Does Stempel have strong enough medicine to cure GM's chronic ills?

March 08, 1992|By Jim Fuquay | Jim Fuquay,Fort Worth Star-Telegram

He entered the chairman's office at General Motors at the start of a difficult decade, and by the second year of his tenure he had forged his die to recast the world's largest industrial company.

The mold included plant closings and slashes in white-collar staffing, billions of dollars for modernization and vows to compete on a world scale. The blueprint was a bold corporate reorganization, an effort to dismantle empires and fiefdoms dating back to the days of Alfred P. Sloan, father of the modern GM.

That was Roger Smith's vision of the early 1980s. Mr. Smith became GM's chief executive in January 1981 and retired in 1990.

His successor, GM Chairman Robert C. Stempel, scrapped Mr. Smith's plan with a sweeping announcement that sounded suspiciously familiar.

Deja vu, or the remedy for a desperately sick institution?

Mr. Stempel's long-term prescription is being overwhelmed by current events: a deep recession that has forced the closings of a score of manufacturing plants and layoffs of thousands of workers. But industry analysts say he has confronted GM's fundamental problem -- its inability to consistently produce cost-competitive cars and trucks.

As part of his restructuring plan, Mr. Stempel decided to keep GM's assembly plant in Arlington, Texas, and close its sister Willow Run plant near Ypsilanti, Mich.

"Before Dec. 18 [the day Mr. Stempel announced GM's coming restructuring], I didn't think Bob Stempel had his attention focused" on costs, said Maryann Keller, automotive analyst for Furman Selz investment bankers in New York City. "But a loss of $7 billion in North America will tend to sharpen your focus."

GM reported a net loss of $4.45 billion for 1991, but the picture was much worse for its North American auto operations. The loss would have been even bigger if earnings at other GM subsidiaries -- Electronic Data Systems, General Motors Acceptance Corp., GM Hughes Electronics and GM's international operations -- had not totaled $4.6 billion.

GM North America -- U.S. and Canadian auto building -- posted an operating loss of close to $7 billion, plus another $1.8 billion write-off to cover the cost of closing 21 manufacturing plants by 1995.

In other words, GM North America lost money last year building cars at the rate of $250,000 in the 15 minutes you might spend reading this article. In the hour you might spend with a Sunday newspaper, the company would have lost $1 million.

"That's $1 million an hour, 24 hours a day, 365 days a year. Somebody's got to address that," said Jim Harbour of Harbour & Associates, a Troy, Mich., manufacturing consultant who spent 30 years working for Ford Motor Co. and Chrysler Corp. "He finally stood up in front of the world. . . . I saw who is the leader of that corporation. I think he has charged that corporation and all its executives: Perform or get out.

"If he doesn't do it, there's no GM," Mr. Harbour said.

Industry observers and management consultants give Mr. Stempel generally high marks in performing his No. 1 job as GM's chief executive officer: defining the company and organizing it to best do its job.

Mr. Stempel proposed these major elements:

* Replace GM's three principal auto groups -- Buick-Oldsmobile-Cadillac (BOC), Chevrolet-Pontiac-Canada (CPC), and Truck & Bus -- with groups based on function `D --platforms (auto chassis and body); power trains (engine and transmission); components; and marketing. A North American Strategy Board will guide the transition.

* Consolidate GM's five technical staffs into three and shift parts of the massive corporate staff into North American Operations.

* Cut employment by 74,000, including 54,000 hourly jobs and 20,000 salaried jobs. This will lower GM's North American work force by 17 percent to about 350,000.

* Close 21 manufacturing plants. GM aims to buy components it can't make efficiently, and increase use of manufacturing capacity.

"If you look at . . . Europe, one of the things we've done over there is use the fixed facility 24 hours a day. Obviously, it's the way we are going to have to go," Mr. Stempel said.

He said, the company decided to try to sell a parts plant in Danville, Ind.

"Those things today . . . are such that we can't be competitive, and we think someone who might have a different foundry and [could] consolidate operations has a better chance at doing that," Mr. Stempel said.

Although the layoffs and plant closings garner attention, they're symptoms of GM's illness, not its cure, Ms. Keller said.

"Closing a factory is not the focus of what you do. Closing a factory is what the customer does to you," she said. "Has one of Arlington's cars become more beautiful, more desirable? No."

Thomas O'Grady, president of Integrated Automobile Resources in Wayne, Pa., said he approves of Mr. Stempel's plan to dismantle BOC and CPC.

"The most important thing is focusing on the platform groups, provided they really do have autonomy," Mr. O'Grady said.

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