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The low level of inflation was one of the most encouraging features of the 1984 economy. For the first eleven months, consumer prices rose at an annual pace of 4.1%. The key to that performance was the restraint shown by workers in wage and benefit demands. Compensation per hour rose an estimated 4.2% in 1984. The climate of slow inflation was not comfortable for everyone, however. Farmers were hurt by weak grain and livestock prices and a plunge in land values.
Plentiful supplies of oil helped hold down inflation. In October, Norway broke ranks with other oil producers and dropped the price of a barrel of its high-quality crude from $30 to $28.50. Britain followed with a $1.35 reduction, to $28.65. At an emergency meeting, the Organization of Petroleum Exporting Countries patched together an agreement on production cutbacks, designed to prop up the price of its bench mark Arab Light crude at $29. But many oil experts doubt OPEC can hold that line much longer.
The good news on energy prices and wages, combined with strong sales, helped a broad range of industries generate healthy profits. Corporate earnings rose 33% during the first nine months of the year over the same period in 1983. Among the biggest winners were the auto companies. General Motors' earnings were up 50%, Ford's 101% and Chrysler's 204%.
While rolling in profits, the car companies were roiled by protests over the compensation of their top executives. Ford revealed that Chairman Philip Caldwell earned $1.42 million in salary and bonuses in 1983, and General Motors said Chairman Roger Smith took in $1.49 million. "A scandal and an outrage," charged Marc Stepp, vice president of the United Auto Workers. William Brock, the U.S. trade representative, was incensed by the bonuses and warned that the Administration might not ask Japan to renew voluntary quotas on auto exports when the curbs expire in March. "Our reluctance," he said, "is a mile wide and a mile deep."
The brouhaha over executive pay injected a note of bitterness into negotiations on new three-year contracts between the auto workers and GM and Ford. In September, after two months of tough bargaining, the U.A.W. launched a selective strike against 13 key GM plants, which produce models accounting for nearly half of the company's sales and employ 62,700 of its 350,000 hourly workers.
The mood on the picket lines was militant, but negotiators on both sides realized that a long strike would cripple the industry in its battle with foreign competitors. After six days of talks, at 2:20 a.m. on Sept. 21, a bleary-eyed Owen Bieber, president of the U.A.W., announced what he called an "excellent settlement." The union took wage increases and lump-sum payments averaging only 2.25% a year, but GM agreed to an unprecedented job- security program. The company is putting $1 billion into a pool for payments ; to workers whose jobs have been eliminated by automation or the shift of production to overseas factories. The deal set the pattern for a similar contract at Ford.