NEWS ANALYSIS : Score One for General Motors : NBC’s Apology for Rigged Test Crash Breaks a Chain of Bad News
At 10:32 p.m. Tuesday, when the final draft of an agreement between General Motors and NBC cleared the firms’ respective fax machines, things began looking up for the world’s largest auto maker for the first time in many months.
The NBC apology that followed a few minutes later on national television was the result of what industry observers and GM employees call a new aggressiveness on the part of GM’s new management.
Indeed, it may have marked at least a symbolic turning point for a company that has for so long seemed to be drowning in an unending stream of bad news.
In the last several days alone:
* An Atlanta jury found the auto maker liable--to the tune of $105.2 million--in the death of a teen-ager who was driving a GM pickup truck with an alleged design flaw.
* Auto safety and consumer groups launched a wide-ranging campaign to force a federal recall of the trucks.
* A Michigan judge ruled that the company must continue to operate an assembly plant it had planned to close.
* GM announced plans to take a write-off for health care costs that will catapult its 1992 loss to an unheard-of $23 billion.
This is not to mention the previous 12 months, whose highlights included two massive plant closing announcements, several strikes against GM by United Auto Workers union locals and the ouster of the company’s chairman and chief executive in a board coup.
“It has not been an easy job lately,” concedes GM public relations manager James Crellin.
But in a well-timed and carefully orchestrated public relations effort, GM managed to seize the moral high ground in its face-off with NBC, which admitted late Tuesday that its “Dateline: NBC” TV news program used incendiary devices to ensure that a fire would erupt in a staged test crash of a GM pickup truck.
“It may be a watershed event for the company,” said one New York public relations executive. “It was fast and ferocious, and I think it shows people that GM still has clout and still stands for something.”
GM general counsel Harry Pearce, who was promoted to executive vice president in charge of GM Hughes Electronics and Electronic Data Systems Corp. in the management shake-up last November, is credited with putting on an intense, persuasive Detroit news conference earlier this week, complete with the trucks NBC had used--extracted from an Indiana junkyard.
And while NBC said its decision to back away from the “Dateline” report was made purely on journalistic grounds, analysts and insiders of NBC parent General Electric said a threat that GM might pull its substantial auto-related business from GE may have helped things along. GE Chairman John F. Welch Jr. is said to have been in contact with top GM executives Tuesday.
Even before the showdown between the two Generals, there were signs that GM was making progress in its transformation, despite many lingering obstacles:
* Earlier this week, John F. Smith Jr., GM’s new chief executive, persuaded his Big Three counterparts not to press dumping charges against Japanese auto manufacturers.
GM, Ford and Chrysler had a good chance of winning such a protest--thereby easing competition and allowing them to raise prices. But Smith backed away from a trade slugfest in what analysts called a triumph of long-term thinking over short-term gain--quite the reverse of GM’s characteristic instincts.
* Despite the massive losses GM is expected to post today, analysts expect the company to break even in its North American operations for the fourth quarter--a $4-billion year-to-year swing that S. G. Warburg analyst David Healy calls “quite impressive.”
On Wednesday, GM’s EDS information technology unit posted record profit of $178 million in the fourth quarter, or 37 cents a share. General Motors Acceptance Corp., GM’s financing arm, more than doubled its quarterly earnings over the previous year to $290.3 million. GM Hughes Electronics earned $234.8 million in the fourth quarter, or 59 cents a share, before accounting adjustments related to GM’s acquisition of Hughes Aircraft Co.
* In an unprecedented gesture of goodwill, Smith is expected to meet today in Detroit with 300 leaders of UAW locals. GM’s labor relations--fractured and torn when the company announced plans for 54,000 layoffs by the mid-1990s--have greatly improved in the months since Smith took over.
To be sure, GM’s troubles are far from over. But NBC’s prime-time retraction has given an immense boost to morale.
“People feel vindicated, uplifted and better than they’ve felt in a long time,” one GM manager said.
