July 17, 1994|By Ted Shelsby | Ted Shelsby,Sun Staff Writer
Hoping to restore Cadillac's lost prestige, General Motors teamed up with Pininfarina of Italy to design a $60,000 two-seat convertible. The car -- the Allante -- was introduced in 1987 and was intended to go head-to-head with the Mercedes 380SL.
But the Allante turned out to be a fiasco and an example of the company's arrogant attitude toward its customers.
No sooner had the car hit the market than a flood of complaints started coming back to dealers. The car leaked in the rain. It squeaked and rattled. The windshield had a ripple and the seat adjusters had a tendency to break, causing the seat to rock back and forth.
General Motors had knowledge of the serious defects before ever shipping the car, but chose to ignore them. The company's approach was that it would fix the problems later if customers complained, Mrs. Keller wrote.
GM was forced to discontinue the Allante at the end of 1992 when sales dropped to about one third of projections. Mercedes never felt threatened, but Cadillac's reputation had been severely damaged.
The fall of GM is even more evident in the failure of the important midsize car market in the late 1980s. Some say this is when the company hit rock bottom.
GM's share of the midsize car market -- the single largest segment of American auto sales -- fell from 60 percent in the middle of the 1980s to approximately 30 percent last year, according to Mr. Hoglund.
GM's problems can best be documented by the way it was trounced by Ford as the two companies each sought to reach the market with a new midsize car.
Ford invested more than $5 billion and essentially its entire future on the Taurus. General Motors countered with the GM-10 series of cars -- the Chevrolet Lumina, Pontiac Grand Prix, Oldsmobile Cutlass Supreme and the Buick Regal.
These were to be GM's bread-and-butter cars and it was planned for them to hit the market at least a year before Ford's twin offerings, the Taurus and Sable.
It wasn't even a contest. Ford got its products to the market in early 1985. Because of a number of delays, the first of GM's models didn't make it to dealers until 1988, with the others following the next year.
And when they did, they were already outdated. "They were old. You cannot do that," Mr. Hoglund said, recalling how they failed to interest consumers.
Compounding the problem, GM made the mistake of introducing those cars as two-door models when 70 percent of the market was in four-door sedans, Mr. Cole said.
While the Ford Taurus became the nation's best-selling car, GM's offerings stalled, and, according to Mr. Hoglund, the company was forced to slash production by about 60 percent.
Although GM officials decline to discuss it, others in the industry say that GM was losing $1,500 on each of the 10-series cars it sold while Ford was pocketing a $1,500 profit on each Taurus and Sable delivered.
"We really got clobbered," Mr. Hoglund said. "And the first guy that took the chunk out of us was Taurus/Sable and then the imports, the Accords and the Camrys. And it's the place we got hurt the worst."
The turnaround
General Motors tried to stem its problems. Beginning in 1986 it began closing some assembly and manufacturing plants -- a number that is now up to 23 -- and eliminating more than 240,000 jobs.
But it was still in a desperate situation when Mr. Smith and his cadre of baby-boomer lieutenants took over in November 1992, faced with the task of halting the record losses and the falling market share, reducing the bureaucracy and building cars that people would buy.
GM was about to close the books on a net loss of more than $23 billion. The board of directors had just booted out Robert Stempel, a 34-year veteran of the company who had served as chairman for two years.
Some GM executives said at the time that the board's ouster of Mr. Stempel was a mandate for radical change, a strong message to his successor to accelerate steps to turn the company around.
Jack Smith -- who was credited with reviving GM's struggling European operations in the 1980s -- heard that message.
He began with a strangely subtle move -- declaring Fridays as casual day, freeing executives on the 14th floor at GM headquarters to take off suit coats and ties and unbutton their collars.
"It was a symbol of the new thinking at General Motors," said William H. Noack, a company spokesman. "It had nothing to do with product, but it was a signal that the attitude was changing at GM."
Since then, Mr. Smith has overhauled every significant operation of the company.
He reorganized its parts purchasing business into a single global purchasing office and reformed the North American Operations.
He cut the corporate staff by 80 percent, reduced the number of car models being produced and slashed the unprofitable sales to auto rental fleets.
One of the brightest parts of GM's recovery -- and a critical element to its future -- has been the North American Operations. NAO, as the company calls it, had an $11 billion improvement between 1991 and 1993.
