 cents a share.

After persistent questioning at yesterday's news conference, Mr. Stempel said that GM must be profitable at whatever number of cars it is selling. By making the cutbacks, he said, the company aims to be able to make a profit with a market share "in the low 30" percent of the domestic vehicle market.

In October, GM's share was about 35 percent, down from 44.1 percent a decade ago.

Baltimore plant spared - for now

General Motors workers in Baltimore got no official word yesterday on the fate of the Broening Highway plant. Unofficially, the report was that the minivan plant is not targeted for closing. About 37 white-collar jobs will be lost through attrition and retirement.

A plant spokesman noted that sales of the minivans are strong. But there is no guarantee that they will be built here after a major re- styling in 1996.

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