Push Reforms or Show a Profit? : U.S. Firms in South Africa Under Growing Pressure

For nearly a decade, General Motors Corp. has been battling apartheid, becoming, along with other American companies, a major force for reform in South Africa. But now the giant auto maker is wondering what chance it has of winning that fight and whether it can even stay on here.

One of the first 12 American companies to sign the Sullivan Principles, a code promoting fair labor practices and equal employment opportunities in South Africa, GM desegregated its own facilities, hired more blacks and trained them for promotion, and every year pumped hundreds of thousands of dollars into programs to improve local schools, housing and health care.

In recent years, GM has joined with other American companies operating in South Africa to push for broader reforms and an eventual end to rule by the white-led government, an effort that has encouraged many South African businessmen to press for faster and more sweeping changes.

But GM is finding that it is near the limit of what it can do. Robert A. White, the company’s managing director in South Africa, says he fears that its efforts and those of other American companies to promote change will not be enough--not enough to satisfy South Africa’s restive black majority, not enough to satisfy the firms’ critics in the United States, and perhaps not even enough to satisfy home offices debating the wisdom of remaining in such a politically turbulent environment.

Nor has GM satisfied its own workers. Even allowing for normal union-employer antagonisms, their view of GM is at times severe enough to call into question the company’s claim that over the years it has been a force for change.

“GM b.s.’s the workers and it b.s.’s the public,” said Norman Erasmus, an overhead crane operator and a shop steward at the GM plant here.

Erasmus charges that the Sullivan Principles “protect the companies against criticism. They could say, ‘We’re living up to the Sullivan code,’ and still avoid paying decent wages. . . .”

A ‘Desperate Situation’

Other union officials complain of GM’s poor record in advancing blacks, an area in which White concedes the company has much room for improvement.

All of which leads White to answer his own question--”Do we as American companies make a difference by staying in South Africa?”--pessimistically:

“Not as much as we want, that’s for sure, and maybe not where it counts.

“The longer this crisis continues, the more desperate the situation will become,” he said in an interview, “and the harder it will be for American companies to justify their presence in South Africa on an ability to effect change here.

“As a force for change, we are on a plateau,” he added. “We have made considerable progress over the years, but it is hard to say how we are going to make more. We are not going to quit. We are committed to remain in South Africa as long as it makes business sense. But I admit that it’s discouraging.”

Discouragement is growing among the 260 American companies still operating here--55 have pulled out in the past 18 months--and American businessmen frankly acknowledge the need to justify their continued presence in South Africa, not only in terms of profits but in the ability to promote basic political change.

“Some American companies are frankly losing heart,” said Lionel R.E. Grewan, a Citibank officer who serves as executive director of the Sullivan Signatory Assn., coordinating observance of the nine-year-old Sullivan Principles. “They are becoming discouraged about their ability to promote peaceful change. They are getting little encouragement from the South African government to stay. They are being told to leave by some segments of the black community, and they are taking a lot of heat back home for being here at all. . . .

Took Courage

“Over the years, however, American companies have . . . spent a lot of money on improving education for blacks, on creating decent housing and on other programs that showed the way forward. Today, desegregating their facilities may not seem like much, but when racial segregation was the law here, it took a lot of courage to go against it.

“There is no question that the American companies in the Sullivan program were the path breakers . . . and their activism encouraged South African companies to do the same,” Grewan continued. “But those were soft targets, things we could achieve in our own plants and offices or could develop programs for and spend money on the outside.

Change Is Never Quick

“Now, we are into social justice and political change, and this is much, much harder. When we do achieve something, it is often not noticed immediately, almost impossible to claim credit for, and never, absolutely never, quick.”

Many American businessmen say that their inability to promote broader, faster changes is an increasingly important factor in their firms’ decisions on whether to continue operating in South Africa.

“Five years ago, no one even asked whether we should stay,” the managing director of a large American food company’s South African subsidiary said, asking, like many others, not to be quoted by name. “Then, we were both making money and promoting reforms.

“Today, the answer to whether we are an effective force for change is so finely balanced and our profits have been so greatly reduced by all this turmoil that I cannot say we will still be here at the end of the year.”

Firms Have Pulled Out

The firms that have pulled out this year include General Electric, GTE, Bell & Howell, Ashland Oil, Phillips Petroleum, CBS, Eaton Corp. and Kidder Peabody. Although most cited South Africa’s depressed economy and their own losses for their decisions, the growing divestiture campaign in the United States was clearly a major factor.

But even some of the American and European companies that are strongly and publicly committed to remaining and working for peaceful change are now drawing up contingency plans for leaving if they are required to do so by their governments.

“It would be stupid and irresponsible if we did not have contingency plans,” said David English, local managing director of Rank Xerox Ltd., which is looking into the possibilities of selling all or part of its South African subsidiary to local interests. “The future may not be in our own hands.”

At GM, which is in its 60th year in South Africa and is one of the largest American employers in the country, the future is further clouded by economics.

Hardest Hit

The local auto industry is among the hardest hit by the recession of the past two years. Ford Motor Co. has merged its operations with a South African company and two European auto makers have pulled out entirely. Sales were down about 25% last year compared to 1984. The industry as a whole is not using even half of its single-shift capacity. Employment by the auto companies and their suppliers has been cut by more than a third since 1984.

“No one is making money--not last year and probably not this, and the future is uncertain,” White said of the South African auto industry.

GM has reduced its work force over the past year and a half to 3,100 from 4,380. It has also increased the proportion of components that it buys from contractors, and is looking for a South African partner to help increase its share of the market--now 11%--which would enable it to borrow more money locally.

“The sheer economics of the business today limit what we can do,” White said. “When you are reducing your work force, you can’t promote as many people as you want, or hire more. When you are not making money, it is hard to put more funds into social action programs. And when you are focused on ensuring your survival in this very depressed market and protecting the jobs of more than 3,000 people, you can’t do as much as you want on other fronts.”

Initiated Reforms

Like most large American companies in South Africa, GM is “looking for ways to make a bigger difference here,” said George Stegmann, the firm’s acting personnel director.

“Even before we signed the Sullivan Principles,” he said, “GM was initiating programs to upgrade the quality of life of its black and other nonwhite employees . . . and to implement fair labor practices and equal job opportunities. We desegregated all our facilities, we opened our apprenticeship programs to blacks, and we recognized black trade unions and provided dues checkoffs--all before the law allowed.”

The Sullivan Principles, drafted in 1977 by the Rev. Leon Sullivan, a black minister from Philadelphia and a member of the GM board of directors in Detroit, called on American companies to adhere to such principles as equal pay for equal work, to provide training for black workers and promote them on merit, and to involve themselves in their local communities.

American businesses in South Africa now have a lengthy list of good deeds to their credit--millions of dollars in gifts to black schools, university scholarships, construction of clinics, contributions to rural relief programs, urban housing projects, development of black-owned companies--and President Reagan frequently cites the American companies as a major force for reform here.

Apartheid Is the Issue

But Stegmann, although proud of GM’s record, acknowledged that “events have largely overtaken most of these programs and initiatives.”

“The real issue, the priority issue, today must be the dismantling of apartheid,” said Stegmann, a white South African. “That means entering into negotiations with credible black leaders in South Africa in order to take the necessary steps for a new South Africa, a South Africa beyond apartheid. This, of course, is a political issue, and it is difficult for a company, a foreign-owned company especially, to move to the core from lobbying government and from developing programs, however worthwhile, around the periphery.”

White put it bluntly: “Today, blacks want Bob White and GM to get them their political rights. They say, ‘Thanks for all GM has done, but we need political rights to change this country, top to bottom, and we want you to help us.’ My question is, how?”

He rejects calls, by Sullivan and others, for a campaign of civil disobedience by American firms, of not complying with any apartheid laws or regulations, as well as demands that the companies withdraw from South Africa to protest continuation of the system of racial separation and minority white-led government.

Growing Apprehension

“Civil disobedience--what’s that going to do for anyone?” White said. “Given this government, that is not a strategy that will have much success here.”

White and other American businessmen are following with rising apprehension the moves in the United States, Western Europe and Japan to impose economic sanctions on South Africa to try to force the government into negotiations with the country’s black leaders.

A bill passed by the House of Representatives in Washington would require U.S. companies to pull out of South Africa within 180 days and to cut all their trade ties with this country.

Legislation pending before the Senate is less stringent, as are the proposals to the European Communities.

“I don’t think we are going to be forced to leave, but some of the so-called compromise measures could make it very difficult to continue operating here,” the managing director of an American-owned electronics company said. “If there is a ban on new investment, how do we bring in new products, which are the lifeblood of our industry?”

Even if their firms are not hit directly by the American or European measures, the executives at many foreign-owned companies fear that sanctions, such as boycotts of South African steel, iron and coal, will, if effective, further weaken the country’s economy and make it less profitable for them to stay.

White Resentment Grows

A second concern is a growing resentment of foreigners among whites, a situation evident in the government’s determination to defy world demands for faster and broader reforms and in jingoistic assertions each day that South Africa can indeed go it alone and that the investment and expertise of foreign firms are not needed.

“Who gets hurt by sanctions depends on what kind of sanctions are eventually imposed,” another American executive said, “but to my mind, South Africa is becoming both a politically and an economically hostile environment for our company and many other foreign firms. . . . People may decide to get out simply because it is not worth the pain--the agony, actually--of staying in a less and less profitable market.”

American businessmen also question the underlying strategy of sanctions, doubting whether it is possible, as one said, “to hurt these Boers enough to make them give up what they’ve got here. It seems to me that what little we can do will only enrage them.”

Views among South African blacks are as diverse as their politics. But even those who call for sanctions and for the withdrawal of foreign companies from the country and a total trade embargo do so more from the belief that every tactic must be tried rather than from the conviction that sanctions will end apartheid.

‘Well-Intentioned Moves’

“Sanctions, disinvestment, boycotts--those are really American issues,” said a politically active black executive at a U.S. computer company. “They are well-intentioned moves, and maybe they might shake up these people in (the) white Establishment. But we blacks know that our problems will have to be solved here, on the ground in South Africa, and while we are grateful for international support, we know that apartheid will have to be beaten here and by us.”

At GM, the company’s black employees believe the firm should stay and, as one shop steward put it, “really do all these things they say they believe in.”

“GM leaving South Africa isn’t going to end apartheid,” Elliot Mtwa, another shop steward, commented, “but GM staying isn’t going to end it either.”

Fred Sauls, general secretary of the National Automobile & Allied Workers Union, which represents most of GM’s 2,100 nonwhite workers, said: “When you are losing jobs the way we are, disinvestment just compounds the problem.

“Of course, we want GM to stay and expand and provide more jobs and pay better--much better--wages. We also want it to live up to all this rhetoric--equal opportunity, affirmative action, social justice--that it uses to cover up what we see as its exploitation of black workers.”

‘Wife and 5 Kids’

Erasmus, the GM crane operator and shop steward, is Colored, as persons of mixed-race are officially classified. He says that one form exploitation takes is poor wages. “For me to buy a loaf of bread, I must work a quarter of an hour,” he said. “In other words, I have to build two cars to put a loaf of bread on the table. To buy a suit, I have to work two weeks. I have a wife and five kids, so how long do I have to work to clothe my family?”

Erasmus said he does not believe that GM is not making money in South Africa.

“The profits may not show up on the books here, but look in Germany, where we get a lot of our parts. . . . GM may not like apartheid, but it sure seems to like the low wages that apartheid brings,” he said.

Wages currently range from the equivalent of $1.28 an hour for unskilled workers to about $3.25 an hour for craftsmen. Blacks working at non-union factories in the Port Elizabeth area are paid as little as 60 cents an hour.

“What we wonder,” Erasmus said, “is where the money goes if a car costs about the same here as in the United States but we only get paid a fraction of what American workers earn.”

No Blacks in Management

Union members are also bitter about the limited advancement of black workers despite GM’s stated commitment to equal employment opportunity. Although blacks and Coloreds hold a number of supervisory positions as foremen and general foremen at GM, there are no blacks at the management level and only two, a physician and a data processing specialist, are in professional or executive positions. Blacks and Coloreds constitute 62% of the work force.

“We have an all-white management at GM that won’t promote a black guy if a cousin or a friend won’t get the job as a result,” Sauls said. “This stems from our whole social situation in South Africa, not to mention the political-economic situation. You have to have a very strong guy politically to implement true equal opportunities. No one at GM is prepared for a real challenge to the system.”

White, who came to Port Elizabeth from GM headquarters in Detroit a year ago, commented: “It’s a failing I am determined to correct. There are reasons for it, among them our very substantial reductions (in staff), but we also still have white managers who give only lip service to upward mobility for blacks.”

GM Has High Ranking

GM nevertheless has held a ranking in the top category--”making good progress”--of Sullivan companies for the past six years.

According to evaluations carried out by Arthur D. Little Inc., the Boston-based management consultant, 36 firms were in the top category, 89 were in the second--”making progress”--and 21 were in the third category--”needs to become more active.” Some American companies, apparently unwilling to risk getting a low ranking, have refused to participate in the Sullivan program, and a few have pulled out.

The Sullivan program itself is often criticized by blacks here who say that their views have not been considered, that it encourages “paper compliance” and not real changes in company policies, and that many of the projects undertaken by American companies, such as the “adopt-a-school” program, unintentionally reinforce apartheid.

As criticism increases in the United States of companies that have continued to operate in South Africa, more firms have signed the Sullivan Principles, and the code itself has been strengthened to include a commitment to political action to end apartheid.

Advertising Campaign

Over the past year, the 195 Sullivan companies have increased their private lobbying with government ministers and pressed publicly for political reforms with bold newspaper advertisements declaring, for example, “There Is a Better Way.”

The latest advertisement, published in early August by Mobil, calls on the government to allow black and white leaders around the country “to negotiate new regional and metropolitan forms of government that respond to the wishes of the people living there.”

“The time has come to build a new non-racial democracy from the regions up,” Mobil says in the quarter-page ad. For a restoration of business confidence, “we want a vision of South Africa without apartheid, a land where people can freely participate in politics regardless of race,” the ad states.

GM’s White found himself in the middle of a nationwide controversy in January when, angered by the hesitancy of Port Elizabeth’s city council to integrate the municipal beaches, he announced that the company would pay the legal costs of any of its employees charged with violating whites-only restrictions. The council, as a result, voted to drop enforcement of the regulations and asked provincial authorities to desegregate the beaches.

GM is now under fire, however, from the National Automobile & Allied Workers Union for refusing to pay the wages of two workers who were detained without charge under the two-month-old state of emergency. Stegmann said the company has kept both men’s names on the payroll, continued their medical insurance and other benefits and will assist their families through local relief organizations but feels it cannot continue their pay in view of current layoffs of other workers.

“These are difficult times, and they require difficult decisions,” Stegmann said. “Wherever our sympathies lie, we always seem to be caught in the middle.”

Aim Is Desegregation

The Sullivan companies have recently undertaken a number of “social justice” projects aimed, as one businessman puts it, at “dismantling whatever bits of apartheid we can and building a non-racial South Africa in its place.”

U.S. companies have helped set up and pay for a network of legal aid centers and neighborhood clinics around the country, not only to help blacks with their day-to-day legal problems but to challenge such government measures as the nationwide state of emergency imposed June 12.

They are working to desegregate at least portions of the main Johannesburg hospital as well as some suburban medical facilities. They are promoting the incorporation of the black township of Alexandra and an Indian neighborhood into Johannesburg’s wealthy white suburb of Sandton. And they are planning the quiet integration of some whites-only residential areas and the establishment next year of three housing developments that will not be racially segregated.

“These projects are intended to produce results that help dismantle apartheid, and some may prove quite dramatic in South African terms if they succeed,” said Grewan, the Citibank officer, who is classified by South African law as a Colored. “Of course, whatever we do will not be enough as long as anything remains of apartheid.”