General Electric Co., in a shift from workers to machines that is becoming a pattern for American industry, yesterday announced a sweeping modernization of its electric light manufacturing business, saying it would have to cut its work force to save the jobs of those that remain.
GE plans to phase out production at ten of its 42 lighting division plants around the country, creating a net job loss of 1,400 employes--eight percent of the division's total.
Coupled with the cutbacks, GE will invest $250 million over three years in faster, more automated production equipment that company officials said is needed to improve quality and productivity and meet increasing competition.
"Some communities and employes will benefit during this essential consolidation, and some will not," said Ralph D. Ketchum, senior vice president of GE's Lighting Business Group. "But the alternative is an inevitable erosion of our leadership position, and jobs, as we become less and less competitive. By taking these steps, we are preserving our employment base and protecting the long-term job outlook."
The GE move is typical of the type of capital expenditures likely to occur in the early, tentative stages of recovery as businesses, particularly old-line manufacturers, look for quick pay-offs in reduced labor costs and improved productivity, according to economists.
"Normally, when capital investment begins to pick up, it goes first into those areas which have a very fast payback period, in which the return on investment is quite clear and can be achieved in a relatively short period of time," said Kathryn Eickhoff, executive vice president for Townsend-Greenspan Inc., an economic consulting firm.
"If they did not make that investment, even more jobs would be lost," said Otto Eckstein, former member of the Council of Economic Advisers and president of Data Resources, Inc. of Lexington, Mass. "At least this way they're salvaging something of a declining business."
The decision to trim over-capacity and to modernize the remaining operations follows a year in which the lighting industry sales declined for the first time in many years. According to a "white paper" prepared by GE, its own 1982 sales in lighting dropped below 1980 levels, "with physical sales volume taking one of the steepest declines in history." GE has about 50 percent of the electric light and lamp market.
"Maintaining the manufacturing base as large as present is inefficient and threatens the health of the business," GE's white paper noted. The impact of over-capacity, increased competition, decline in demand for certain products and other factors "make it imperative to downsize the business," GE said.
"Failure to do so will affect the GE lighting business's competitive position, resulting in erosion of market share and necessitating layoffs and plant closings on a scale much larger than the present plan," the company asserted.
Six of the 10 plants that will be phased out are in Ohio, the center of the company's lighting business. Other facilities in Salt Lake City, Newark, N.J., Jackson, Miss., and St. Louis, Mo., will also be shut down.
The elimination of those facilities would account for a greater job loss than the 1,400 out of 18,000 employes in the lighting division, but 550 employes are expected to be absorbed into other GE operations.
Other plants, including a GE facility in Winchester, Va., will benefit from the consolidation.
Ketchum said that more than $110 million of the money the company plans to spend on its productivity campaign will be spent for advanced equipment, other improvements and employe-related expense at incandescent light plants in Ohio and at the Virginia plant.
Another $80 million will be invested in the company's fluorescent and high efficiency lamp manufacturing plants in Ohio.
Employes whose jobs will be eliminated include an estimated 500 workers who will be eligible for special severance benefits of up to 50 percent of normal earnings and another 400 eligible for early retirement. Those who are not absorbed into the GE work force elsewhere will benefit from income maintenance and placement and retraining programs, GE said.
Part of the competitive threat to GE has been from other domestic manufacturers, including North American Philips Corp., which recently acquired Westinghouse Electric's lighting operations. That acquisition increases Philips's share of the U.S. market to about 21 percent, according to GE. Foreign imports, including light bulbs from Hungary, have also been gaining an increasing share of domestic markets.
"GE got soft and didn't see the shift in the markets--the new competition in imports and price competition," said one industry analyst familiar with the corporation. Consolidation and modernization of operations, plus an effort to differentiate its product rather than sell it as a commodity, should assist the firm in keeping its market share, he said.
Recently, GE has been promoting its "soft" light bulbs and an energy efficient "Miser" maxi-light. As a result GE's unit sales of incandescent lights grew at a faster rate than the consumer market for incandescent lights last year, according to one source.