The Los Angeles Times from Los Angeles, California • 42

I'arl IV Monday, January 18, 1982 CooAnjjeles Slimes TANDON: Growing FORD: Big Dilemma earning 5 cents an hour, are now employed by Tandon. Of the company's 1,600 employees, about 450 work in plants in India and Singapore. Asked about criticism of such pay levels, Tandon insisted he isn't exploiting his countrymen. "Things are just not as expensive there," he says. "Besides, we bus them to and from work and subsidize their lunches." Built Hospital Cradling a gold-plated floppy disc drive on his desk the one millionth Tandon has produced the devout Hindu says his newly acquired wealth has enabled him to build a $3 -million hospital in his hometown of Barnala, in India.

Tandon sells its disk drives for $150 to $300 each to more than 300 customers around the world including Atari, North Star, Tandy, Commodore and Wang Laboratories. Tandon official Lembas says that price is about the same charged by the company's competitors, but that Tandon has a greater profit margin because its manufacturing costs are lower. to $10 million when the stock split," Lundin says. Tandon Corp's. sales in the European market attracted the attention of investors in Germany and France.

One of them was Jean De-leage of the Paris-based investment company Saffinnova who visited the then-tiny operation in 1976. "The most difficult thing for me was to locate the little garage," De-leage said with a laugh. Saffinnova purchased $250,000 worth of stock, and urged other investment firms to follow suit, including the venture capital firm T. A. Associates of Boston.

During the next four years, those investment firms and others pumped $3.6 million into Tandon, enabling it to expand into other countries, including India. In that impoverished nation, Tandon found a cadre of skilled, low-cost workers trained in computer production and left without jobs when IBM closed its India subsidiary in 1977. Many of those workers, Continued from First Page I could get them into the floppy disc drive business." Even though he accomplished the task, he says, Pertec balked at his suggestion to expand the line. As a result, he quit the job at Christmas, 1975, to start a business of his own in Chatsworth. "At first my wife, Kamla, helped me to do the soldering, wiring and assembly work," he says.

"I frequently took time out to clean the bathrooms and sweep the floors. We had to do everything ourselves." Former Pertec product manager Gerald Lembas, now executive vice president at Tandon bought 200,000 shares of the fledging firm for $17,000. The shares later split four for one, Lembas said, and his slice of the company is now worth about $20 million. The stock currently trades at about $26. Simi Valley resident Len Lundin, another former Pertec employee, invested $5,000.

"My $5,000 (worth of stock) went up to $7 million, then pital-spending requirements to bring new cars and trucks to market. GM also builds a greater variety of vehicles and proportionately more large, expensive, high -profit cars than Ford. That means GM would have far more flexibility in applying its labor savings to the prices of its cars. GM could, for example, leave the prices of half its cars and trucks intact the half that costs the most and makes the most profit per unit and double the price cuts in the "bottom" half of its car lines, where price is most important and competition with the Japanese the keenest. In addition, more labor hours go into those large cars.

In assembly alone, according to GM's production and manning levels, it takes nearly 49 labor hours to build an equipment-laden Buick Riviera but 31 hours to assemble a subcompact Chevrolet Chevette. Thus the per-car labor savings stand to be greater at GM, the big-car company, than at Ford, where fully one-third of its 1981 production was accounted for by its subcompacts which take just 28 hours to assemble. Double the Number Ford and other auto companies have always had to deal with the built-in advantages that stem from GM's size, integration and enormous range of cars and trucks. GM built more than twice as many cars and trucks in this country as Ford last year. Its economies of scale, as its five car divisions as- Foreign Stock Exchanges Quotations From Friday semble fundamentally identical cars with largely identical parts, are a major reason for the company's dominance of the car market.

GM's smaller competitors have survived with greater manufacturing efficiencies a recent study presented at a Stanford University conference called GM the least efficient assembler of cars among U.S. firms and with distinctive vehicles and whatever customer loyalty they can foster. But the UAW-GM price-cut plan, which calls for a public announcement of dollar-for-dollar price cuts to match the new labor agreement, would put Ford in the position of having to make an identical pledge even though its absolute labor costs wouldn't be reduced as much as GM's. Don Ephlin, the UAW's chief bargainer with Ford, suggested that Ford doesn't want to put quite such a fine point on it. Tne company apparently prefers the flexibility of using the labor savings as it sees fit, matching GM's prices as needed through various marketing programs.

Peter Pestillo, Ford's vice president for labor relations, says any price cuts "need not be part of a labor agreement." By this weekend, the UAW's Fraser indicated that might be acceptable. "It doesn't necessarily have to be a pass -through," dollar-for-dollar to customers, he told reporters. "They're free to take a different approach." Don't Trust Their Bosses The major trouble with that, from the union's standpoint, is in winning ratification of a new labor agreement from the nearly 600,000 Ford and GM union workers affected. At a meeting of several hundred local union leaders in Chicago on Jan. 8, opposition to any wage or benefit concessions centered on the suspicion that Ford or GM would use the savings to build plants or buy more parts overseas, fatten executives' salaries and buy more robots to replace workers.

A promise by Ford and GM, which would be documented by an independent accounting firm, to cut car and truck prices, instead, is seen by the union leadership as politically essential to win rank-and-file approval of a leader labor contract. As for antitrust difficulties. Ford told the union that is is worried because such an agreement with the UAW would intervene directly in the pricing policies of Ford and GM. Theodore St. Antoine, a labor law scholar at the University of Michigan Law School, says it is true that the current U.S.

Supreme Court has shown a willingness to apply antitrust law more broadly in labor-relations areas. But, he adds, "My judgement is that even the Burger court isn't going to buy that (Ford's London Toronto (in Canadian dollars quotations in cents unless marked (in British pence unless otherwise specified) Continued from First Page the amount of concessions the UAW will accept. Alfred S. Warren, GM's top negotiator, confirmed this weekend earlier reports that GM has asked the union for a $5-an-hour cut in labor costs and said that could result in average price reductions of $1,000 to $1,200 per car and truck. But, Fraser, responded that was more than double the concessions the union has in mind.

Sees It as Gimmickry The price -cut idea, and several other provisions, were agreed upon by GM as the "framework" within which any labor-cost reductions would be negotiated. The scope of those cuts, along with the union's demand for job security, are the focus of the continued bargaining. As the first week of bargaining continued, Ford refused even to address the price-cut plan, and sought to dismiss it as gimmickry. Instead, the company's bargainers presented the union Friday with what was described as a full proposal for a two-and-a-half year contract complete with a profit-sharing plan and unspecified "job-security" provisions for workers. Ford clearly wishes the whole price-cut idea had never come up.

Lee A. Iacocca, Chrysler Corp. chairman and former president of Ford, says it "puts their backs to the wall." As economists and others explain it, Ford's problem with the idea stems from the major differences between it and GM. Ford is less integrated than GM. That is, it buys more of its components from other firms.

Thus, while about 150 hours of labor might go into a finished car, in GM's case about 120 or 125 of the hours represent its own labor costs. At Ford, manufacturing analysts say, the total is 90 to 100 hours. The rest represents labor at the supply firms from which Ford buys parts. Squeeze Play The UAW says it wants the same dollar contract at Ford and GM, as has traditionally been the case. So, if the union agrees to trim $3 an hour from the contract, the integration factor alone means Ford might save just $270 to $300 per car while GM would save $360 to $375 per car.

And that doesn't account for the profit margins of the supply firms. Thus Ford, to get the same labor cost savings as GM, would have to get substantial price cuts from its suppliers which presumably means suppliers would have to win labor concessions themselves. The only alternative, a Ford man says, "is to squeeze it out from somewhere else." That could create additional pressure on, for instance, Ford's ability to meet its record ca High Low 122 2144 20' Net Close Cttng. 22 21 13- 6'. 9 V.

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