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United Airlines announced two weeks ago that it would cut about 1,000 employees, or more than a quarter of the Chicago headquarters staff, as part of a program to save $100 million in 1987. Battered USX, which lost $1.83 billion in 1986 and fended off the predations of Raider Carl Icahn, last week said it would shut down four steel plants and lay off about 4,000 of its 22,000 active steelworkers. Something of a storm was stirred up last week when the New York Times reported that CBS, which has already pruned some 1,200 of its 15,500 employees, would ask its news division to slice $50 million from its $300 million budget. That draconian figure was denied by Chief Executive Officer Laurence Tisch, but the company admitted that it was still looking for ways to improve efficiency. Hundreds of other large corporations are planning or already carrying out slimming-down programs, including Exxon, Union Carbide and Time Inc.
What is remarkable about the current cutbacks is that they come at a time when the gross national product is expanding at a respectable 2.5% annual rate. The goal of the slimming exercise, then, is not merely to compensate for hard times -- though a quick fix for short-term profits is always welcome -- but to have a permanent effect. Says Alfred Rappaport, an accounting professor at Northwestern University's Kellogg Graduate School of Management: "Restructuring will be a way of life for a long, long time." Reason: the forces that prompted the movement are still growing in power and momentum.
Chief among those forces is foreign competition. In addition to traditional rivals in Europe and Japan, American companies face an ever expanding roster of formidable competitors in developing countries from South Korea to Brazil. By late 1986, imports amounted to 14.5% of the GNP, up from 10.6% in 1982. One of the industries that has been hit hardest -- and made the most radical adjustments -- is autos. Struggling General Motors, where profits declined 26% to $2.9 billion last year, has laid off 6.5% of its 578,000 workers since 1981 and announced plans to close twelve major plants by 1989. At the same time, GM will reduce the number of managers and other salaried workers by 25% by the fall of 1989. Similar moves are under way even at Ford, which earned $3 billion in 1986 to overtake GM as the most profitable American automaker. Ford plans to cut its salaried payroll by about 20% by 1990.
Another force behind restructuring has been the avalanche of corporate mergers and acquisitions. More than 4,000 of those unions, worth a record $190 billion, took place last year. After most of the buyouts, the merged company eliminates staff duplications and unprofitable divisions. In the past six years, for example, General Electric spent $11.1 billion to buy 338 businesses, including RCA, a $6.3 billion acquisition. During the same period, GE shed 232 businesses worth $5.9 billion and closed 73 plants and offices.