GM Throttles Back : 2 Overlapping Units Are Eliminated to Curb Costs, Appease Board
General Motors Corp., scrambling Friday to satisfy its impatient board of directors, said it is eliminating two of the six bureaucracies responsible for designing and building its cars and trucks.
In a statement put out under the names of reputedly lame-duck Chairman Robert C. Stempel and President John F. Smith Jr., GM said the consolidation will help it reach its goal of slashing 20,000 white-collar jobs by the end of 1993.
Though it comes at the end of a week of disclosures that Stempel’s job is in jeopardy, Friday’s action is part of a retrenchment begun last December aimed at eliminating 74,000 jobs and closing 21 factories.
But an expectation on Wall Street that GM’s cost-cutting will accelerate as a result of Stempel’s expected ouster pushed the auto company’s stock price up 5/8 to close at $33.50 in active trading Friday after two investment firms recommended purchase of the shares.
Stempel’s fate is expected to be decided by Nov. 2, the date of GM’s next scheduled board meeting. Director John G. Smale, retired chairman of Procter & Gamble, is considered likely to be named interim chairman.
David Healy, analyst at S. G. Warburg & Co. in New York, describing himself as a “jury of one” who doubts that GM’s cost-cutting can proceed much faster than it has already, predicted the stock price will soon fall back.
GM’s action folds two so-called platform organizations into two others to eliminate overlapping design and engineering resources, GM said. It does not change what cars GM produces, though the number of car lines is expected to be reduced eventually as the company struggles to halt its massive losses.
The change leaves GM with four organizations assigned to bring different categories of cars and trucks to market: 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 corporation.
The vehicles are divided according to platforms, or chassis types, each common to a range of car nameplates. For example, the Buick Century and Olds Cutlass Ciera are based on the same underlying structure.
The company has 18 such structures, or platforms, each with its own costly design, engineering and manufacturing staffs, while other auto firms have fewer than six. Those redundancies are blamed for much of GM’s huge competitive cost disadvantage.
Smith, head of North American operations for GM, 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.
