US Finds Its Form of Perestroika Difficult
Shrinking of US companies has more to do with long-range economic changes than recession
THE United States is undergoing a corporate restructuring that in its own way is as dramatic as the political restructuring heralding the end of the cold war."We have a historic restructuring of the American workplace," says Dan Lacey, editor of a management newsletter called Workplace Trends. "This era is passing," adds Michael Useem, a University of Pennsylvania professor and author of a forthcoming book on corporate restructuring. "The precise form of the new era - the company, employment life in the new era - is not yet clear." This Wednesday, General Motors plans to reveal a new major proposal to reduce its work force. The automaker already has announced it plans to trim 15,000 jobs by 1993. And just last week, several other top corporations made significant announcements: * TRW Inc. said it would cut its payroll by 10,000. * Xerox announced a plan to reduce its work force by 2,500. * IBM said it may reconsider its no-layoffs pledge if it has to cut more jobs than expected next year. The giant computermaker already plans to cut 20,000 positions next year through its traditional methods of attrition and early retirement. IBM cut 20,000 this year in the same manner. In the good old days of the postwar US, Americans could count on three things: a steady job, increasing income, and a sense that the next generation would live better than the last one. This cozy arrangement began to unravel in the 1970s with the rise of foreign competition. US manufacturers, particularly steel and auto companies, responded by closing marginal plants and laying off blue-collar workers in droves. When foreign competition increased and moved into new industries, it forced a raft of US corporations to take another hard look at themselves. They found deeply rooted organizational problems that required a complete overhaul, Professor Useem says. The numbers are startling. During the 1980s, the Fortune 500 eliminated nearly 1 in 4 of their manufacturing jobs. Starting in the mid-1980s, they began to cut white-collar jobs as well. In October, Standard & Poor's identified 32 US corporations that had announced restructuring moves during the last nine months. Since then, US corporations have been cutting jobs at a rate of 2,600 every business day, Mr. Lacey says. The list of restructuring companies reads like a Who's Who of corporate America: Allied-Signal, Aluminum Company of America, Apple Computer, Colgate-Palmolive, Du Pont, McDonnell Douglas, Monsanto, and Tenneco. (Congress gears up tax-cut plan and growth package, Page 3.) The current recession has speeded the process. Even when the recession ends corporate restructuring will continue. "We will see more of this change, not less, even if the recession ends," Useem says. One reason: Shareholders gained power in the late 1980s and are pressuring managers to increase profits. The implications of this trend are unsettling, these analysts suggest. Many big US corporations will shrink and be less dominant. "We will never think that IBM and GM are the national jewels that they once were," says Dennis Logue, a management professor and associate dean at Dartmouth University's Tuck School of Business Administration. Thus, white-collar professionals and blue-collar workers will find it harder to get a steady, lifetime job. Nor is there any guarantee their income will rise. After rapid growth in the 1950s and 1960s, the income of the average American stopped growing for all intents and purposes in 1973. A few sectors of the work force made continued progress: professionals, college-educated workers, and women, says Lawrence Mishel, research director of the Economic Policy Institute, a labor-supported think tank. But even they stopped earning more in 1990. That is why, in the face of a mild recession, Americans are so glum, these analysts suggest. "We're looking out into the future and into the past and realizing that our standard of living hasn't risen and isn't going to rise for the rest of the decade," says Audrey Freedman, a labor economist with the business-supported Conference Board. Americans managed to conceal the wage stagnation during the 1980s, she adds. They borrowed heavily; and more women entered the work force, which created more two-earner families. But those trends couldn't continue. "You already have two people trying to go to work to keep a family going where one could do it before," says Rudy Oswald, chief economist of the AFL-CIO. "Where can you go from here?" he says. Optimists say the restructuring will create companies more able to compete with Europe and Japan. Other analysts worry the new era will lead to a greater division between rich and poor. Still others suggest that smaller, nimbler US corporations still won't be able to compete with Japan.