Pressed to cut costs, GM to merge design divisions

October 24, 1992|By Los Angeles Times

DETROIT -- Scrambling to satisfy an impatient board of directors, General Motors Corp. said yesterday that it was eliminating two of the six bureaucracies responsible for designing and building its vehicles.

In a statement put out under the names of its reputedly lame-duck chairman, Robert C. Stempel, and president, John F. Smith Jr., GM said the consolidation would help it reach its goal of slashing 20,000 white-collar jobs by the end of 1993.

Although it comes after a week of indications that Mr. Stempel's job is in jeopardy, yesterday's action is part of a retrenchment begun in December that is intended to eliminate 74,000 jobs and close 21 factories.

But an expectation on Wall Street that GM's cost-cutting will accelerate after Mr. Stempel's expected ouster pushed the auto company's stock price up 67.5 cents yesterday, to close at $33.50, after two investment firms recommended the shares.

Mr. Stempel's fate is expected to be decided by Nov. 2, the date of GM's next scheduled board meeting. A board member, John G. Smale, the retired chairman of Procter & Gamble, is considered likely to be named interim chairman.

David Healy, an analyst at S.G. Warburg & Co. in New York, described himself as a "jury of one" who doubts that GM's cost-cutting can proceed much faster than it is already. He predicted that the stock price would soon fall back.

GM's action folds two platform organizations into two others to eliminate overlapping design and engineering resources.

The change leaves GM with four organizations to produce vehicles: a Cadillac-luxury car division; a mid-size car division; a compact-car division; and Saturn Corp., the new GM subsidiary that remains separate from the rest of the corporation.

The vehicles are divided by chassis types, each common to a range of car nameplates.

The company has 18 such structures, or platforms, each with its own design, engineering and manufacturing staffs; other auto companies have fewer than six. Those redundancies are much blamed for GM's competitive cost disadvantage.

Mr. Smith is also expected to announce soon the permanent shutdowns of seven factories in addition to 14 already identified. Those steps are intended to cut the blue-collar work force to 250,000, from 304,000, by the end of 1994. White-collar employment will fall to 71,000, from 91,000, by next year.

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