GM Actions Part of US Renaissance
Export growth, `agile manufacturing' cited as evidence of industrial resurgence
THE General Motors Corporation - the sleeping giant of the automobile industry - has just opened its eyes. It announced new management that vows to downsize and refocus the company.Skip to next paragraph
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In making the changes, GM joins the parade of American manufacturers who are reinventing themselves. It is a messy but hopeful period, perhaps the most sweeping industrial change in the United States since Henry Ford's day.
"The existing industrial era dominated by mass-production manufacturing is drawing to a close," writes Roger Nagel, director of Lehigh University's Iacocca Institute.
The forthcoming era involves making companies not only lean but nimble. These new manufacturers focus on their core strengths. They make alliances with other focused companies to quickly push customized products to market. Mr. Nagel calls it the age of "agile manufacturing."
But before GM gets agile, it will have to get as lean as its competitors. Former chairman and chief executive officer Robert Stempel had a plan to close 21 plants and cut 74,000 jobs by 1995 - a 20 percent cut in the company's capacity. But Mr. Stempel resigned Oct. 26, reportedly under pressure from the board of directors, who felt he was not moving fast enough.
On Nov. 2, the board announced that GM president John Smith Jr. would also take the position of chief executive officer and that outside director John Smale would be the company's "nonexecutive chairman." It also halved the company's dividend.
"Unfortunately, it's catch-up" for GM, says George Magliano, director of automotive services at the WEFA Group, a consulting firm. The company will have to make the difficult cuts that automakers Ford and Chrysler made in the 1980s and, at the same time, revamp its aging line of mid-sized cars and minivans.
It is tempting to interpret the troubles at GM as a symbol of American industrial decline. Like GM, many US manufacturers have been slow to make difficult changes and they have struggled against foreign competition. But the gloom is only half justified, experts agree.
"We have tended to take that gloom that is real and say: `That's the whole economy,'" says John Jackson, a business professor at the University of Michigan. "That's not the whole economy." Signs of improvement
"The widespread myth of American manufacturing decline is just that - it's a myth," says Dexter Baker, chairman of the National Association of Manufacturers. "American manufacturing is undergoing something of a renaissance."
The signs of rebirth are many. US exports are up - almost double the level of 1986 - while imports have grown by only a third. Take away the import-hungry auto industry, and the US came within $32 billion of balancing its trade deficit last year.
Manufacturing productivity is also up. The US is one of only two major industrialized countries in the 1980s to boost its rate of productivity growth to levels comparable to those of the 1960s and early 1970s. The US productivity growth rate lagged behind Japan during the period, but it outpaced the former West Germany.
These positive signs are obscured for two reasons. First, large manufacturers get more attention than small ones and it is the large firms that have suffered the worst losses. Second, the dynamism of some manufacturers is offset by declines in others.
But even auto manufacturers see some bright spots. In the same week that GM announced a third-quarter loss, its Lansing Automotive Division said it was studying a plan to bring production back from a plant in Mexico.
And while GM has been losing market share, Ford has been gaining it. In 1981, the No. 2 automaker claimed 19.7 percent of the domestic car and truck market; this year, it expects to nab a 24.5 percent share - slightly ahead of the combined share of all Japanese companies.
"Looking at Ford and the auto industry, I would say it's on the rebound," says David McCammon, vice president and treasurer at Ford. "The early '80s - that was a far more terrifying time."
"I am much more optimistic than I was six months ago," says David Cole of the University of Michigan. His optimism is due in part to emerging problems among Japanese competitors and in part to the new GM attitude.
"GM really has a sense of urgency that it did not have," Dr. Cole says. It now has internal models showing how to improve. For example, GM officials are looking to spread the production and marketing concepts learned at the company's well-regarded Saturn division to other car divisions.
And what is happening here in Michigan is also taking place on factory floors throughout the industrial Midwest.
"The whole idea was that this heartland would never be a competitive place for manufacturing," says Richard Florida, professor of management and public policy at Carnegie Mellon University. But "the American heartland - ignored by government, abandoned by large parts of business - has become the real cornerstone of the American economy." Midwest key region
The Midwest embraces not only world-class US manufacturers such as Motorola, Corning, and Steelcase, but also the best Japanese and European manufacturers: Sony, Honda, Matsushita, Thomson, Phillips, and Siemens. No other region of the world has most of the best manufacturers located there, Professor Florida says.
Times were simpler in Henry Ford's day. The promise of mass manufacturing was straightforward - consumers could spend less to buy more, explains David Lewis, professor of business history at the University of Michigan. Mass production did put many craftsmen out of work, but it also helped Ford more than double workers' wages.
The benefits of the current manufacturing transition are much less dramatic, experts say. Quality is up, but the new era so far has not provided a spurt of new jobs or better wages. "Maybe this is the way it's going to be," Cole says.