Jack Smith's vision for General Motors - includes related article on Smith

Automotive Industries, Sept, 1998 by Marjorie Sorge

The GM chairman says he has an engineering and design plan to put passion back in the automaker's cars and trucks

Only the Detroit Tigers have had a worse year than General Motors Chairman Jack Smith. He just can't seem to win very often either.

Many in the press have strongly questioned his abilities as chairman of General Motors. The UAW staged a 54-day strike that closed down the automaker, cost $2.5 billion and caused market share to plummet to 21%. A $9 billion stock buyback didn't boost margins nearly enough. Reports showed that GM lost $104 pre-tax per vehicle in North America in 1997 while Ford made $1,520 and Chrysler, $1,366. And, worst of all, GM's vehicles still don't seem to stir passion in many buyers.

But this is a man with quiet grit. Stick around, says this unassuming chairman that everyone at GM simply calls "Jack." "Our vision is nothing less than to be the world leader in transportation products and related services," he says. GM will be a company that "is constantly looking ahead with each foot of ground that is gained. A company that will not surrender one inch of that hard-fought ground. Count on it."

He's been forming that vision since 1992 when he took the chairman's chair from Bob Stempel in a "palace coup" led by the board of directors. At that time GM was close to bankruptcy. Today, earnings are strong. GM made $6.7 billion in 1997. But is that enough to mm Smith's vision into reality? The ultimate goal is to be big and fast to market. "Big and fast wins, look at the NBA," says Richard Wagoner, president of North American Operations (NAO).

How the vision plays out will affect the jobs of literally millions of people from GM engineers, designers, marketing and manufacturing experts and hourly workers to the suppliers and even the barber shops and bars around GM plants.

So far, Smith's plan has produced mixed results. GM's market share flutters between 30% and 32%. Before the stock market started its roller coaster ride in late August, its price/earning ratio was 9 with a yield of 2.7%, while Ford's is at 12 times earnings with a 2.8% yield, and it didn't buy back stock. NAO showed a $2.3 billion net profit in 1997, a dramatic turnaround from the $5.6 billion it lost in 1992. But International Operations (IO) faltered, dropping from $1.4 billion in 1992 to $981 million in 1997. (All numbers exclude special items.)

GM cut its hourly workforce by 30,000 in the last three years. "That's $2 billion in cost reduction," points out David Cole, head of the Office For The Study of Automotive Transportation (OSAT) in Ann Arbor, Mich.

Smith's vision is working, GM Vice Chairman Harry Pearce told AI a few months ago. "We obviously had a very keen focus for the first couple of years on doing things that would improve the bottom line." But all the time, GM continuously worked on creating a more agile and more open culture, he says. That may not be enough. "GM needs a revolution not an evolution," says William Pochiluk, a partner at Pricewaterhouse Cooper. "Continuous improvement won't get it to where it needs to be."

Culture

It's been no secret for years that GM's arrogant, plodding, elephantine culture had to change. It has, but many think not enough. "We will never return to our old arrogance," promises Pearce. "There's a lot more to be done. We're going to have hiccups along the way."

Many are tired of waiting for the hiccups to end. Wall Street is getting impatient. The dealers and suppliers are getting impatient. Some even suggest replacing the top 500 executives. While that may be a bit radical, it is true that many still need to be re-educated.

"The group is cultist in nature," says one long-time GM executive. "That stifles free action. No one is willing to stick their neck out."

That's changing, maintains Bill Poulos, director of GM's vehicle development process center. "The old culture was, `I'm not going to raise my hand. I'm going to hide behind you because I hope your problem will be discovered before mine,'" he says. "Now it's OK to surface the problem."

Vehicle Development Process

That's one of the directives Poulos follows as he tries to slash vehicle development time to 18 months shortly after the year 2000. It currently takes 24 months from styling freeze to Job One. The only way to reduce the time is to find the errors early, and that means people must speak up.

Engineering has been streamlined to further cut the time. For example, in 1992, there were 12 vehicle engineering centers. Today there are four. That makes for quicker decisions. In 1992, more than 20 executives attended strategy meetings. Now the four vice presidents representing each of the engineering centers meet weekly. "We needed to get fewer voices into the decision process," says Jay Wetzel, vice president, GM Tech Center.

Today, engineering is run like a factory. In the past engineers worked too independently. Now each understands how his or her job is related to the rest of vehicle engineering. "It's all about standardizing the work that people do in the engineering factory," says Poulos. "Once you do that you can move people around because it is all done the same way."