GM replaces No. 2 leader in shake-up Head of operations overseas gets post

April 07, 1992|By Doron P. Levin | Doron P. Levin,New York Times News Service

DETROIT -- General Motors Corp. abruptly demoted its No. 2 executive yesterday and reassigned several other top executives, a sign that the world's largest automaker faces continuing difficulty in reversing the steep losses of its troubled North American automotive operations.

After a board meeting in Dallas, Lloyd E. Reuss was replaced as president, effective immediately, by John F. "Jack" Smith Jr.

Mr. Smith, who had been a vice chairman in charge of GM's international operations since 1990, received the additional title of chief operating officer.

In addition, the board replaced Robert C. Stempel, GM's chairman, as chairman of its powerful executive committee with John Smale, the retired chief executive of the Procter & Gamble Co. The move sends a powerful signal of the activism of outside directors and suggests that GM must make major improvements or more changes will be coming, perhaps affecting Mr. Stempel as well.

For 1991, GM posted a $4.45 billion loss, the biggest in U.S. corporate history.

In December, Mr. Reuss was at the center of speculation that a shake-up was inevitable, after a year in which GM lost $7 billion in North America and decided to shut 21 plants and eliminate 74,000 jobs over several years.

But as recently as Feb. 24, Mr. Reuss received a public vote of confidence from Mr. Stempel during the announcement of a reorganization of North American operations. The sudden reversal of that support suggests that Mr. Stempel might be feeling increasing pressure from outside See GM, 10E, Col. 6GM, from 1Edirectors to speed changes that will make the automaker more efficient.

The board, on Mr. Stempel's recommendation, also demoted Robert T. O'Connell from his job as executive vice president and chief financial officer. Mr. O'Connell was replaced by William E. Hoglund, who had been executive vice president in charge of GM's parts operations.

Since 1988, Mr. Hoglund has been in charge of GM's automotive components group, power products and military operations.

GM said in a statement that the management changes had been made to integrate domestic and overseas operations and to return North American operations to profitability.

"Regaining profitability requires a more aggressive management approach to remove excess costs, while keeping GM's focus on customer satisfaction," the statement said.

The GM public relations department declined to elaborate on the press release detailing the changes.

The management changes were unexpected. Since the 1920s, no top GM executives had been demoted so abruptly. At no time since GM's early history had the board played such an active role in forcing the management to meet the objectives of directors, who have been distressed by GM's performance.

The changes surprised some financial analysts, who said the moves would impart a much-needed sense of change at GM.

"It's the most visible thing management can do to signal a break with the past," said Maryann N. Keller at Furman Selz in New York.

Analysts added that although changes in the corporation would not be immediately evident after Mr. Smith was installed, his experience in Europe was likely to aid him as the automaker sought to consolidate production.

"The way GM plays football is not going to change," said Jean-Claude Gruet, an analyst with UBS Securities. "But there's going to be a new quarterback here."

The changes were announced after the close of stock trading. Earlier, GM shares had gained 37.5 cents to close at $36.625 on the New York Stock Exchange.

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