Tires Finally to Hit Pavement in GM's Restructuring Bid
WHEN General Motors Corporation chairman Robert Stempel accompanied President Bush to Japan early this year, it symbolized a significant change in the relationship between the world's most powerful government and the world's biggest automaker.
Back in the 1960s, GM was so monolithic, government trust-busters were ready to break it up. Today, GM's chief went along with the president in the hope of getting some government help.
Since the oil shock of 1979, GM has lost a dozen percentage points of market share. Its factories are grossly underutilized. Add the impact of hefty concessions to labor unions, and you create a recipe for huge losses.
GM lost $4.5 billion last year. Yet that masks the real problems in the core North American automotive operations. Subtract profits earned overseas and by nonautomotive units, and the loss mushrooms to $8.7 billion - or roughly $1,900 for every car and truck GM sold in the United States and Canada in 1991.
Yet Mr. Stempel conceded recently that "it's clear we're not going to put [import] restraints on this market.... We're going to have to compete."
Can GM turn itself around? And if so, at what cost? Since the mid-1980s, company officials have frequently announced plans to cut costs and regain market share. In 1984, then-chairman Roger Smith launched a large bureaucratic reorganization. But the result was little more than confusion, almost paralyzing operations for more than a year. Now GM will try again. The first step in the current turnaround program was announced Dec. 18, when Stempel said GM would close 21 plants and eliminate 74,000 jobs by 19 95. Cutback details announced
Last Monday, the carmaker named the first 12 of those factories to go, including the Willow Run Assembly Plant in Ypsilanti, Mich. Those 12 closings will eliminate about 16,000 hourly jobs.
But just closing plants won't solve GM's problems, warns auto analyst Maryann Keller of Furman Selz. What GM must do, she says, is come up with "a more rational product line ... that reflects what consumers want." And to do that, you must streamline the bloated GM bureaucracy that has "led to a lack of responsibility, a lack of cost control, and redundancy all over the place."
GM management appears to finally recognize that the problems are manifold - and that they won't be solved overnight. Last week's announcement outlined a broad series of steps which Ms. Keller calls "a plausible solution. I don't know if they are going to execute it, but they have identified the problem."
For his part, Stempel insisted he has not launched another corporate reorganization. Perhaps not, but it sure looks like one to most industry observers. As part of what Stempel called GM's "Future Vision," it is creating a new North American operations unit responsible for building cars for the combined US and Canadian markets.
A labyrinthine organizational chart is being straightened out. Consider that under the old system, staffs responsible for engineering and designing cars did not report to the people that actually built the vehicles.
"We'll have fewer organizational layers with a faster decision-making process," Stempel said. He also promised more accountability within GM ranks. In the current system, managers are moved on a regular basis, so if a mistake is made, it's difficult to hold any one individual responsible.
At Ford Motor Company, with the hot-selling Taurus, top managers were in place from the time the vehicle was conceived to the time it went into production. By comparison, there were three different program managers involved in the mid-sized GM10 project - the code name for such slow-selling models as the Chevrolet Lumina.
Indeed, you may see fewer models in the future. During his press briefing, Stempel noted "We are in the process of reconfiguring our product line."
That could have several meanings.
Industry sources suggest that GM is stretching out some product development programs. It has, for example, confirmed that it will delay replacing another mid-sized model, the Buick Regal, by about two years. Refocusing product lines
GM is also likely to "deproliferate" its lineup. Right now, it has 19 different product platforms, and most of its divisions sell complete product lines, ranging from subcompact to full-sized luxury cars. To accentuate their brand identities - and cut costs - some of those models will be eliminated. While Chevy may focus on models aimed at blue-collar buyers, Buick will emphasize larger cars for the professional customer.
"The real bottom line is that they cannot afford to do all that they had on their plate," says David Cole, director of the Office for the Study of Automotive Transportation at the University of Michigan.