Sunday, February 06, 2000
Smith made GM leaner, stronger
Verdict on legacy remains in future
BY DAVID PHILLIPS
Detroit News
DETROIT — In his first letter to shareholders in early 1993 as General Motors' new chief executive officer, John “Jack” F. Smith, Jr., pledged to make GM profitable, satisfy customers with better products and expand the business.
“Our ultimate objective is to exceed expectations,” he wrote shareholders as GM faced one of its darkest periods. “We want our customers to brag about our products and services worldwide.”
Eight years later, it's not clear whether GM will achieve those goals. As Mr. Smith, a low-key, self-effacing executive, prepares to steps aside as CEO for President Richard Wagoner, he leaves a company still in the throes of a massive long-running turnaround.
Undoubtedly, GM is a stronger company than it was when he assumed the operating mantle. But it continues to lose important market share to competitors, while patching up strained relations with suppliers, dealers and union workers.
“Within 10 years the auto industry is going to be dominated by a select few,” said David Cole, executive director of the University of Michigan's Office for the Study of Automotive Transportation. “We may have to wait until then to see how Jack's legacy ultimately unfolds.”
GM was a stumbling giant when Mr. Smith was handed the reigns after a management shake-up in November 1992. The automaker had staggering operating losses of $4.5 billion in 1991 after losing $2 billion in 1990.
Bloated North American engineering and manufacturing staffs, combined with high fixed costs, meant GM needed five years to bring new cars and trucks to market. Scrappier rivals were churning out slick new Honda Accord sedans and Mazda Miata roadsters every three years.
Americans were falling in love with pickup trucks, sport-utility vehicles and minivans while GM remained largely a car builder.
Mr. Smith, who replaced the deposed Robert Stempel, and his team of young but relatively experienced executives moved to close excess plants, leveraged GM's vast purchasing clout to win favorable price cuts from suppliers, and dismantled the automaker's powerful product-development bureaucracy that often left Chevrolet, Pontiac and Oldsmobile with similar cars and trucks.
“GM traditionally used its huge size as an excuse,” said Quinn Spitzer, a management expert with McHugh Consulting in Pennington, N.J. “Under Jack Smith, it has found a way to use its vast size as an advantage. But most outsiders still view GM's fortunes with reserved optimism.”
Mr. Smith, blessed by a buoyant U.S. economy, has been able to restore profits, largely by cutting costs, and raised GM's quarterly dividend from 20 cents in 1992 to 50 cents.
After a decade of regular strikes, relations with the volatile United Auto Workers are on the mend, thanks to Mr. Smith's personal involvement. He is leading GM to embrace electronic commerce as a major cost-cutting tool.
Investors are noticing, bidding GM shares up to all-time highs in recent months.
But GM's slice of U.S. car and truck sales remains under pressure and below 30 percent — the lowest since the 1920s. And the automaker continues to lose money on its aging small car and small pickup lineup, while profits in South America and Europe are under pressure.
Young buyers and affluent professionals still largely ignore Cadillac cars and Chevrolet sport-utility vehicles.
“GM's power and clout in the U.S. marketplace hasn't increased at all under Smith,” said Eugene Jennings, a management expert and former Michigan State University professor. “The duet of Smith and Wagoner has not performed up to expectations, and it's my guess they will still be struggling in three years.”
Under Mr. Smith, GM did kill lackluster models such as the Buick Roadmaster, Chevrolet Caprice, and Oldsmobile Ninety-Eight.
Delphi Automotive Systems and Electronic Data Systems were divested, helping lower costs and shrink GM's worldwide payroll from 750,000 in 1992 to 388,000.
“The big challenges and tough calls are behind them,” Mr. Cole said. “But they are moving into a new product cycle that carries more risks, but it's a bet every automaker has to make. If you aren't in the marketplace with head-turning vehicles such as the Chevrolet Avalanche, Pontiac Aztek, you won't survive long-term.”
He credits Mr. Smith's quiet, low-key manners for allowing GM to acquire strategic stakes in Asian automakers Subaru, Isuzu and Suzuki, and establish important technology ties with Honda and Toyota.
Mr. Smith, who will remain as chairman, said he will spend his remaining months working to rebuild GM's tattered dealer relations, and visiting key partners overseas.
“We have a lot of momentum now,” he said. “We aren't a troubled company anymore.”
'Please come to Ohio'
BullsEye search engine drops fee
P&G's prescription for growth: buyouts
Viagra ads to be tied to Valentine's
Ohio team builds bridge in Honduras
Recruiter gets voice applications
SMALL-BUSINESS DIARY
Smith made GM leaner, stronger
TRISTATE'S PRICIEST HOMES
