New GM Management Shifts Out of Neutral : * Automobiles: The regime announces a new stock offering and names a layer of executives. Major changes in the company’s car lines still loom.
The new regime at General Motors Corp. set in motion its promised face lift Friday, anointing a new second tier of executives atop its troubled North American car and truck business and announcing a stock offering to raise up to $2.4 billion.
The steps are a prelude to the surgery that GM is expected to perform on its complex array of vehicles. New president John F. Smith Jr. is expected to order the elimination of at least one full line of cars, accelerate some new-vehicle programs and delay or drop others over the next three to five years.
The proposed sale of up to 57.5 million shares of GM common stock--said likely to dilute the value of existing shares by about 10% in the near term--follows three sales of preference stock that have already raised about $3.4 billion over the past two years.
GM stock tumbled $2.75 to close at $39.625 on the New York Stock Exchange as investors expressed dismay with the “dilution” of ownership they’ll suffer after the new shares hit the market. But analysts welcomed the offering, as they have welcomed the reorganization and other tough steps GM has taken in recent weeks, including the ouster of two top executives.
“Despite the reaction in Wall Street today, I think the offering will be very successful,” said John Casesa, auto analyst at Wertheim Schroder Inc. in New York. “Before all these changes, it would have been a hell of a lot tougher” to interest investors.
In addition to raising badly needed cash to develop new cars and trucks, the repeated bolstering of its balance sheet has been an attempt, so far unsuccessful, to prevent several downgrades of GM’s credit rating. The company staggered to a $4.5-billion loss last year, the worst in U.S. corporate history. Losses hit $7 billion in North America, the focus of Friday’s actions.
In an internally televised speech to employees across the country, Smith and Chairman Robert C. Stempel fleshed out GM’s new North American Operations, announced in February as the company’s second big bureaucratic overhaul in eight years. The NAO, among other things, will oversee the manufacturing of nearly all GM vehicles.
The actions underscored Smith’s strong hand in remaking the weakened domestic divisions by establishing direct reporting relationships between himself and all key executives in sales, production, finance, planning, supply, logistics, design and engineering.
Friday’s key appointments are former Oldsmobile General Manager J. Michael Losh, 45, put in charges of sales and marketing of all cars and trucks in the U.S., Canada and Mexico, and E. Michael Mutchler, 57.
Mutchler was head of GM’s former Chevrolet-Pontiac-Canada mega-division, which was disbanded in February. He was named to run all domestic car development and production. Both Losh’s and Mutchler’s jobs are new positions.
Joining them as group executives atop the NAO are J. T. Battenberg III, 48, former head of the Buick-Oldsmobile-Cadillac mega-division, which also disbanded in February.
Battenberg was placed in charge of GM’s nine component divisions. Clifford J. Vaughan, 58, was named to run all domestic truck development and production. He headed the disbanded truck and bus division.
All report to Smith, who was named president and chief operating officer earlier this month when Lloyd Reuss was ousted as president. Smith has far broader powers than Reuss, however, and retains control over the successful international division that he headed previously.
Also Friday, Smith pulled a top lieutenant from GM Europe, J. Ignacio Lopez, a Spaniard credited with simplifying purchasing operations there, to company headquarters as head of worldwide purchasing, a new post intended to globalize purchasing and slash the costs of material.
The NAO, which resembles the way Ford Motor Co. organizes its domestic car and truck business, must come to grips with a costly collection of 18 car “platforms,” or body types, that often duplicate each other in the marketplace and command their own designers, engineers and factories.
Partly to support those platforms, for example, GM’s powertrain division builds 18 “families” of engines and transmissions.
The 18 platforms are spread across the five familiar car marketing divisions, Chevrolet, Pontiac, Oldsmobile, Buick and Cadillac. While GM reiterated Friday that it will keep all five divisions, the company might not continue to offer the same array of cars that it does now.
A GM spokesman noted that since 1987, the company has already reduced the number of car models it sells to 65 from 84. But he said GM does not discuss future product plans.
One top candidate for elimination is one of GM’s two lines of mid-sized, front-wheel-drive cars: the A-body, a 1981-vintage design that includes the Buick Century and Oldsmobile Ciera (and formerly the Chevrolet Celebrity and Pontiac 6000, both discontinued), or the W-body, a 1988 line that includes the Chevrolet Lumina, Pontiac Grand Prix, Cutlass Supreme and Buick Regal.
Development has already begun on replacements for both by the mid-1990s, but neither line has sold well enough to fill the factories designed to build them. Dropping one could save $3 billion to $5 billion. Those decisions will also affect which factories GM closes as it proceeds with plans to shutter 21 plants by 1995. Other potential targets, analysts say, are the similar Chevrolet Caprice and Buick Roadmaster, large cars that have been sales disappointments, and one of GM’s three competing lines of compact front-wheel-drive cars.
The Lines They Are a Changin’
Restructuring announced Friday at General Motors Corp. could lead to the loss of a line of mid-sized cars. Some of those nameplates are popular and would be missed by consumers; others would not. Replacements for the mid-sized lines are in the works.
Chevrolet: The troubled division has already lost one model, the Celebrity, and could lose another, the Lumina.
Pontiac: The Pontiac 6000 has already been axed, and the division also stands to lose the Grand Prix. Sales in the division have been bolstered by the popularity of the 1992 Bonneville, however.
Cadillac: The 1992 Seville has put the division in the spotlight with its innovative design and high quality. No changes in Cadillac are expected.
Buick: The division stands to lose one of its mid-sized models--the Century or Regal--if the expected changes occur.
Oldsmobile: The former head of the Oldsmobile division was named to supervise sales and marketing of all North American-made cars. Industry observers have said GM should kill off this ailing division, but the only plan involving Oldsmobile includes discontinuing the Ciera or Cutlass Supreme.
