GM's John Smith extols productivity, cars that excite A giant strains to turnaround

July 17, 1994|By Ted Shelsby | Ted Shelsby,Sun Staff Writer

Detroit -- The year was 1967 and it seemed half of America was taking Dinah Shore to heart when she sang "See the USA in your Chevrolet."

It was the heyday of the big car and of General Motors Corp. It dominated the domestic market, selling more cars than all other U.S. companies and importers combined.

The bestselling car in America was GM's Chevrolet and the automaker had three others in the top six.

In Baltimore, the General Motors plant had 6,000 workers building the Chevrolet Chevelle, the Pontiac Tempest and GTO and Buick Special along with Chevrolet and GMC pickup trucks.

The company so dominated the auto scene that Sen. Philip A. Hart, the powerful Michigan Democrat who headed the subcommittee on antitrust and monopoly, was moved to join a growing chorus in Congress calling for the breakup of GM. "It's too big," he declared. "It is not good for the economy to have one company so dominant. There is not enough competition."

But it wouldn't take an act of Congress to bring General Motors down. GM did that itself.

The company that had made big profits from producing big cars found it extremely difficult to adjust to the dramatic changes in the auto market and in the American lifestyle brought on by two crippling energy crises and the government's insistence that cars be more fuel efficient and less polluting.

It sputtered through the l970s and 1980s as its market share plummeted to one-third of U.S. sales, and then nearly crashed in the early '90s when it posted huge losses and was on the verge of bankruptcy.

"There's no doubt about it, GM was into a death spiral," says David E. Cole, director of the University of Michigan's Office for the Study of Automotive Transportation and the son of former GM President Edward Cole. "It was a near death experience."

To save itself, General Motors was forced into a sweeping restructuring -- changes in attitudes and methods from top to bottom. But it is a strategy that seems to be paying off.

Under the leadership of John F. Smith Jr., the low-keyed president who took over as chief executive 20 months ago, and his two predecessors, the world's largest manufacturing company is in the midst of what many say could be one of the greatest turnarounds in American corporate history.

GM has posted the biggest gains in productivity among the domestic automakers over the past two years. Its North American operation -- the core of the company -- has emerged from being billions of dollars in the red. And its new cars are stirring excitement -- unlike the so-called "cookie cutter" models in the mid-1980s, when GM last revamped its car fleet, that all looked alike.

GM's stock has risen nearly 80 percent over the past 21 months and analysts have sharply raised earning projections for the company. Some predict gains in earnings of more than 200 percent this year and another 30 percent in 1995.

Although its future looks brighter than its past, Mr. Smith acknowledges the job is far from completed.

The company faces two key questions that analysts say will bear heavily on the future of GM: Can it continue to slash its operating costs, which remain the highest in the industry? And will the overhaul of virtually all of its vehicles result in models that people will want to buy?

The need to do both is undisputed. The company's North American Operations -- which accounts for as much as 70 percent of total GM sales -- has lost more than $15 billion since 1991 and until the final quarter of last year had not posted a quarterly profit since 1989.

GM had only two models among the Top Ten sellers last year -- the full-size Chevrolet pickup truck and the compact Cavalier. And the Chevrolet division, the heart of the company that historically has accounted for half of vehicle total sales, saw its shipments drop to 2.4 million last year from 3.7 million in 1978.

To underscore the seriousness of the situation, GM announced a major reshuffling of top management 20 days ago, including naming its chief financial officer, G. Richard Wagoner Jr., president of its North American Operations, and saying it will seek a new person -- perhaps from outside the giant corporation -- to head marketing.

"General Motors is a classic example of a company that was not using its strengths associated with its size and technical sophistication," Mr. Cole said. "It was really saying [to other car companies], 'We are so big and powerful that we are going to put one hand behind our back and we are going to tie our legs together so that we can compete with you on a fair and square basis.' "

"Now they didn't do that consciously, but that is what they did by just not thoroughly using their heads in designing and building cars. That is really what it amounted to," he added.

GM's problems and lost stature is the result of "billy goat management," said Rodney A. Trump, the president of United Auto Workers Local 239, which represents the 3,200 hourly workers at GM's van production plant in Baltimore.

"Baaaad management. They were fat, dumb and happy."

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