As auto plants lay off workers, so do their suppliers


November 06, 1992|By Ted Shelsby | Ted Shelsby,Staff Writer

BELCAMP -- Workers at the Johnson Control Inc. plant here last week were busy turning out thousands of cushioned seats each day to keep pace with production at the General Motors Corp. minivan assembly plant in Baltimore.

The Harford County assembly line moved steadily along as a wide variety of seats -- bucket, bench, high back, recliner and tour recliner in four colors -- began a journey that took them to the Chevrolet Astro and GMC Safari minivan plant on Broening Highway.

Everything has to be carefully coordinated. Under GM's just-in-time inventory control system, the Johnson seats arrive at the GM plant's loading dock as they are needed. When a GM worker needs a pair of blue tour-recliner seats for a flashy Astro model moving down the line, the worker is expected to be able to reach back, grab the proper seat and bolt it into place.

The coordination of these operations, 30 miles apart, illustrates the close ties between the local GM plant and the handful of

area suppliers. It explains why the seat production line at Johnson Control shut down this week and about 65 workers accepted voluntary layoffs after GM halted van production because of slowing sales.

The meshing of assembly lines is only one example of the interdependence between GM and its network of suppliers. GM is also looking to its supplier for help in an aggressive campaign to cut its financial losses and make its products more competitive.

GM's cost-cutting war is being directed by J. Ignacio Lopez de Arriortua, a Spaniard who was called to Detroit this year to oversee GM's $50 billion purchasing budget. Mr. Lopez had been head of GM's European purchasing department.

He began ruffling feathers among suppliers almost immediately by requiring them to submit new bids on all their existing contracts and to lower their production costs. Area suppliers to GM's Baltimore plant say they haven't been forced by Mr. Lopez to cut prices yet, but they expect some pressure when contracts are renewed.

"Lopez -- that's the buzzword in the [auto] industry today," said Steve Jones, manager of Monarch Industries Inc. in Belcamp, only a few hundred yards from the Johnson Control factory. Monarch makes --board and other plastic components for the minivans.

"He's big on getting a lot of people to bid on contracts," Mr. Jones said. "He'll take the low bid and ask us to match it if we want the work. We don't have to undercut them, but we will have to match them."

"From what we've been hearing," Mr. Jones continued, "he likes to see you take 5 or 10 percent off the top and then make 2 percent productivity cuts each year."

Monarch workers also are feeling GM's problems firsthand. The factory closed Monday morning, and 80 workers were laid off because of a shutdown of the Baltimore minivan plant, which had been scheduled. Workers there are scheduled to return next week.

Local suppliers pointed out that they also operate under a just-in-time inventory system. So when the Baltimore plant closes, the ripple effect doesn't end at front-line suppliers like Johnson Control, Monarch and the Marada Industries Inc. plant in Westminster.

"We apply the just-in-time inventory arrangement to our vendor, too," said M. Dennis Sisolak, manager of the Johnson Controls plant. "Anything in transit comes in, but we halt all other shipments. We never have more than a day or a day-and-a-half inventory in stock."

At Marada Industries' Westminster plant, Dan Quickel, assistant general manager, said an unexpected shutdown of the Baltimore minivan plant can have a dramatic impact on his plant's profitability.

When things are moving smoothly, Mr. Quickel said, Marada can produce the metal components it makes for the minivans, ship them to Baltimore and be paid by GM in time to pay its own supplier to take advantage of a quick-payment discount.

But when there is a sudden disruption, as occurred this year when the Baltimore plant was closed as a result of a strike in Ohio, this finely timed arrangement falls apart.

When GM's Baltimore plant closed because of the strike, the value of Marada's inventory immediately shot up, to about $1.1 million, from about $900,000. Mr. Quickel said that whenever Marada is forced to borrow money to finance its inventory, it pushes its cost of doing business up by about $40,000 a month.

Area suppliers to the GM plant are learning that they are less vulnerable to such problems if they have more than one customer. Although half of Marada's output goes to GM's plant in Baltimore, it also makes parts for Honda, Volkswagen, Jeep and Chrysler.

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