GM Loses Record $4.5 Billion; Announces 12 Plant ClosingsBy Warren Brown
The Washington Post
General Motors Corp. Monday reported that it lost a record $4.5 billion in 1991, and it identified 12 of the 21 plants that will close as it downsizes its operations during the next few years.
GM's loss, the worst annual loss for an American corporation in history, brought last year's total loss for the Big Three -- GM, Chrysler Corp. and Ford Motor Co. -- to $7.7 billion. GM's loss was larger than expected and reflected the impact that a weak economy and cautious consumers were having on the company's sales.
There also was a surprise in the list of plant closings, which will eliminate about 16,000 jobs. Workers at GM's Willow Run assembly plant in Ypsilanti, Mich., were stunned that GM had decided to close their facility rather than a competing plant in Arlington, Texas. Analysts had expected GM to close the Texas plant because it is more distant from suppliers, which increases costs.
"Right now we are shocked," said Charles D. Evans, 46, who repairs cars at the end of production at Willow Run. "We feel we were cheated. Nobody was expecting it. We thought Texas didn't stand a chance."
On Capitol Hill, the announcement added fuel to the political reaction against Japan's trading policies. House Majority Leader Dick Gephardt, D-Mo., said that if the United States did not take steps to counter Japan's auto companies, "we're going to be out of the business."
The closings announced Monday and others to come by the end of the year, coupled with the shrinkage of GM's administrative groups, will eliminate 74,000 jobs by 1995. In all, by the mid-1990s, GM will have cut both its hourly and salaried work forces to half the size they were in 1985, when the company had 142,000 hourly workers and 500,000 salaried employees.
"In 1991, the North American automotive industry sustained losses unparalleled in its history," GM Chairman Robert C. Stempel said. "General Motors is taking aggressive action to reverse this trend and improve our prospects for future profitability."
GM officials said Monday that all employees, including top-level executives, will share the pain. For example, they said, the company is trimming pension benefits for current and retired top executives by $14 million a year through a change in its executive compensation plans.
Stempel also said GM will centralize most of its North American design, engineering and administrative functions in a move that promises to undo a previous reorganization implemented by former GM chairman Roger B. Smith in the early 1980s.
All of the changes are meant to halt GM's precipitous decline, in which the company "has been going down like a rock," Stempel said.
In fact, the results released Monday understated the company's weakness in its home market. GM showed an $8.5 billion loss in its North American automotive operations, including $1.8 billion for costs related to the plant closings. The losses were partly offset by a $2 billion profit in GM's overseas operations and another $2 billion gain in its non-automotive North American businesses. GM's sales and revenue last year totaled $123 billion, slightly lower than the year before.
GM's U.S. market share has fallen to 36 percent from 45 percent in the late 1980s.
In the weeks since Dec. 18, when GM said it would close 21 plants, the 4,000 workers at Willow Run and a similar number at the Arlington, Texas, factory have been waiting to see which would keep their jobs.
"We are ecstatic," said Lonnie Morgan, financial secretary for the United Auto Workers union Local 276 in Arlington. "But we are sorry that this may mean a loss of jobs for workers in Ypsilanti. They are trying to put out a good product too."
Both the Arlington and the Ypsilanti plants assemble big, rear-wheel-drive cars and station wagons for GM's Chevrolet, Oldsmobile and Cadillac divisions. The plants can turn out 500,000 cars and wagons annually for a market that is buying only 250,000 of those vehicles a year from GM.
The Ypsilanti workers believed that they had the best chance to survive because they can produce cars at a lower cost than those rolling out of Arlington -- about $400 less per car because of Ypsilanti's location near GM's suppliers.
But the Arlington workers gave GM something that analysts say will benefit the company more in the long run. UAW members at Arlington voted to work three shifts daily without overtime, giving GM many of the same cost advantages it enjoys in its profitable European operations, said Edward J. Sullivan, an analyst with the WEFA Group in Pennsylvania.
Also, the state of Texas teamed up with the city government of Arlington to give GM a tax abatement package of $30 million. No similar incentive plan came from Michigan or Ypsilanti.
By pitting Arlington against Ypsilanti, "GM set up a system whereby it accomplished work-rule changes and received government concessions that it otherwise would not have gotten," Sullivan said.
UAW President Owen Bieber accused GM of playing communities against one another, a charge that Stempel denied.
"Neither politics nor incentives had anything to do" with GM's decision, Stempel said. However, Stempel said GM would lean favorably toward factories with flexible work rules in future plant-closing decisions. "Clearly, plants that agree to innovative labor arrangements will be high on our list."
Other plant closings announced by GM yesterday include the proposed shutdown of its minivan manufacturing facility in Tarrytown, N.Y., which employs 3,456 people.
Other plant closings include an engine facility in Flint, Mich.; an engine plant in Moraine, Ohio; a castings plant in Saginaw, Mich.; an engine plant and a castings factory in Canada; two component plants in Detroit; and a machine-tools plant in Anderson, Ind.