Word: steel
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Dates: during 1980-1989
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...earnings, unusually high during the first quarter of 1982 because of a one-time sale of assets and tax benefits, were down 47% this year, but profits for the company's C.I.T. Financial and NBC subsidiaries moved ahead. Basic industries generally have yet to feel the recovery. Republic Steel lost $35 million in the first quarter, almost twice as much as last year. Armco lost $128 million. Dow Chemical's profits declined from $154 million last year to $69 million this year. Dow President Paul F. Oreffice explained that his industry "traditionally lags a general economic turnaround...
...reducing the role of Government in the economy is doomed. Says he: "Every industry in America is deeply involved with and dependent on Government." While preaching nonintervention, Reich notes, the White House has been unable to resist demands for subsidies and import relief made by such industries as steel and autos. This protection, he says, keeps businesses from adapting to the rigors of worldwide competition. Reich would replace capricious protectionist measures with an explicit industrial policy aimed at retraining unemployed workers for new jobs and channeling investment into technologically advanced products that would enable U.S. companies to keep pace...
...Model T, Reich points out, American managers have relied on mass production. Relatively unskilled workers on long assembly lines put together standardized products. That strategy, which served the U.S. so well for more than a half-century, is no longer viable, Reich argues. Standard goods, from shoes to steel beams, can now be mass-produced more cheaply in developing nations such as South Korea and Malaysia, where the cost of labor is lower than in the U.S. To remain prosperous, Reich says, American industry must concentrate on high-priced, low-volume customized products. Examples: computer-controlled machine tools and high...
Reich charges that too many American managers have become "paper entrepreneurs," more concerned with manipulating short-term profits than with developing new products. He laments the rush of conglomerate building through mergers and acquisitions. U.S. Steel paid about $6 billion to buy Marathon Oil last year, Reich notes, even as the steel company's own plants were becoming increasingly obsolete. Says Reich: "Ours is becoming an economy in which resources circulate endlessly among giant corporations, investment bankers and their lawyers, but little new is produced...
Reich's industrial policy is attractive in the abstract, but critics charge that it would face pitfalls in practice. For one thing, the bulk of Government aid is likely to go to old industries with great political clout (steel or autos) rather than to emerging ones (computers and robotics). This has often been the experience in Europe. Says Michael Wachter, an economic adviser to President Carter: "France and Germany have made their hi-tech sectors weaker with government help. Those industries become more dependent on their governments for support, and the help proves to be something negative, not positive...