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GM’s CEO Will Become Chairman : Autos: Move, effective Jan. 1, is a vote of confidence in Jack Smith’s turnaround efforts.

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TIMES STAFF WRITER

General Motors Corp. said Monday that Chief Executive John “Jack” F. Smith will become chairman Jan. 1, a move that amounts to a major vote of confidence in his turnaround efforts at the world’s largest auto maker.

Smith, who will remain president and CEO, will succeed John Smale, the former chairman of Procter & Gamble Co. who has served as chairman of GM since 1992, when he led a boardroom coup that shook up the management ranks.

Smale, who will remain on GM’s board of directors, said the board believed the strategy undertaken by Smith and his management team was achieving the results sought when Smith was installed three years ago.

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“It’s clear that GM’s management team under Jack Smith’s leadership has turned GM around,” Smale, 69, said in a statement. “While much still remains to be accomplished, the board has full confidence in GM’s future.”

The comment is significant because it is the first time a GM director or official has publicly acknowledged that the auto maker has largely recovered from the financial debacle that left it awash in losses in the early 1990s.

Investors also endorsed the move, pushing GM shares up $1.875 Monday in trading on the New York Stock Exchange. The stock closed at $51.25.

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The management change ends a closely watched experiment by GM to give outside directors more say in setting the auto maker’s agenda and to make top managers accountable for their performances.

Still, the reforms brought about by Smale will continue to affect GM. Smale, a GM board member since 1982, will become chairman of a new executive committee to coordinate the board’s activities.

“The fundamental role of GM’s directors in overseeing GM’s management and affairs will continue,” Smith said.

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GM’s turnaround effort has been one of Detroit’s longest-running soap operas. Every time it seemed GM was on the verge of regaining its former strength, it would suffer another financial setback.

But in the last year, GM has made steady progress toward recovery by cutting costs and producing some popular cars and trucks. For the third quarter, it earned $642 million, up 16% from a year ago.

“The turnaround is gaining momentum,” said David Cole, executive director of the University of Michigan’s Office of the Study of Automotive Transportation. “You can see it in the growing esprit de corps. Morale has improved tremendously.”

Most important, the company is again making money in its North American automotive operations. GM earned $1.84 billion in the U.S. for the first nine months of 1995, compared with $79 million for the same period in 1994. The auto maker lost more than $17 billion in North America from 1990 to ’93.

Such hemorrhaging prompted Smale and other outside directors to force the resignation of then-Chairman Robert Stempel in 1992. The board believed Stempel was not moving quickly enough to correct GM’s mounting problems.

The board installed Smale as chairman to help set the company’s strategy and Smith to run day-to-day operations. Smale was the first nonexecutive chairman to head GM since 1937, and the structure became a management turnaround model for other large corporations.

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Smith, 58, who proved his mettle in the 1980s by turning around GM’s European operations, installed a legion of young managers to breathe new life into operations.

The unassuming New Englander known for his team management approach took many of his cues from Smale, a press-shy, no-nonsense executive who built Procter & Gamble into a consumer products powerhouse.

One member of Smith’s team is 54-year-old Harry J. Pearce, GM’s top lawyer, who oversees its highly profitable Hughes Electronics and Electronic Data Systems subsidiaries. Pearce, who gained national attention by proving that “Dateline NBC” rigged crash tests of the company’s C/K pickup trucks, was elected Monday as a director and board vice chairman.

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