2 Top GM Executives Demoted : Autos: The company’s board, impatient with the firm’s problems, replaces President Lloyd Reuss and Chief Financial Officer Robert T. O’Connell.
The board of General Motors Corp. abruptly ousted the company’s president as well as its chief financial officer in an unprecedented shake-up that reflects the deep woes confronting the world’s largest industrial corporation.
Meeting in Dallas, GM’s board also moved to take a more prominent role in overseeing the corporation by installing an outside director as head of the board’s executive committee in place of Chairman Robert C. Stempel.
After less than two years on the job, Lloyd E. Reuss, 55, was replaced as president by John F. Smith Jr., the company’s vice chairman and head of its international operations, who turned 54 Monday.
GM observers called the shake-up, parts of which had been rumored over the winter but denied by the company, a clear sign of the board’s dissatisfaction with management’s progress in slashing costs and resuscitating the ailing auto giant. It was the third bombshell from GM since December, when the company announced plans to shut 21 plants and eliminate 74,000 jobs. In February, GM announced a major corporate reorganization.
“It means Lloyd hadn’t lived up to expectations,” said David E. Cole, director of the University of Michigan’s Center for the Study of Automotive Transportation. “It indicates the board has taken a very strong position.”
The demotion of Reuss was the first top-level bloodletting in modern times at GM, which has been synonymous with stability in the executive suite. Its executives have always held their jobs until retirement; dissatisfaction would be resolved with a face-saving move.
But the company lost $4.6 billion last year, the worst showing of any company in U.S. history. GM lost far more than that--as much as $10 billion, analysts estimate--on its core North American car and truck business.
“Nothing like this has happened before at the top,” Cole said. “But GM has never been in this situation before. These are very different times, and history is no good measure.”
In a pointed statement, GM said it wanted “a more aggressive management approach to remove excess costs.” It also said the changes “will promote the adoption of best practices throughout the corporation,” mentioning Smith’s international operations as a model.
Reuss was understood to be disliked by many in the company, and in his tenure as head of GM’s now-defunct Chevrolet-Pontiac-Canada division he was criticized for a traditional, autocratic style. More recently, Reuss has been under intense pressure to halt the financial hemorrhaging and was thought to be targeted by the board.
However, as recently as February, Reuss got a vote of confidence from Stempel when he was named to chair a new North American strategy board to implement GM’s latest reorganization. Smith will replace him in that job too.
Said Ronald Glantz, auto analyst at Dean Witter Reynolds in San Francisco: “I suspect that the last straw was GM’s inability to gain market share in the first quarter, despite having more products than anyone else.”
Smith, the main architect of the growth in GM’s highly profitable European operations, was also given the title of chief operating officer, which Reuss didn’t hold.
That move--and Stempel’s replacement as head of the executive committee by director John G. Smale, retired chairman of Procter & Gamble, amounted to a modest clipping of Stempel’s wings. But there was no immediate indication that Stempel was in jeopardy.
Meanwhile, GM’s chief financial officer, Robert T. O’Connell, 53, was replaced by 57-year-old William E. Hoglund, who has been executive vice president in charge of GM’s automotive components group.
In Smith and Hoglund, GM’s board promoted two men widely considered capable of running the company. Said Glantz, “I applaud the moves. Both Smith and Hoglund are exceptionally gifted executives.”
Smith, born in Worcester, Mass., joined GM after graduating from the University of Massachusetts with a degree in business administration. He moved up through the company’s powerful financial staff.
Smith really made his mark when he was put in charge of passenger car operations in Europe in 1986. Under his leadership, GM’s European operations posted a dramatic turnaround.
His successor atop GM Europe was Robert Eaton, the man recently plucked by Chrysler Corp. to replace retiring Chairman Lee A. Iacocca. But many in GM said the revival in Europe--where GM earned $1.5 billion last year--owed more to Smith than Eaton.
The top-level shuffle also appeared to return Hoglund to the corporate mainstream. The former head of GM’s Saturn Corp. unit has wide experience and was a candidate for the chairmanship before Stempel got the job.
Engineer Reuss was demoted to executive vice president and placed in charge of “new vehicles and systems,” a new grouping that includes small-car subsidiary Saturn, GM’s electric vehicle project and other responsibilities.
O’Connell was made senior vice president in charge of General Motors Acceptance Corp., GM’s huge finance subsidiary, and named to replace GMAC’s retiring chairman in May.
