The Bosses Cut Back

Technically, the 1970 recession ended more than a year ago--but try to tell that to the battle-scarred bosses of many corporations. They are continuing or even tightening the draconian controls on spending that they started during the downswing. And their austerity campaign is cutting a wide swath --from hiring practices to such two-bit matters as engineers' putting tuxedo rentals for professional dinners on their expense accounts. In what could be a permanent, important change in U.S. business, more and more managers have adopted a show-me attitude. They are asking: "Is this expense necessary?"

Corporate chiefs argue that such penny-pinching eliminates wasteful practices that they never should have allowed in the first place. "People who get fat get coronaries, and the same is true of corporations," says Jim Patterson, public relations director of American Oil Co. His company is restricting, among many other things, the number of executives who attend conventions. The nationwide economy drive also reflects a persistent hard-times psychology among some bosses who have been starved for profits for several years and now will do almost anything to bring earnings up. They want to see more solid evidence of the business comeback before relaxing their grip on the corporate budget. E.F. Andrews, a vice president of Pittsburgh's Allegheny Ludlum Industries, sums up the mood with considerable hyperbole: "When you have been lying in the gutter and finally reach the curb, you feel better, but not that much better."

Goodbye, Veeps. Company chiefs learned during the recession that they could get along with smaller work forces, and they are continuing to trim zealously. Though steel production rose slightly last year, the number of employed steel workers fell by 44,000, to 487,000. U.S. Steel Corp. chopped almost 17,000; among others, it dropped 200 engineers in Chicago and 100 scientists, mostly Ph.D.s, at Monroeville, Pa. Two years ago U.S. Steel had 13 administrative vice presidents and 45 garden-variety v.p.s; now the respective totals are four and 38. At Jones & Laughlin Steel's Pittsburgh works, job cuts have bred a strange situation: some high-seniority steelworkers have been kept on only by being bumped to the lower-paying plant cafeteria, where they have replaced waitresses who in turn have been shunted to menial jobs in the mill so that the lowest-seniority workers could be let go.

There is also a deflation in plans for hiring the hard-core unemployed. Ford Motor Co. had pledged to hire 1,800 lowincome, unskilled workers in the year ending this June; so far it has taken on only about 750. Among the other firms that have reduced their hard-core hiring programs are Gulf Oil and Burlington Industries. Early retirement is another increasingly common device to reduce costs. After eligibility for under-65 retirement programs was temporarily widened late last year at Eastman Kodak and IBM, some 3,700 employees from the two companies took advantage of it. More and more employees are leaving at age 55.

Dirty Dozen. At some companies, comprehensive economy drives embrace just about everything. TWA in the last two years cut 3,000 employees from its payroll, sold 16 jetliners and ordered a company-wide freeze on management salaries. A cost-cutting committee nicknamed "the Dirty Dozen" followed up by axing the company's entire 35-man ad department.

Cost cutters are still paring inventories. Government analysts, who earlier predicted a smart rise in inventories this year, now expect them to stay flat through June. For example, Borg-Warner Corp. reduced its stockpiles by $10 million last year, despite a rise in sales, chiefly by buying materials and supplies closer to the time that they were put into production. Frills and fripperies are falling all over. UMC Industries, a widely diversified manufacturer, discarded all of its Western Electric speaker phones--devices that permit an executive to conduct a phone conversation while standing several feet away from his desk.

The unkindest cut for many managers has been in opportunities for creative use of the expense account. Like many another company, papermaking Crown Zellerbach has ordered employees to fly tourist rather than first-class on domestic trips. More and more Borg-Warner executives are taking buses instead of taxis or limousines from airports to hotels, offices or homes. Outgoing Chairman Robert Ingersoll started the practice years ago, and subordinates figure that they had better emulate the boss. Attendance at the Engineers Society of Western Pennsylvania dinner in Pittsburgh recently dipped to 800 from 1,000 last year, and free liquor was harder to find; only 31 companies opened hospitality suites, off from 40 to 45 in more liquid times.

Top administrators have been forced to spend endless, exasperating hours poring and picking over minor items in corporate budgets, thus cutting into the time that could be better invested in more creative work. Having done so much to squeeze expenses, many of them vow that they will never revert to their old spending habits. That is not necessarily good news for the economy. Companies need to keep costs under control, and the U.S. doubtless can survive a deflation in the number of hospitality suites at conventions. But reductions in employment and inventories, however justified in individual cases, slow the business upturn. Those executives who are holding back on new spending because they fear that the economy will not soar may be indulging in self-fulfilling prophecy.

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