A Look At General Motors

09/13/96

The world's biggest industrial enterprise, General Motors is also the world's largest auto-maker; 80% of its revenues are from automotive products. GM designs, makes, and sells 77 different car and truck models under 8 well-known nameplates that include Buick, Chevrolet, Pontiac, Oldsmobile, and Cadillac. Some of these models are proving to be excess baggage as GM, although still #1, is the choice of only 1 out of every 3 buyers these days. As a result GM is rethinking its strategy. It is also continuing a major downsizing, started in 1992, and dramatic cost-cutting efforts.

In late 1994 CEO John Smith brought in outsider Ronald Zarrella, former president of Bausch & Lomb, as marketing chief to help jump-start the troubled giant. Zarrella wants to reduce the number of chassis used throughout GM, trim the number of dealerships, decentralize product development decisions, hire managers from the outside, clearly differentiate each brand name, and axe some venerable models. First to go: the Cadillac Fleetwood, Chevrolet Impala SS, Buick Roadmaster, and Chevrolet Caprice.

GM already is trimming its Oldsmobile division and converting at least one car assembly plant to boost production of light-duty trucks. In mid-1995 GM agreed to sell its National Car Rental Co. to focus on its core auto businesses.

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In its early years the automobile industry consisted of hundreds of firms, each producing a few models. William Durant, who bought and reorganized a failing Buick Motors in 1904, reasoned that if several makers united, each would be protected in an off year. Durant formed the General Motors Company in Flint, Michigan, in 1908.

Durant had bought 17 companies (including Oldsmobile, Cadillac, and Pontiac) by 1910, the year a bankers' syndicate forced him to step down. In a 1915 stock swap, Durant regained control through Chevrolet, a company he had formed with race car driver Louis Chevrolet. GM created the GM Acceptance Corporation (auto financing) and acquired a number of companies, including Fisher Body, Frigidaire (sold 1979), and a small bearing company, Hyatt Roller Bearing. With the Hyatt acquisition came Alfred Sloan, an administrative genius who would build GM into a corporate colossus.

Durant resigned in 1920 and sold his stock to DuPont, which had begun buying GM stock in 1917, raising its total stake to 23%. DuPont kept this share until a 1957 Supreme Court antitrust ruling forced it to sell.

Sloan, president from 1923 to 1937, implemented a decentralized management system, now emulated worldwide (Sloan remained chairman until 1956; his 1963 book, My Years with General Motors, is a management classic). GM competed by offering models ranging from luxury to economy, colors besides black, and yearly style modifications. By 1927 GM had become the industry leader.

The first US company to downsize its cars in response to Japanese imports, GM introduced a line of front wheel-drive compacts in 1979. Under Roger Smith, CEO from 1981 to 1990, GM laid off thousands of workers as part of a massive company-wide restructuring and cost cutting program. The workers' plight was depicted in the 1989 documentary film Roger and Me.

GM bought Ross Perot's Electronic Data Systems (1984) and Hughes Aircraft (1986). Intense competition from imports and Ford caused GM's market share to drop from 47% in 1979 to 35% by 1989. That year GM bought 50% of Saab Automobile.

In 1990 GM launched Saturn, its first new nameplate since 1926, and wrote off $2.1 billion to cover plant closings. In 1992 GM made the largest stock offering in US history, raising $2.2 billion. GM also underwent a series of board room coups, and for much of the year it existed in a kind of limbo, no one knowing quite where the company was headed. Unhappy that costs weren't being cut more quickly and seeking to "end the chaos," the executive board forced CEO Robert Stempel to resign and John Smith took over.

In 1993 NBC apologized for improprieties in its expose alleging that GM pickups equipped with "sidesaddle" gas tanks tended to explode upon side impact. However, the government still asked GM to recall 4.7 million trucks.

A unanimous federal appeals court in 1995 overturned the settlement of a national class action suit involving GM's side-mounted pickups, which would have given owners a $1,000 voucher to buy a new GM truck and plaintiffs' attorneys $9.5 million in fees.

GM announced in August 1995 that it would go ahead with its long-considered move to spin off Electronic Data Systems, its computer services unit.

NYSE symbol: GM Fiscal year ends: December 31 Chairman: John G. Smale, age 67 CEO and President: John F. Smith Jr., age 56, $3,425,000 pay

Bill Maloney -- The Auto Channel