GM Has Record $2-Billion Loss : Economy: The 3rd-quarter plunge reflects the cost of closing up to 9 plants and eliminating thousands of jobs.

Conceding its shrunken role in the U.S. car and truck business, General Motors Corp. on Wednesday took a $2-billion loss--its worst ever and one of the largest quarterly losses in American business history--to pay for padlocking up to nine assembly plants and severing thousands of jobs.

GM announced it was setting aside $2.1 billion to cover the costs of closing the assembly plants and other, unspecified operations. The writeoff overwhelmed the company’s slim operating profit for the third quarter.

Four of the affected plants, whose work forces had dwindled to 6,500, have been “temporarily” closed for as long as two years. Those plants--in Missouri, Michigan, Massachusetts and Georgia--had become symbolic of what Wall Street viewed as GM’s refusal to admit that it isn’t the market colossus it used to be.

The five other factories--in Michigan, Ohio and Canada--have been operating under a cloud because they hadn’t been assigned anything to build after 1992 or 1993. Together, they employ another 9,400 workers.

The Van Nuys, Calif., assembly plant similarly has no cars or trucks to build after the Chevrolet Camaro and Pontiac Firebird operations are transferred to a Canadian plant in 1992 or 1993. But GM officials held out some hope Wednesday that the facility will survive the round of closings. If so, it would be designated as a so-called “flex” plant, assigned the task of assembling several types of cars for the West Coast market.

GM’s financial showing in the July-September period was weak even without the huge writeoff--a 79% plunge in profits from a year earlier. This mirrored the poor results announced earlier this week by Ford Motor Co. and Chrysler Corp., all blamed on a weak auto market in the United States.

GM Chairman Robert Stempel called the last quarter “a period of extraordinary external uncertainties, declining North American consumer confidence in general economic conditions, and intense competition in the marketplace.”

But the Cadillac-sized writeoff, a sort of financial housecleaning intended to give GM more credibility on Wall Street, has less to do with the current weak outlook for car sales than with a long-running decline in market share that has left GM with what Stempel called “redundant facilities.”

“It addresses the problem of excess capacity and excess people, to put it bluntly,” said David Healy, a New York-based analyst at Barclays de Zoete Wedd, a British investment house, echoing a segment of Wall Street approval of GM’s action.

Still, Healy and others expect more closings in coming years if GM is to meet a goal of operating at 100% of its plant capacity versus about 70% prior to the closings announced Wednesday. For the moment, the New York Stock Exchange was “underwhelmed” by GM’s actions, Healy said, nudging GM stock up about 12 cents to $36.75 per share.

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 a big safety net in the form of beefed-up layoff pay, early retirement offers and other measures.

“We found nothing surprising in today’s announcement,” said Frank Joyce, a UAW spokesman.

By one analyst’s estimate, the cost of paying employees at the closed plants for not working over the next three years--the life of the labor agreement--accounts for a large portion of Wednesday’s writeoff. GM wouldn’t offer details on what the $2.1 billion would cover. However, unspecified additional component plants and warehouse operations will also be closed or consolidated in the next three years, the company said.

GM and union officials said it was impossible to know how many of the roughly 16,000 active and laid-off workers at the nine plants would end up without any jobs. The timing of some closings isn’t certain, they explained, and some workers might get jobs elsewhere in GM, depending on the car business.

Still, at least for workers at the four already-closed plants whose fates were sealed by Wednesday’s announcement, the news erased doubts that the shutdowns would not be reversed.

“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, bargaining chairman of UAW Local 93 in Kansas City, Mo., where the GM assembly plant has been closed since April, 1988.

The idled plants whose shutdowns were made permanent Wednesday are in Kansas City; Pontiac, Mich.; Framingham, Mass., and Lakewood, Ga. The five expected to close in the next two to three years include plants in Lordstown, Ohio; Scarborough, Ontario; Flint, Mich., and two in Pontiac.

Though they come as news to many outsiders, the eventual closures at the five plants have been considered inevitable at the factories themselves, some union leaders and GM executives said. Referring to a local newspaper serving Lordstown, a company official said, “Maybe the Wall Street analysts don’t read the Youngstown Vindicator.”

Lordstown’s van assembly plant--one of three plants in a large complex--is to close so that van production can be consolidated in Flint. In one example of efforts to salvage some of the jobs, GM and the union are studying whether to start a third shift at the Lordstown car line--a step not taken in the U.S. auto industry in decades--to keep many of the 2,500 displaced van assemblers working.

“Hopefully all the workers will end up in the passenger (car) plant,” said Tony Zone, vice president of Local 1112.

But such solutions hinge on GM’s success in winning back car and truck customers--a big task for a company whose share of the U.S. car market has tumbled to about 35% from 45% in the last 10 years. GM now sells 40% fewer cars in this country than it did a decade ago; its U.S. blue-collar work force has tumbled from 500,000 to 300,000.

Even without the huge third-quarter writeoff, GM earnings would have been just $109 million, down 79% from a year ago. That is believed to include heavy losses on its U.S. car and truck business, given that its overseas auto operations and vast financial, computer and aerospace subsidiaries were solidly profitable.

Earlier this week, Ford reported a 78% falloff in earnings and Chrysler posted a $214-million loss.

The auto industry’s troubles prompted Standard & Poor’s, the Wall Street bond-rating firm, to issue a warning Wednesday that the credit ratings of each of the Big Three could be downgraded.

Though it will depend on whether GM can make a competitive recovery--its share of the U.S. car market in recent months has begun to inch upward--the company indicated there could be more plant closings after 1993.

Beyond that, however, as many as four more GM assembly plants could be vulnerable, said economist Daniel Luria of the Industrial Technology Institute, a nonprofit research organization in Ann Arbor, Mich. GM currently has 31 assembly plants in this country.

This round of plant closings “gets them from 70% of capacity to 90% of capacity,” said Luria. “If they’re really serious about getting to 100%, they’ve got to find three or four more plants” to close.

Of course, the other approach is to do better in the car and truck business.

Donald Ephlin, retired head of the UAW’s GM department--and once a worker at the now-permanently shuttered Framingham plant, said:

“Whenever GM reacts to Wall Street, they make terrible mistakes. There aren’t too many plants. There’s too little production, because they lost so much market share. They ought to go out and get it back and fill the plants up.”

Times researcher Amy Harmon in Detroit contributed to this story.

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