New Team to Get Job of Remaking GM : Management: Analysts see the need for a radical restructuring of the ailing auto maker. But the new leaders will face the same entrenched resistance to change.
The forced resignation of General Motors Corp. Chairman Robert C. Stempel has cleared the way for a new management team to carry out the radical transformation widely viewed as essential for the auto maker’s survival.
The two men most likely to lead the accelerated effort to turn around the company, analysts said Monday, are John G. Smale and John F. Smith Jr., both of whom have been working largely behind the scenes to transform the company since April.
Smale, the retired chairman of Procter & Gamble and a GM director, led a boardroom coup last spring that installed him in Stempel’s seat as chairman of the board’s executive committee and ousted President Lloyd E. Reuss. Smith, who had been vice chairman in charge of GM’s international operations, has served as president and chief operating officer for the last seven months.
While the messy changing of GM’s guard is widely viewed as a necessary step toward remaking the company, analysts warned that the new leadership could find themselves banging their heads against the same entrenched cultural barriers and aversion to change that worked against Stempel.
Indeed, critics say that GM has long been too mired in its own traditions to keep up with the changing world around it. To them, Stempel’s forced departure is a welcome break with the past that may pave the way for GM’s resurrection.
Smale, 65, is most likely to lead the initial changes. He is expected to be named interim chairman at the next board of director’s meeting Nov. 2. Widely respected for his marketing acumen, Smale vastly expanded P&G;’s overseas presence during his nine years as the company’s chief executive. He also led the soap maker into the more profitable health and beauty business.
Jeffrey Sonnenfeld, management professor at Emory University, hails him as “one of the true legendary industry titans on the scene today.”
Without the complex corporate allegiances of previous GM chairmen, all of whom bore the deep imprint of the company on their psyches, Smale may be able to perceive the company’s needs and act on them more quickly than an insider such as Stempel, industry observers said.
“Stempel was a great guy, but he represented so much of the past,” said Richard Koppes, general counsel for the California Public Employees Retirement System, which owns 1% of GM’s stock. “Smale did what needed to be done in April, and he was very successful at P&G.; We would be very pleased to see him as chairman.”
But among the ranks of GM managers, where Smale is an unknown quantity and loyalty to the popular Stempel remains widespread, many question the wisdom of putting someone who is relatively new to the car business at the helm of the world’s largest auto maker.
“I know his claim to fame is getting the American Dental Assn. to endorse Crest,” an unenthusiastic GM engineer said. “He’s supposed to have a great record of past successes. Seems like he ought to quit while he’s ahead.”
Smale may well follow such advice and step out of the way within a year, when GM’s future is more secure, analysts said. That may leave the chairman’s spot open for Smith, who would be more warmly received by GM managers. For now, the burly Worcester, Mass., native is likely to get the chief executive title, analysts said.
Since assuming his expanded powers in April, Smith has by most accounts turned GM’s North American operations upside down, hacking away at costs, demanding price cuts from suppliers and accelerating white-collar job cuts.
“By GM’s standards, Jack’s management style is radical,” noted Maryann Keller, author and auto analyst at Furman Selz in New York. “He is not a micromanager, and he expects his managers to perform. He delegates responsibility and attracts talented, independent managers. He has demonstrated a talent for finding and grooming the right people for the job.”
Smith has attacked GM’s troubled North American operations with many of the same strategies he used to engineer a dramatic turnaround of the company’s European business during the mid-1980s. There, he slashed the central office staff to 200 people, challenged GM Europe’s entrenched parts suppliers and negotiated flexible labor contracts that boosted productivity. The result has been five straight years of profit.
GM’s board of directors hopes that Smith, with Smale’s support, will work the same magic in North America. They are likely to rely on two other top GM executives: J. Ignacio Lopez de Arriortua, the new parts purchasing chief whom Smith imported from Europe, and William E. Hoglund, GM’s chief financial officer.
Lopez has saved GM hundreds of millions in the last four months alone by renegotiating contracts with the company’s parts suppliers. Hoglund, the former head of GM’s innovative Saturn division, has worked to make the finance staff support the company’s car and truck operations, rather than attempting to direct them, as it has in the past.
Both executives stand to gain more influence as the new management structure falls into place. Hoglund, who was favored by some to become chairman before Stempel got the job, may be in the running for the top spot again.
With Stempel and all that he symbolized about GM’s past out of the way, analysts say that Smale and Smith have a better chance of remaking the company than their predecessors.
But there are skeptics.
“There are still 40 layers of management to get from the chairman down to a UAW worker,” said Warren Bennis, a professor of management at USC. “GM has always been arrogant. It has always been very inbred. If they think they’re going to overnight transform the GM culture, they’re wrong.”
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