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GM executive voices concerns about American industry.

1993 AFS Detroit Chapter Management Night

Richard Donnelly, vice president and group executive of General Motors' Powertrain Group, told a packed house of nearly 400 at the 33rd AFS Detroit Chapter Annual Management Night January 21 that some economists downplay the hemorrhage of GM jobs and cash. An article in The New York Times, he said, implied there would be no cause for alarm in the U.S. if GM's new management team failed to restore the company's profitability and market share.

The Times' article quotes economist Alfred E. Kahn as stating: "the unique strength of this |U.S.~ economy is its capacity to acknowledge failure and move on." Economist Irwin Steizer of the American Enterprise Institute is quoted as declaring that "even in bankruptcy, GM would not disappear...its plants, engineering and marketing expertise would be recycled."

The Times' article, Donnelly said, suggested that it would be no big deal if GM disappeared. Another company would take its place, leaving the U.S. unaffected despite the fact that the economy already has been hard hit by foreign competition. He claimed the Japanese would be most likely to take over vacated U.S. engineering, manufacturing and marketing resources--and move them to Japan. Foreign industries would replace domestic industries at a quicker pace, irreparably hurting America's economic position.

Although his remarks focused on GM, Donnelly stressed the automaker is merely one example of much broader competitive pressures on American industry. He said he was not bashing the Japanese, declaring instead the importance of understanding the basis of Japan's economic power and culture as a way for Americans to compete effectively with them.

He listed some of what is at stake if American industry was lost to foreign ownership:

* one of every seven jobs in the U.S. depends on the American auto industry;

* for every new job created by a foreign transplant, America loses two jobs;

* every $1 lost to the Far East in displaced jobs means $2 are lost here;

* manufacturing's direct production commands more than 20% of the nation's gross domestic product.

One Perspective

Putting the U.S. metalcasting industry in perspective, Donnelly reported that 3200 foundries employ 230,000 people. These foundries produce over $25 billion in castings, which are used in 90% of all domestically manufactured goods. Losing market share to off-shore producers depletes a finite resource already damaged by subsidized competition. It also adds to the burdens still affecting a key part of an industrial base long neglected by government inaction.

For instance, real wages in the U.S., after growing for 100 straight years, peaked in 1973 and have remained flat ever since. There are 18.2 million manufacturing jobs in the U.S.--fewer than there were in 1969. The number of lower paying service jobs has increased from 33.7 million to 85.1 million. The median weekly wage for U.S. workers fell from $409 in 1979 to $391 today.

"We are being outperformed by global competitors, especially Japan," he said. "Our leadership in steel is gone--the whole array of consumer electronics and photographic production is gone. Autos are going, but producers are working hard to reverse this trend. To counter this industrial loss, we must have government involvement to help structure support mechanisms."

He pointed out that Japan's economic system has the advantages of low defense, pension and health care costs; an excellent, educated workforce; and government support of key industries and businesses through low-cost capital. The cooperative relationships between government and business have supported an essentially closed market.

Donnelly argues that the U.S. can't compete only on a company-by-company basis or with a fragmented and incremental approach to international trade. Japan and Europe have much more comprehensive government/industry economic systems and he holds that the U.S. can afford to do no less.

"We must decide as a nation what technologies will provide jobs, maintain our standard of living and offer future security," he said. "Think of what could be done if industry, government, labor and academia joined forces to tackle the major issues that ultimately will determine the survival of the U.S. economy. The results would be more and better jobs, a higher standard of living, improved trade balance, reduced budget deficit, ecological gains and economic freedom."

He called for increased incentives for capital formation and investment, an aggressive trade policy, lower health care costs and an end to regulatory overkill and conflicting legislation.

Donnelly concluded by agreeing with Lee Iacocca's call for the Big Three to compete fiercely on products while being "joined at the hip" as advocates of an American industrial policy that assures U.S. competitive success in world markets.
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Title Annotation:General Motors' Powertrain Group Vice Pres Richard Donnelly
Author:Kanicki, David P.
Publication:Modern Casting
Date:Mar 1, 1993
Previous Article:People concerns need managing.
Next Article:Investment in safety again pays big dividends to employees at Pennsylvania Steel Foundry.

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