General Motors dropped its biggest lemon last week — a lemon of its making. The giant auto maker announced the closing of 21 plants in North America and the loss of over 70,000 jobs by the mid-Nineties. From 1990 to 1995, 100,000 GM workers will not have their employment and the number of GM workers left will be half of those laboring in 1985.
GM is presently losing $500 million a month in its North American operations, but its European subsidiaries are making good profits. Since Japanese companies employing American workers in their plants in this country are also making good profits, the spotlight searching for the cause of GM’s troubles focuses on top GM management, led by Roger Smith, the company’s strong-willed, sharp-tongued boss during the nineteen-eighties.
Roger Smith started the nineteen-eighties with a boast. He was going to invest $40 billion by 1984 to modernize GM factories and take 70 percent of the domestic motor vehicle market (excluding imports). In 1980 GM sold 62.6 percent of all U.S. manufactured cars and 45.9 percent of the total domestic and import market.
Smith did spend the $40 billion to automate the machinery; but he spent very little to improve the quality of GM’s cars. Instead, he spent money to lobby against any attempt by the U.S. Department of Transportation or the Environmental Protection Agency to advance safety, fuel efficiency, pollution control or bumper standards which would reduce casualties, disease and the waste of consumer dollars.
When he retired in August 1990, Roger Smith was presiding over a troubled corporation with just 36 percent of the total U.S. car market, having lost market share not just to the Japanese but also to Ford and Chrysler. GM lagged behind those two companies in air bag installation (a life-saving device Smith opposed strenuously for 10 years) and even fell behind in car styling.
For such a performance, Roger Smith was rewarded with a large increase in his retirement pension — from $700,000 a year to $1.2 million a year!! Every sixteen days, in retirement, Smith makes what an auto assembly line worker makes in a year.
Hitherto unimagined financial rewards for massive management failures marked the corporate go-go years of the Eighties. Smith exemplified this perverse, reverse incentive. He made more than four times what the heads of Nissan and Toyota made in those years.
In the meantime, GM workers’ wages were essentially flat, adjusted for inflation. Indeed, GM management demanded concessions from their workers, intimating anything else would close down the plant. GM demanded property tax concessions from local towns and cities where their plants were located, thereby placing school, fire, police and other budgets under tighter pressure. In 1985, GM’s new Poletown plant in east Detroit extracted $350 million in local, state and federal taxpayer subsidies and then employed only half the workers the company had promised to hire.
The big GM factory and worker cutback announced this month did not include the resignation or firing of any top executives or any cuts in their fat salaries. Workers took the brunt without their culpable company executives sharing in the sacrifice.
To top off the bungling and connivance, GM’s present bosses did not, for the most part, name the plants they will close. It only gave the workers and public the number of plants that will be shut down. The final decision on which plants are to be shuttered will come around February.
Why did GM foment such suspense, such tension and agony which tens of thousands of families will be going through before and after the Christmas holidays? Because GM’s current CEO, Robert Stempel, and associates knew that what was going to happen was what the Wall Street Journal described as an “economic free-for-all pitting worker against worker, community against community and the U.S. against Canada.” More property tax abatements, relaxing rules in Canada on pension-fund payments, and worker concessions at various plants are being proposed by worried workers and municipalities.
But, of course, GM’s Stempel denied that is what GM had in mind when it did not reveal the names of the plants. “We aren’t in the process of whip-sawing.” Oh, yeah, and when you step on the accelerator of your 1992 Cadillac, Mr. Stempel, you don’t know it will lurch forward either.
Given GM’s chronic and continuing, stubborn and imperious management, the company is in trouble and needs to be reduced in size. But the double-standard, devious way the company’s executives did it shows than nothing has really changed at the top of GM.
Donald Frey, former CEO of Bell & Howell, put it best in reacting to the announced cutbacks: “Stempel’s got bureaucrats in all places and all levels doing the same damned piece of business in their office for 30 years.”