Atari Moves to Asia

"It happened two hours before quitting time. One by one we were called into the conference room and in a split second we were without jobs. I'm depressed. I feel like I'm dreaming. "

a Filipino woman laid off from Atari.

SANTA CLARA COUNTY, CA - On February 22, Atari, Inc., the manufacturer of home computer and video games, announced it was laying off a quarter of its U.S. work force and shifting production to Hong Kong and Taiwan. Six hundred workers in the home computer and video game divisions were immediately laid off; 1,100 will follow in July. But Atari retained local production of arcade video games, which are too heavy to ship across the ocean.

The announcement stunned Atari's predominantly minority work force, many of whom had been attracted to the company by its promise of long-term job security. Wanda Strickland, a 20-year-old games assembler, who had been making $5.35 an hour at Atari, said: "Everyone was shaken up by what happened. We got burned. I thought that as long as Atari was making products I'd be working here. That's pretty dirty that they're taking the jobs overseas."

Three days after Atari's announcement, the Glaziers and Glass Workers Union, an AFL-CIO affiliate that had been working with Atari production workers to organize the plant, charged the company with shifting its jobs overseas to avoid unionization and said it would file an injunction with the National Labor Relations Board to block additional layoffs. "All over this country.. .blue collar, line employees are daily subjected to unfair treatment, substandard wages, chemical exposures, and a basic lack of fellow human considerations, by the 'High-Tech Industries'," a union statement read. "To expect people.. .to remain silent about such working conditions in this country, is to deny the history or existence of the labor movement."

The Atari layoffs evoked a strong reaction from public officials across the country. Local Congressman Norman Y. Mineta called the layoffs "tragic," and said "I am not convinced that the Atari Corporation made every effort to find comparably profitable alternatives which would inflict less pain ...it is cruel to assume that seventeen hundred people can shift easily to new jobs."

On February 24, the Alabama legislature issued a stinging rebuke of the company for what it called a "Judas decision made by perhaps a mere handful of executive ingrates," and demanded a national boycott of all Atari products.

The job transfer - as one trade unionist described the action - also shocked the media, and caused consternation among advocates of high technology and the home computer industry itself. As a symbol of the shift from manufacturing to computer-based industries, Atari and other electronic firms have been seen as the "engines of growth" of the 1980s, providing the jobs eliminated by the closure of the nation's steel, auto and textile plants. Atari's move to Asia seemed to signal the demise of this strategy-and an end to the myth of Silicon Valley.

"The Atari thing really burst the bubble," one industry consultant says. "Everything from the political structure on down was predicated on this industry being different."

But what was "different" about Atari was the manner of its closing-abruptly eliminating domestic jobs while expanding overseas - rather than the move itself. Since 1963, when Fairchild Semiconductor opened an assembly plant in Hong Kong, most American consumer electronic companies have built offshore plants. Lenny Siegel, writing in Global Electronics Information Newsletter, describes the phenomenon: "Simply, companies locate production where costs - including direct labor, management costs and shipping - are lowest. Factors such as stability are important, and tax and trade incentives are calculated into the decisions as well."

Ed Jones, an organizer with the Glaziers and Glass Workers Union, says, "Atari's closure is unique because it's the first time a major layoff in Silicon Valley destroyed a major work force and transferred their jobs overseas. Most of the firms leave their domestic people intact and by attrition or expansion go overseas."

Atari's management said the sudden move was to save on production costs. But both the union and industry consultants - as well as some former Atari executives - have said that Atari's move reflected confusion and panic in the ranks of Atari's management, which has been scrambling to regain its position in the face of growing competition.

Thus while the company may not be "a very good example to cite in forecasting broad industry trends," as Business Week points out, it does provide a glimpse into the world of high tech companies in the U.S. - and offers some lessons for those who are counting on high technology to decrease unemployment.

Atari: quick rise, sharp fall

Atari was founded in 1972 and rapidly became a leader in the fast-growing video-game industry with products like Pac Man, Asteroids and Missile Command. In 1976, Atari was acquired for $28 million by Warner Communications, Inc., and by 1982 accounted for almost half the sales and 70 percent of the operating income of Warner's consumer electronics division. Profits have been high: between 1980 and 1981 they jumped from $80 million to $287 million, then "slowed" to only $324 million in 1982. In 1981, Steven Ross, the chairman of Warner Communications, personally earned $22 million-more than the presidents of Exxon and General Motors, and equal to the wages of 2,500 Atari workers.

Atari's profits were boosted by the enormous boom in home video products, an industry that underwent rapid expansion in the 1970s. But they were also made possible by the industry's low wage rates. 3,000 of Atari's 10,000 employees work on assembly lines in Hong Kong, Taiwan, Singapore, Ireland and Puerto Rico, earning wages that range from 50` to $3.00 an hour. Average assembly line wages in the U.S are $5.50. Most U.S. production workers are minorities, many newly arrived immigrants from Southeast Asia. According to Ed Jones, 60 percent of Atari's work force is Hispanic, 20 percent Asian, and 3 percent to 4 percent Black.

In the last two years, Atari has begun running into trouble. As new competitors entered the field, its share of the market dropped. According to Business Week, its market share in video cartridges dropped to 41 percent in 1982 from 80 percent in 1977; and its share of the game market is expected to fall from 70 per cent in 1980 to 50 percent in 1983. Atari's chief competitors-Texas Instruments and Commodore International, Inc.-are outproducing Atari's game units by a "twoto-one" margin.

The loss of Atari's competitive edge seriously cuts into Atari's profits. In December, Warner shocked investors when it announced that Atari's fourth quarter earnings were dropping to $1.2 million from $136.5 million in the same quarter of 1981. Warner stock immediately fell 37 percent.

Atari's reputation was further damaged a few weeks later when government investigators charged top executives with selling stock on the basis of inside information, only days before the lowered pro fit predictions were made public. Thus many observers view Atari's February layoffs as a hurried reaction to a rapidly eroding situation.

But Atari claims that the move had been contemplated for a year as a way to save on costs. In a public statement, Atari Vice President Bruce Entin said, "Moving into a much cheaper manufacturing facility will enable Atari to be much more cost competitive with Texas Instruments and Commodore, especially in home computers." One securities analyst estimated the move could mean a 25 percent savings on the $899 cost of its Model 1200 computer, its most expensive model. The 1200 is now being made exclusively in Taiwan.

(When contacted by Multinational Monitor, Atari refused to comment on the move to Asia or the public reaction to the announcement.)

According to union organizer Ed Jones, Atari's move will only save the company 3 percent to 4 percent on costs "if you include transport costs." Jones sees the move as a strategy to thwart the organizing efforts of his union, a drive that began last year. Among the issues raised by the union was job security, the lack of seniority rights, safety and wages.

One union leaflet passed out to employees reads: "Most of us have to struggle to support ourselves and our families on the ridiculous wages the company pays ...We have had enough, no more promises, no more waiting, now we have finally decided to unite and organize. Hundreds of us have already signed authorization cards.. .We are tired of no seniority rights, lay-offs of people when the company hires new people.. .and requiring us to work overtime without notice. This is 1982 not 1782. The days of slavery are over."

The company successfully used the area's high unemployment rate to intimidate workers, says Jones. "They'd point to the two auto plants that have closed around here and say it was an example of how unionism and restrictive work rules forced those corporations to close. And they used that fairly effectively, and said workers could avoid that situation in an uncertain economy by cutting wages or hours.

"But then they turn around, and look what they do."

Layoffs help union drive

The job transfer, in sharp contrast to Atari's claims of job security, has strengthened the union among the remaining production workers in Atari's arcade video game department. Union authorization cards have been "flooding in," says Jones.

Some workers had to express their sentiments after the fact. "We sure wish we had a union," laments Francisco Pinon, a 19-year-old Mexican immigrant who, along with his wife, was one of the workers affected by Atari's move. "Then they wouldn't have been able to kick us out like this."

In addition to its organizing drive and petitions to the National Labor Relations Board, the Glaziers Union is trying both legal and legislative strategies to prevent further Atari layoffs. For example, the union has asked county, state and federal officials to review tax breaks and other incentives the company has received. Locally, Jones hopes that riders can be put on tax breaks given to high tech companies that would prevent companies from relocating to avoid unionization. On the federal level, Jones thinks pressure can be put on Congress to deny Atari Department of Defense and other government contracts for violating labor law (moving to avoid unionization).

Although a boycott against Atari products has been considered by the union, Jones says it is a questionable tactic " to boycott a company when you're trying to represent the workers."

The Glaziers Union has targeted a number of other firms in the area, joining the Union of Electrical Workers (UE) and several other unions in a campaign to organize workers throughout the valley. As at Atari, they have met stiff resistance; not one plant has been organized.

One difficulty, according to Jones, is the "mutual aid pact" among electrical companies, and the services of lawyers and professional union busters offered by such groups as the American Electronics Association and the Semiconductor Industry Association. Jones cites the case of Indy Electronics, a small company with 300 employees. In the three months prior to a union election (in which the union lost), he says, the company shut down for three weeks to hold seminars about the union. This "shows the lengths these companies are willing to go," he remarks. "I can't see anybody in their right mind going that far unless they were told by other groups-anything you need, do it."

But some local activists say that organizing attempts have failed partly because the labor movement has not put a priority on organizing in Silicon Valley. Jones, for example, is one of only a handful of full-time organizers.

High-tech/low skills

The same day that Atari announced its job transfer, an incident occurred that illustrated what American workers are up against. "There was a meeting held with a delegation from Hong Kong that the Chamber of Commerce of San Jose sponsored," Jones recalls. "They invited 200 companies to discuss the possibilities of their moving plants to Hong Kong. Sixty companies showed up. This was right at the same time that thing had just broken with Atari. It was outrageous."

This incident brought home the fact that Third World countries are lobbying not only for U.S manufacturing and heavy industry, but for high technology as well. South Korea, for example, recently passed new laws to lure foreign investors in electronics and semiconductors.

But what these countries will get are the production jobs. In this sense, Atari's move represents a trend rather than an isolated incident. "What you see is a definite trend," says Jones, "dividing tasks between the high tech worker in the states-R and D, engineering, that type of thing. And then they're shifting the blue collar work overseas. I don't see that as a cure-all, unless you're going to have a mandatory situation in which everyone gets a master's degree in electronics."

But long-time observer Lenny Siegel argues that "though production may not increase as fast as other activities, the changing product mix will ensure the demand for production workers. The increasing automation of certain production lines, in fact, may bring some offshore manufacturing back to the U.S."

For those millions of workers unable to get the degrees necessary for the highly technical jobs of engineering or research, however, the alternatives are bleak. According to a recent study by Data Resources, Inc. quoted in Business Week, "the number of high-tech jobs created over the next decade will be less than half of the 2 million jobs lost in manufacturing in the past three years." While dollar output in high technology will increase 87 percent in the next 10 years, says the magazine, "the number of workers needed to produce this increase will need to rise by only 29 percent."

A recent study by two Stanford University educators gives an idea of where the majority of "new jobs" might be. Citing Bureau of Labor Statistics and other data, Henry M. Levin and Russell Rumberger say that, between 1978 and 1990, the U.S will need three times as many new janitors and maintenance personnel (600,000) as new computer systems analysts (200,000). Total new jobs in the same period for computer programmers (150,000), they say, are less than one-fifth the projected growth in fast food workers and kitchen helpers (800,000).

In addition, the study states that only three or four of the top 20 occupations in the total number of new jobs require education beyond high school, and only two-teaching and nursing-require a college degree. High technology, they say, is likely to "further simplify and routinize work tasks, reducing opportunities for worker individuality and judgement. For example, robots could replace up to 3 million operative jobs in the next 20 years and potentially eliminate all 8 million operative positions-currently 8 per cent of the work force-by the year 2025."

Such a scenario, of course, implies a continuation of current practices and policies. But if things keep going the way they are, the multinationals may be hurting themselves. Says Jones: "I think if these guys get there way, they're going to destroy their own market. How are you going to sell your products if a high percentage of your workers are unemployed?" Q