As colossal GM struggles, economy holds its breath

October 29, 1992|By Ian Johnson | Ian Johnson,New York Bureau

NEW YORK -- As General Motors Corp. struggles to find a new position for itself in the modern manufacturing world, little could be more revealing of the automaker's ongoing woes than its corporate fact book.

Once a reliable guide to a national icon, the GM Handbook is now out of print. GM officials sheepishly admit that with all the turmoil, cutbacks and resignations -- culminating in GM Chairman Robert C. Stempel stepping down Monday -- any book would be hopelessly dated before it left the printing house.

But though the GM fact book might be out of date, some GM facts show why manufacturing companies like GM matter to the U.S. economy if it is to be more than a pyramid, with high-tech geniuses on the top and hamburger flippers on the bottom.

A peek at the company also shows why the mammoth has been such a force in U.S. industry and the full scope of its problems. And it suggests the scale of downsizing that is likely to shrink the company drastically as hundreds of thousands of pink slips are handed out over the coming years.

The most telling sign of GM's importance is how easy it is to sink into super-superlatives when describing the carmaker's size.

GM isn't just the biggest U.S. company; its $123.7 billion in revenues last year were nearly a quarter larger than the second-biggest company, the Exxon Corp. And its number of employees, 750,000, is twice that of the second-biggest employer, International Business Machines Corp., with 344,000.

Economists reckon that GM accounts for more than 2 percent of this country's gross domestic product, the most common measure of the economy. If it were a country, GM's economy would be bigger than Austria or Denmark and only 15 percent smaller than Mexico.

But much more important than the sheer number of dollars generated are the jobs and who has them. Of the 775,000 employed worldwide, about 450,000 employees work in the United States. Although this accounts for less than half of 1 percent of total employment here, these relatively high-paying jobs are disproportionately filled by minorities and workers with only high school diplomas.

Robert W. Crandall, a senior economic researcher at the Brookings Institution, said studies show that the income of young black men has plummeted along with the auto industry's fortunes.

"What is happening is that many of these workers only have a high school diploma and the jobs they get instead are just not paying as well," Mr. Crandall said.

GM had 350,000 blue-collar workers in 1985, but now has only 300,000. This is due to shrink to 250,000 by 1995 as part of a package of cuts that will close 21 factories and slash another 50,000 salaried positions in its famed bureaucracy.

The cuts are expected to be deepened in the coming months after the board of directors appoints a more aggressive chairman to replace Mr. Stempel, who was viewed as not ruthless enough in reacting to last year's $4.5 billion loss, the largest in history for a U.S. company. The board is expected to name a new chairman Monday when it meets in New York.

GM jobs not only pump $15 billion in salaries into the national economy, but also help cover 1.5 million people with health insurance. A further 350,000 retirees and their family members draw benefits totaling $1.5 billion each year. Finally, 886,400 people work for 23,400 GM dealerships across the country.

Economists looking at the big picture are quick to point out that even if GM were to go bankrupt or contract radically, not all of these people would be out of work with their purchasing power lost.

Bankruptcy would mean a major reorganization and even more layoffs, but the company would almost surely continue operating, said Larry White, chairman of New York University's Economics Department who tracks the auto industry.

"Twenty years ago, GM and IBM were at the top of the heap. Now, they're not. Nothing lasts forever," Mr. White said, noting that Japanese investment has meant job growth in states such as Kentucky and Tennessee.

But for individual communities, the death or contraction of a giant like GM can be devastating.

"On the macro level, yes, other companies would probably pick up employees, but for some cities it would be painful. Would another owner, for example, keep the Baltimore van factory open? And for communities like Willow Run [Michigan], the closure of a GM factory is like a death knell," said David Andrea, a senior research associate with the Office for the Study of Automotive Transportation at the University of Michigan Transportation Research Institute.

Although the loss of GM's minivan factory on Broening Highway in Baltimore would not be as dramatic as losses to smaller cities in the Midwest, such as Willow Run, it would be devastating for the plant's 3,000 hourly employees and could severely hurt the local economy.

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