$1.98 billion GM loss fuels concern at Baltimore plant


The permanent closing of four auto assembly plants contributed to a staggering $1.98 billion third-quarter loss, General Motors Corp. reported yesterday -- amid speculation that its East Baltimore minivan assembly plant could fall victim to consolidation a few years down the road.

GM officials attributed one of the biggest quarterly losses ever posted by a U.S. company to a $2.1 billion restructuring charge associated with the shutdown of its assembly plants in Framingham, Mass.; Leeds, Mo.; Pontiac, Mich.; and Lakewood, Ga. All of the plants have been idle for some time.

In reporting its bleak operating results, GM said that other North American manufacturing and warehouse operations will be consolidated or closed.

Some industry officials expressed concern yesterday that the company's minivan assembly plant on Broening Highway could be one of those to go.

The van made here is due for a major overhaul for the 1996-1997 model year, according to automotive officials and industry observers, and the 3,700 workers at the Baltimore plant have been given no guarantee that the restyled vehicle will continue to be built here.

Kari Halsey, a spokeswoman for the GM's Truck and Bus Group in Detroit, which oversees the operations of the Baltimore plant, said that "Baltimore is high on the list of contenders" to build the restyled van but added that the division also will be looking at other sites for the work.

GM is expected to make a decision in 1993 on where the vehicle will be built. "We're aware of that," said Rodney Trump, president of Local 239 of the United Auto Workers Union, "and we're working hard to make sure it's Baltimore.

"I don't like losing," he added, "but neither do the other guys." Mr. Trump said he has heard that at least two other plants will be vying for the minivan assembly.

"We're doing everything we can to make certain the work stays here," said the union official. "We began working on this early this past summer."

Mr. Trump said the workers' efforts to persuade GM's top management to stay with Baltimore include improving the quality of work on the popular Chevrolet Astro and GMC Safari minivans, improved labor and management relations and increased cost-effectiveness.

He expressed concern, however, that a plant could do a lot of things right and still lose out as a result of "the politics" sometimes associated with decision-making.

David Andrea, a research associate with the University of Michigan's Office for the Study of Automotive Transportation, said GM is looking for ways to boost its profitability, which could include the consolidation of some assembly-plant operations.

"Baltimore is secure for the next few model years," Mr. Andrea said, "but after that its future is uncertain." He explained that GM could be looking at building a new minivan and a new sport utility vehicle on the same chassis and that there could be a number of plants vying for the production rights.

If Baltimore is not selected for that work, he warned, the plant might find itself in the very difficult position of trying to come up with another product to produce or face closing. The Broening Highway plant has been producing cars and trucks since 1935.

To the city's advantage, Ms. Halsey said, "we've had a very successful van program in Baltimore, and obviously Baltimore is high on the list of contenders" for the new product.

The threat of permanent closing is nothing new to many of the workers at the GM plant. The plant here faced a serious threat in the early 1980s, when it was put in the precarious position of having no product to build.

GM was well into a $270 million renovation of the plant when it suddenly halted construction and left city and state officials in suspense for about a year, during which top GM officials couldn't assure them that the automaker would continue business here. The plant eventually was selected to produce GM's new minivan, and the renovation resumed.

[Auto industry analysts applauded GM's restructuring move yesterday, calling it the "big bang" that the world's biggest automaker needed to make it more profitable. But they cautioned that GM's near-term woes are still far from over, Reuters reported.

[Analysts had expected the charge to total anywhere from $700 million to $2.5 billion.]

Stressing the positive, GM Chairman Robert C. Stempel pointed out in a statement that GM earned $109 million in the third quarter before taking into the account the restructuring charge associated with the four plant closings.

But even earnings from operations were down nearly 80 percent from the same period last year, when the company posted an operating income of $517 million.

Terrence P. Sullivan, a spokesman for GM, attributed the sharp drop in operating income to a number of factors, including the high cost of consumer incentives to boost car sales, problems with labor disruptions at plants in Brazil resulting from political unrest, and higher-than-expected costs associated with its investment in Saab, a Swedish car company.

GM said its quarterly sales and revenues totaled a record $30.8 billion, up from $28.8 billion in the year-earlier period.

The loss was equal to $3.54 a share, compared with a gain of 72 cents a share last year.

For the nine months, GM reported a loss of $368.7 million on revenues of $94.8 billion. In the first nine months of 1989, it earned $3.5 billion on revenues of $95.6 billion.

The automaker has seen its share of the U.S. auto market drop from 50 percent in the late 1970s to about 32 percent today, and Reuters reported that some stock analysts see the plant closings as an example of the "housecleaning" GM needs to cut costs and improve its competitiveness.

GM's non-automotive production businesses, including General Motors Acceptance Corp., Electronic Data Systems Corp. and Hughes Electronics Corp., all posted higher profits in the third quarter.

[Reuters reported that Shearson Lehman Bros.' Joseph Phillippi, who attended an analysts' meeting in New York with GM officials, said the charge was big enough to turn the automaker around.

[He called the restructuring a major initiative that Wall Street had long been pushing for. "This is the big bang that we have been arguing for," he said.

[But some analysts stressed that GM's immediate prospects for its core domestic auto group remain bleak. The group must contend with a weakening auto market and overall economy, falling output and high costs for buyer incentives.]

[For workers, the shutdowns represent the dropping of the other shoe after September's labor agreement with the United Auto Workers that cleared the way for plant closings but promised employees beefed-up layoff pay, early retirement offers and other measures, the Los Angeles Times reported.

[By one analyst's estimate, the cost of paying employees at the four closed plants for not working over the next three years -- the life of the labor agreement -- accounts for a large portion of yesterday's write-off.

["We're better off knowing where we're at. When you work at a place 20 or 25 years you get a lot of hope built up that it'll open back up, and it's hard to believe it won't," said Dennis Stanley in Kansas City, Mo., where the GM plant has been closed since April 1988.]

Copyright © 2020, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad