GM orders shake-up at troubled financing subsidiary

June 12, 1992|By Los Angeles Times

DETROIT -- Citing mismanagement and poor judgment, General Motors Corp. ordered a major housecleaning at its finance subsidiary yesterday in the wake of an embarrassing $422 million fraud case involving one of its car dealers.

GM replaced the president, the chief financial officer and the operations boss of General Motors Acceptance Corp. It also reassigned several other officials and said it was taking disciplinary action against "numerous" employees at GMAC's Smithtown, N.Y., office.

But the financially troubled automaker said an internal investigation found no evidence of criminal activity or "self-dealing" by any GM employee.

"You can say this was a matter of accountability," said a GMAC spokesman. "There was some mismanagement, poor judgment and non-performance of obligations."

It was GM's first substantive comment in the case of former dealer John McNamara of Port Jefferson, N.Y., who is accused in a federal indictment of bilking GMAC out of $422 million in an elaborate phony export scheme.

McNamara has pleaded not guilty to the charges.

Disclosed in December as GM's deep problems and inefficiencies in the car and truck business were becoming clear, the McNamara case seemed to bolster a growing impression of the nation's biggest company as financially inept.

GM lost $4.5 billion last year, the worst showing ever by a U.S. corporation. Its troubles led the GM board to revolt in April, forcing the ouster of the company's president and prompting another corporate reorganization.

Since then, fast-paced change under new President John F. Smith Jr. has been remaking the face of GM's North American car and truck business.

Analysts said that yesterday ousters at GMAC, instead of the customary face-saving reassignments, are another sign that GM's new aggressiveness is taking place company-wide.

"It's a real change in policy at GM to see such quick action," said John Casesa, an analyst with Wertheim Schroder in New York. "New management is becoming less willing to tolerate poor performance."

Shortly before the fraud was made public, GM announced the May 1 retirement of John R. Edman, GMAC's chairman and chief executive, and his replacement by Robert T. O'Connell.

Yesterday President William J. Lovejoy, 52, was placed on "special assignment" and replaced by John R. Rines, 44. Chief Financial Officer George G. Fenner, 58, retired and was replaced by John D. Finnegan, 43.

The company also said that it would expand and upgrade its auditing staff and create a new position to oversee "major credit exposures."

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.