ST. LOUIS -- The end of the Cold War and a soft auto market have landed one-two punches on this Mississippi River city, where defense contracting and cars are economic heavyweights.
Since the first of the year, thousands of pink slips have gone out to St. Louis workers, with more feared. Even if the Persian Gulf crisis delays Pentagon budget cuts, many believe the damage is already done.
In February, Chrysler Corp. announced it was closing its Plant No. 1 in Fenton, in western St. Louis County. Despite some last-minute orders, the automobile assembly plant will be completely closed by November, leaving 4,500 workers out in the cold.
In July, Belleville Shoe Manufacturing Co., across the Mississippi in Illinois, announced it was letting go 160 people, or 46 percent of its work force. Belleville Shoe is the largest supplier of combat boots to the U.S. military, producing 2.4 million pairs in the past four years. The Pentagon postponed any new orders for at least a year.
On July 16, after weeks of rumors, the heaviest punch hit. McDonnell Douglas Corp., the nation's largest military contractor, said it was eliminating 17,000 jobs nationwide and as many as 5,200 in St. Louis alone. McDonnell Douglas is the largest employer in the state of Missouri, with more than 40,000 workers.
Nor is the worst over. Many fear financially troubled Trans World Airlines Inc. could crash on St. Louis's economy. TWA employs 8,000 people here.
Since taking over TWA in 1986, critics say corporate raider Carl Icahn has piled up debt while making huge personal profits. The air carrier has a $1.26 billion debt due over the next four years and is expected to lose more than $350 million this year.
Many hope TWA can be sold, but there are no "white knights" in the wings. Nor is the worst over at McDonnell Douglas. Most of the layoffs in the current round are white-collar workers, whose dismissal had more to do with cutting the company's overhead than with cuts in government contracts.
Aircraft production line workers are still filling orders for new fighter planes, but two major McDonnell Douglas programs are slated to end in 1993. No new aircraft orders could mean these workers, too, would lose their jobs.
The problems at these big employers have a multiplier effect, resulting in jobs lost at smaller subcontractors and service firms. "A good analogy is dropping a pebble into a rain barrel -- the ripples just keep going out," said Pat Welch, an economics professor at St. Louis University.
Missouri officials estimate the McDonnell Douglas layoffs alone will cost the area $440 million in lost business revenue and wages and a loss of jobs for another 5,000.
Some smaller firms already feel the pain. Fred Weber Inc., one of the largest local builders, had four new construction projects valued at $1 million to $5 million each canceled by McDonnell Douglas.
Gruener Office Supplies Inc. is seeing its $1 million a year in business with the aerospace giant dry up. "It stands to reason. If they lay off a lot of white-collar workers, they are going to need less office supplies," said owner Ed Gruener.
Despite these setbacks, local observers argue that the St. Louis economy -- while sluggish -- is not in a recession.
"From the mid-1980s through the first part of 1989, we were growing at a faster-than-normal rate ... up by around 2.5 percent a year," said Russ Signorino, a labor analyst at the Missouri Department of Employment Security in St. Louis.
Signorino said a growth rate of between 1 percent and 2 percent a year is more normal for the metropolitan area, which includes 2.4 million people living in the city of St. Louis and the nine surrounding counties in Missouri and Illinois.
"But in the middle of 1989, we slowed down considerably -- car sales were off and home sales slowed because of interest rates," Signorino said. "The rate of growth is now below 1 percent."
Signorino added that there is no recession in the labor market, because new jobs are still being created, though more slowly. With more than 1.2 million jobs in the St. Louis area, analysts say that the McDonnell Douglas, Chrysler and other layoffs amount to less than 2 percent of the local employment market.
Blue-collar manufacturing employment has remained basically flat for 10 years. But service industry employment -- particularly white-collar -- is up dramatically and now stands at nearly a million jobs.
In 1980, one job in four in St. Louis was in manufacturing; it is now one in five.
There are other factors softening the impact of the big layoffs. For one, there are high-paying construction projects under way. A new downtown domed stadium and convention center and the new Metro Link light-rail system will keep 7,000 workers on the job through 1993.
Also, there are fewer defense subcontractors than there used to be, said Fred Raines, an economics professor at Washington University in St. Louis. That means that Pentagon cuts have less effect than they might have.
Raines is in the middle of contacting the 735 metro area firms that the Pentagon said are military contractors.
"But we find that we are getting dozens and dozens of companies writing back and saying, 'We'd like to help, but we haven't had a government contract in years,' " Raines said.
Signorino cautioned that absorbing the recent layoffs could be difficult if the U.S. economy continues to slow. "Our main concern is the national economy," he said. "If the economy was growing at a faster rate, we could absorb these people" faster.
Signorino added that the full impact of the McDonnell Douglas layoffs has not hit yet. He said many of the layoffs aren't scheduled to take effect until Sept. 14.
"We have seen only a small percentage of McDonnell Douglas employees coming in to register" with the state employment service, he said.
"Part of it is human nature," Signorino said. "A lot of us will not start looking as long as we're still working."
Recovery from the round of local layoffs is complicated by the refusal or inability of McDonnell Douglas and other military contractors to plan for conversion to civilian manufacturing.
Sister Mary Ann McGivern, director of the nonprofit St. Louis Economic Conversion Project, said the reasons for this are part economic and part corporate culture.
"First, in the short run, there is no incentive for conversion on the part of large defense contractors, since they are still getting lucrative government contracts," McGivern said.
"Second, they have very good reasons to think they cannot manage a civilian company."
McGivern said the management structure of many military contractors is very narrow and with an experience of selling to only one customer, the U.S. government.
In short, like former state-run factories in Eastern Europe, these firms are ill-prepared to face free-market competition.
Stanley C. Pace appears to agree with McGivern. He is the retiring chairman and chief executive of General Dynamics Corp., the nation's second-largest military contractor, which is headquartered in St. Louis.
Pace recently told the St. Louis Post-Dispatch: "If we acquired something, we'd probably pay too much for it and we'd probably not manage it very well."