US smokestacks fire up for '84 gains
The outlook for America's smokestack industries is not as grim as it appeared this week when US Steel Corporation announced major cuts in its production capacity and work force.Skip to next paragraph
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In fact, the fortunes of old-line industries - steel, machine tools, automobiles, and chemicals - are expected to be better next year than in 1983.
''For most of these industries 1983 was not a good year,'' says Priscilla Luce, an economist at Wharton Econometric Forecasting Associates. Because of weak sales at the beginning of the year, most posted declines in annual production figures and other key indicators, she notes.
''1984 will be a significantly better year for most sectors of heavy American industry,'' says Jerry Jasinowski, chief economist at the National Association of Manufacturers. The bottom line will be fattened by modestly better sales as the recovery continues and by continued cost cutting, he says.
''All of them will do considerably better than they did last year,'' but without hitting the sales peaks achieved in the 1960s and 1970s, adds John Cremeans, director of research at the Commerce Department's Bureau of Industrial Analysis.
But further dramatic - and economically painful - steps to streamline key industries are expected. Despite the improvements forecast for 1984, United States heavy industry still is like ''a sick man who is smiling today when yesterday you couldn't get any response,'' Mr. Cremeans contends. ''He is not getting up and running around.''
The start of 1984 finds many firms in the smokestack industries beset with costs higher than their international competitors and with technology that is less advanced. At the same time, the gradual shift in the economy toward less material-intensive, high-technology products has left many old-line firms with large amounts of excess productive capacity.
And the dollar's high value has made export sales even more difficult to land. In fact, in November the US bought some $7.5 billion more than it sold, the second worst monthly trade deficit on record, the Commerce Department reported yesterday.
So US Steel's decision to restructure by trimming its potential output by about 20 percent - eliminating 15,400 jobs in the process - ''will take place in other parts of smokestack industry'' as well as at other steel producers, predicts Peter Ziesmer, industrial group vice-president for Data Resources Inc., an economic consulting firm.
''The restructuring of American industry which began in 1980 will continue for at least the next two years,'' says economist Jasinowski says. In their bid to cut costs sharply and become internationally competitive, firms will continue ''shutting down plants, reducing the amount of employment, and cutting overhead costs,'' he says.
The continued restructuring is expected to trigger an increasing number of linkups - either mergers or joint ventures - between US and foreign firms. ''We have got to begin to look at these markets globally,'' Mr. Ziesmer says. However , US Steel announced this week it is dropping discussions with British Steel Corporation to import semifinished steel for the American firm to finish here, a venture which would have enabled it to close out an inefficient production line at its Fairless Works near Philadelphia.