Murphy's Law: Things Will Go Right

By Marshall Loeb

Executive View/Marshall Loeb

The biggest man in the largest manufacturing company in the world sits at a cluttered desk that is piled high with sales reports, production analyses, sheaves of magazines and a couple of dime-store signs that proclaim BLESS THIS MESS and PLEASE DON'T STRAIGHTEN THE MESS ON MY DESK! YOU'LL GOOF UP MY SYSTEM. Thomas Aquinas Murphy, 62, chairman of General Motors Corp., is a casual fellow with gray Brillo hair, thick bookkeeper's spectacles, a heap of optimism and no pretenses. From his 14th-floor corner office behind security-locked glass doors in the Gen eral Motors Building, he looks out at Detroit's soaring Renaissance Center, which is the city's multimillion-dollar bet on its own future, and to him the view is bright.

Tom Murphy is the most vocal bull in the auto industry, and he is out on a lengthening limb. While other auto chiefs forecast that Americans this year will buy about 11 million cars, slightly below last year's near record. Murphy takes all those reports on his desk, puts them through his own mental calculator, adds some instincts that come from his 40 years in the nation's most important industry, and tells one and all that the figure will approach 11,750,000. Sales were set back by the worst winter he has ever seen, but he figures that they will rise with the temperatures. Murphy's uncannily accurate forecasting record in the past couple of years would make a bookie tremble. If he is right this time, the whole economy will perform much better than orthodox seers predict.

In any case, G.M. is putting its money where Murphy's math is. It will spend more than $4 billion this year, increasing to $5 billion in 1980, to expand and modernize. Murphy aims to increase G.M.'s already large share of auto markets abroad--notably in Latin America, Africa and Asia. But G.M. will invest 85% of its capital budget in the U.S., a slightly higher proportion than in past years. By next year's end it will add 30,000 jobs to its domestic employment rolls, which is particularly pleasing to the chairman, who was unemployed for a year during the Depression 1930s. Says Murphy, in the flat tones of Chicago, where he grew up: "When I see the magnitude of our spending, I can't understand why the national figures for capital investment don't show more of an upward tilt."

Business people are not spending more. Murphy reckons, because they overexpanded during the world boom of 1972-73, then were stuck with costly overcapacity during the deep recession of 1974-75. "The scars run pretty damn deep." he says, ''and a lot of people are saying, 'My God, I'm not going to get caught in that position again. I'm going to run as hard as I can with the plants I've got, and I'm not going to put any more in place." Suddenly one day they'll realize that here it is--the big demand--and they will be scurrying to get out there and build that new plant because everybody will be saying, 'By gosh. I need that.' " The auto industry is going through revolutionary change to meet the Government requirement that each manufacturer's new fleet must average 27.5 m.p.g. of gas by 1985.

Murphy seems undaunted and stresses that he does not want that ambitious target relaxed. To reach it. he says, "we're going to have more diesel engines, more efficient transmissions, more electronics in the whole vehicle, less weight all around. We're measuring stuff in grams today. We say to our suppliers, 'How many grams does that component weigh? Well, you ought to be able to take 10% out of it.' " He also hopes that 27.5 m.p.g. is only an interim goal, that cars will become even less thirsty later in the 1980s.

As he looks ahead, Murphy reckons that the U.S. is moving toward a conservation ethic, a society in which products will be smaller, more durable, with more built-in quality. That does not worry him a whit, but he is concerned about several other trends.

One is what he views as unfair competition from Japan, Inc. "The government and the business people and the bankers there move as one. The Japanese sell more than 1 million vehicles a year in the U.S., but they import fewer than 50,000 vehicles from all countries. They have a way of operating to make sure that their markets are served by their own manufacturers. When I look at the value of the yen today compared with its value three years ago, I have to conclude that their autos are not fairly priced because the value of the yen has appreciated a heckuva lot more than they have raised their prices. In the U.S., we have to take a hard look to make sure that we are not victims of our own desire to continue on a free-trade course. Any alternative would be bad for the U.S. and bad for the world, but I don't think the game should be rigged against us."

Murphy also worries about the rising impediments to productivity, which he thinks are threatening the U.S.'s ability to pay high wages. "I like those high wages," he contends. "They make our people better customers." He notes that the U.S. is rightly concerned about the environment, about health and safety in the workplace, yet many of the new regulations not only impede productivity gains but also put the U.S. at a competitive disadvantage against countries that are much less fastidious. If the U.S. continues to place restrictions on anything that might pollute or present any hazard to customers or workers, he argues, then its economy will become a service economy--"We will just shine each other's shoes"--and its standards of living will decline. Worse, its freedoms will suffer. Says Murphy: "There's a desire today for more security and for a risk-free society. But that becomes a choiceless society, not a free society."

Yet when he balances out society's assets and debits, Tom Murphy calculates that the nation is on the rise. "I keep looking back at the late summer and the early fall of 1974; you know, we were in a shambles. We had come through a helluva period. Viet Nam had been tearing the country apart, and there had been the oil crisis, the recession, Watergate. When I see how far we've come in getting our act back together, it gives me a lot of confidence about where we are going." Then Murphy looks at all those charts that show his plants running full out, his workers on overtime to meet a demand so heavy that it will lead to shortages of light trucks and some cars by early spring, and he says: "Yeah, I think the economy is in good shape."

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