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January 08, 1982 - Image 4

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The Michigan Daily, 1982-01-08

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"' S

Page 4

Friday, January 8, 1982

The Michigan



Edited and managed by students at The University of Michigan

Vol. XClI, No. 80

420 Maynard St.
Ann Arbor, MI 48109


Editorials represent a majority opinion of the Daily's Editorial Board


Going for the fast buck
while productivity declines

refused yesterday to block U.S.
Steel's acquisition of Marathon Oil,
thus clearing the way for one of the
largest corporate mergers in United
States history.
Mobil Oil Company, an earlier bid-
der for the takeover rights to
Marathon, had its motion for a delay of
the Supreme Court ruling denied by
Burger in the same session. If Mobil
had been allowed to acquire Marathon
t would have presented itself as a
atant and outrageous violation of
; TS. anti-trust laws.
However, the U.S. Steel-Marathon
merger may present many of the same
problems. It will create the nation's
12th largest industrial corporation with
combined revenues last year of $23.5
billion. This is not to say that large
profits will not eventually lead to a net
Nbenefit, it may. But U.S. Steel is taking
the quick profit approach to increased
Srevenues. They are investing their
phoney in the large profit industry of
the decade: oil. They make this in-
vestment because the oil industry can
provide the company with immediate
and extraordinary revenues.
But this is not the way toward even-
tual success within the nation's steel
industry. The Japanese and the West
Germans invested their profits in
capital improvements and research
and development. Now Japan
produces both higher quality and lower
priced steel than its American com-
petitors. This draws American dollars
out of the United States into foreign
markets and furthers the recession
currently plaguing the nation's steel
U.S. Steel, a company that has
recorded substantial losses over the
past few years, has decided to opt for

immediate diversification of its
money, instead of the attempting long
run reinvestment in better produc-
tivity and higher technology.
Now is obviously the time for
mergers. The Reagan administration
has allowed the Justice Department to
relax its prosecution of anti-trust
cases. The atmosphere for corporate
mergers is perfect given the recent
burst of activity in "company buying,"
such as the Conoco-DuPont deal, or the
American Express-Shearson Loeb
Rhoades acquisition.
Ailing industries, however, should
not waste their accumulated profits
($6.2 billion will be spent by U.S. Steel
in acquiring Marathon) on investmen-
ts that will not directly- benefit their
primary production.
Instead, a massive long-range
program of capital improvement
would eventually enable the American
steel companies to actively compete in
an efficient manner with their foreign
It is popularly believed that cor-
porate decisions are always made with
the greatest benefit to the company in'
mind, and that greatest subsequent
benefit to the nation will result. But
this notion is a fallacy, as can be seen
from the current state of the U.S. auto
and steel industries. While Japanese
auto producers were busy making sure
their plants and technology did not
become obsolete, American auto
producers kept their stockholders hap-
py with high dividends and high im-
mediate returns on short-term invest-
The Supreme Court has allowed U.S.
Steel to spread its hard-earned profits
into the oil fields, but it in the process
has kept the nation's steel producers
moving along the path to eventual
complete obsolescence.

Bo7 a
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ALLY gtI46

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braindrain.' Iiits


as Reaganomics hits




By Frank Browning
Lombardi has worked there for 10
years. Joe Bellino had put in
eight; Tom Phoebus, 10; Fletcher
Prouty, nine and one-half; Phil
Held and R. Hagopian, about the
same. They and a score of others
like them were widely regarded
as the most talented and ex-
perienced men on the executive
team-people who had been with
the company almost from its
first day of operations. And then
they were gone.
The company they worked for
is Amtrak, and the official reason
they were fired is a 25 percent
personnel reduction brought on
by the Reagan administration
cutbacks. But among many
present and past Amtrak em-
ployees, there is a growing
suspicion that the cuts have been
specifically designed to gut the
company of the most talented
executives and thereby bring
about a corporate collapse that
could not be affected through
direct congressional action.
"I'D LOVE to know why they
picked so many senior people
that no company would eliminate
unless there were some other
reason," mused Phil Held, a nine-
year veteran who has spent his
life in the railroad industry.
"There's no college that will train
somebody in that kind of ex-
perience in transportation."
Held was fired on May 28, just
as he was directing the most sen-
sitive reorganization of the Am-
trak reservation system ever un-
dertaken, an operation that could
not be completed for another five
One week before his own
dismissal, Joe Bellino, director of
Industrial Liaison at Amtrak,
was awarded a special bronze
plaque in praise of his work
developiing national emergency
contingency plans with the Pen-
tagon. At a special ceremony,
Amtrak president Alan Boyd per-

sonally told Bellino that he had a
long future with the company.
charge of planning for Amtrak's
forthcoming assumption of the
northeast commuter services
currently operated by Contrail - a
function that will more than
double the company's manpower.
Tom Phoebus, who had
developed the Amtrak ticketing
system, the largest and most
complex in the country, was
released and then rehired as a
ticket clerk.
C. Dismukes, director of Am-
trak's Taxes and Insurance, was
responsible over the last eight
years for paying some $31 million
in local and state taxes
throughout the nation. He was
fired without notice.
A FEW WEEKS before the
"May28 slaughter" when most of
these firings were announced,
Vice President for Operations
Bob Herman was removed from
his job and given a minor post at.
the Washington Union Terminal.
Herman had supervised the
daily operation of trains coast-to=
coast, with special responsibility
for the busy Northeast Corridor,
where his experience, first with
the Pennsylvania Railroad and
them with Amtrak, reached more
than 20 years.
Fletcher Pronty, fired from a
job as senior director of Public
Affairs in which he wrote all the.
key planning documents and
speeches for Amtrak's last three
presidents, believes the pattern
of executive firings is part of a
careful strategy developed by the
Department of Transportation to
wreck the company.
Said Prouty: "It is a method of
dismantling the corporation,
almost innocuously. They're
throwing out the real people who
have done a good job and leaving
behind the crud. The process is
under way and it's very effec-
PROUTY IS bringing suit
against Amtrak for
discrimination in its choice of
layoffs, charging that there was

no equitable policy developed to
guide the dismissals. As many as
100 of the 400 laid-off employees
are reportedly preparing similar
Amtrak President Alan Boyd
categorically denies that there
was any suchddiscrimination in
the dismissals, or that there has
been outside administration in-
terference in the company's
Prouty, however, claims that
his supervisor, Vice President for
Public Affairs Jim Steiner-a
former member of -the Reagn
administration's transition
team-regularly canceled vital
public affairs programs that had
long been part of Amtrak policy.
said, he was forbidden to con-
tributerarticles on Amtrak to
such prestigious almanacs as
Janynes World Dictionary of
Railroads and the McGraw-Hill
Encyclopedia of Science and
Technology, both of which solicit
material about the passenger
trains of the world.
Despite early attacks made on
Amtrak by Transportation
Secretary Drew Lewis last
spring, public and congressional
support for passenger trains
remains remarkably high.
Demand for seats has been at
record levels throughout the
year. Even the Republican-
controlled Senate recently spur-
ned the president's transpor-
tation budget and approved a
higher spending limit that would
mandate Amtrak to run a money-
losing train through West
Virginia and Kentucky, although
the railroad itself was ready to
drop it.
"Amtrak was one of the first
budget-cutting proposals Reagan
made that the public reacted to
negatively," said an aide to Rep.
Henry Reuss, (D-Wis.), chair-
man of the congressional Joint
Economic Committee. "Every
office on the Hill got huge stacks
of mail in support of Amtrak-far
more and far sooner than the

complaints we heard on school
lunches, Medicare cuts, even
Social Security."
IN PROUTY'S view the selec-
tive firings are simply "a clever
maneuver to effect broader
budgetary cutbacksthat they
couldn't accomplish through
Congress." More importantly, he
argued, reductions in main-
tenance, and removal of ex-
perienced staff in the main-
tenance division, could so ham-
string the system that it may
cease to operate at all.
"Some days last winter we had
only 11 spare cars in the whole
system. That system will simply
stop when it gets as few as eight
to 10 cars short. At that point your
just can't pull cars off the tracks
-or repair them, and when that
happens the whole thing will
collapse because key connections
in the system simply won't be
The issue for Prouty and many
of the other executives who were
dismissed is not merely a
question of alleged firing
discrimination. Rather, they
argue, it is a pressing need to+
maintain and expand a coherent
passenger railroad system in
America at a time when Japan
and Western Europe are devoting
more resources to rail service as
an alternative to the automobile.
Pro-rail sentiment also seems to
be rising in Congress.
If Prouty and his associates are
correct in the prediction of a
massive breakdown just at the
beginning of next summer's high
tourist season-a tourist season
that also will coincide with many
key congressional cam-
paigns-then a great many
people might conclude that the
Reagan transportation policy is
no way to cut a budget-or to run
a railroad.
Browning wrote this article
for Pacific News Service.

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