(FORTUNE Magazine) – HOW DO YOU improve on success? That's the task Louis Hughes, 44, the vibrant president of General Motors Europe, attacks these days. GM is already the most efficient and profitable of Europe's automakers, but Hughes wants more. His mission: to knit together its disparate operations into a production system equal to the best Japan has overseas. There's nothing quixotic about Hughes's quest. A deep recession has gripped Germany and is dragging down the rest of Europe, ravaging profits. Honda, Nissan, and Toyota are increasing production in Britain for a major assault on Europe. Other European carmakers are besieged by a variety of ills. Says Hughes: ''You can fall very deep and very fast if you don't pay attention.'' He could rise very far and very fast, however, if he burnishes GM's performance in the world's No. 1 auto market. GM Europe has become the mother of chief executives: Jack Smith, now CEO of all of General Motors, made his name by turning around GM Europe in the mid-1980s, when it was running in the red. His successor there, Robert J. Eaton, took over from Lee Iacocca as Chrysler's CEO in January. Hughes has his eye on the big prize: inheriting Jack Smith's mantle in Detroit. GM Europe has bred still other high-visibility alumni. Though he never became president, the latest is the mercurial Spaniard Jose Ignacio Lopez de Arriortua, 52, the brilliant cost cutter who was made head of purchasing in 1985 and served there until last year, when Smith promoted him to GM's worldwide purchasing chief. After a series of embarrassing flip-flops, Lopez left in March for the No. 2 job at Volkswagen AG, head of production and purchasing. To GM's well-publicized annoyance, nearly a dozen co-workers left with him. The combined efforts of such esteemed executives have made Europe the jewel in GM's crown -- and maybe even the model for the renaissance of GM's money- losing North American operations. Unit sales of the flagship Opel and Vauxhall brands have risen every year since 1985. Last year, GM Europe nearly passed Peugeot/Citroen to move into second place in unit sales, behind Volkswagen, with a market share of 12.6% -- its highest ever. On nearly $29 billion in sales, it earned $1.3 billion, more than any of its rivals. Hughes doesn't expect to match those results this year. He figures his sales will fall 20% in Germany, where GM Europe does 40% of its business, and also slump -- though not so badly -- in Italy, France, and Spain, while improving slightly in Britain. Already five of his plants close part of the week to reduce inventories; this year Hughes plans to cut employment at least 6%, eliminating 3,000 or more workers. GM should get a push from the new Corsa, a subcompact introduced at the Geneva auto show in March, which will probably start at $11,000 or so. Journalists and even some competitors praised the car for appealing design, efficient packaging, and well-executed details seldom found on economy models. One example: mechanical seat belt tensioners, which tighten the belts around the driver and front-seat passenger in a collision. While standard on Saabs and BMWs, for instance, they are not available on any car made in the U.S. The Corsa embodies many of the reforms that Hughes is driving through GM Europe. It was designed, engineered, and brought to market in just 36 months, almost as fast as the Japanese can do it and just half the time Ford needed to develop and launch the new compact Mondeo, also unveiled at Geneva. The Corsa contains 30% fewer parts than its predecessor, 4,500 in all, because suppliers do some preassembly before shipment. The exhaust system, which at one time included 16 separate pieces, now comes as a single part. That saves money for GM and -- eventually -- for the customer. The new Corsa also incorporates many design changes that make it easier to assemble, improving quality and productivity. The labor needed to attach the seats to the frame has been reduced by two-thirds because hooks have replaced nut-and-bolt fasteners. Overall, the Corsa costs 25% less to put together than its predecessor and requires just 20 worker-hours -- not quite world-class, but getting there. HUGHES KNOWS both Europe and CEO Smith well. In 1987 he joined Smith as vice president for finance of GM Europe; they had worked together 15 years earlier at the GM treasurer's office, in New York City, and teamed up on the production agreement with Toyota in 1983 that led to the Nummi plant in Fremont, California. Hughes took over Opel in 1989 and last year succeeded Eaton as president of GM Europe. A native of Cleveland, he studied mechanical engineering at General Motors Institute and has an MBA from Harvard. Despite his broad smile, Hughes radiates intensity, conviction, and drive. He learned German to communicate with Opel's hourly workers, immersing himself in the language for six months and forcing colleagues to use it in meetings with him. That frustrated everybody at first, but he is now so confident that he uses German even in conversation with English-speaking Germans. GM Europe is both simpler and more complex than GM in the U.S. The European subsidiary turns out just six basic models of a single line of cars. They are marketed in Britain as Vauxhalls, where they ranked second in sales last year, and elsewhere as Opels; in the U.S., GM sells six car lines totaling 60 models. But GM Europe sells its cars in more than 25 different countries, where customers' tastes continue to differ even as their economies converge. Britons buy 75% of one sedan model with hatchbacks, vs. 25% for Germans. The company also has to manage a crazy-quilt manufacturing system that includes outposts in Britain, Portugal, Hungary, Turkey, and Sweden. Its plants vary dramatically in capacity -- and costs. The factory at Izmir in Turkey builds only four cars an hour, while Russelsheim in Germany produces up to 80, and Zaragoza in Spain peaks at 88. Workers in Turkey get $4 an hour, while some in Germany make $36.40. GM hopes to produce 400,000 Corsas annually by next year, enough to rank it among Europe's top sellers. Says Hughes: ''The first thing we have to do is sell, sell, sell. Then we have to cut our costs. We have to keep pushing urgency, urgency, urgency in the system.'' Say it three times and it still doesn't get any easier, because GM's get-lean movement pits it against the powerful German labor union IG Metall. That battle could last several years. The point man is Opel Chairman David Herman, 47, a New Yorker who attended the London School of Economics and has a Harvard law degree. Herman's job is to organize all of Opel's 35,000 hourly workers into Gruppen, or teams. Says he: ''It is clear now to everyone that the management of people is the key to productivity. We're trying to build new cultures together, but we have a long way to go.'' Before taking over Opel last November, Herman reorganized the work force at Sweden's Saab after GM bought a half interest in it in 1989. He cut assembly time by more than half, from a shocking 120 hours per car to a still hefty 57. He also helped reduce daily absenteeism among Saab's laid-back Swedes and Finns from 12% to 8% and annual turnover from 16% to 5%. Herman says the 1994 Saab 900 has been redesigned to be put together in perhaps as little as 30 hours. Saab remains sickly, however. A sales slump has forced the closing of two of its three plants. Losses over the past two years totaled $700 million. Reorganization is critical to improving Opel's productivity because the union got German employers to reduce the workweek from 37 hours to 35 hours by 1995. So far Herman has shifted 44% of the workers into teams of five to 15 people. Besides figuring out how to do their jobs better, the team members learn to balance responsibilities so that one doesn't spend 60 seconds inserting fasteners, for example, when another next to him needs only 45 seconds to tighten them. But progress toward creating teams at Opel's older plants has been slow. Where possible, Herman uses persuasion. But if the carrot doesn't work, he has a big stick at his disposal. Last fall, GM started building cars at its new plant in Eisenach, in what used to be East Germany. When it is fully operational, Eisenach will be able to build 150,000 cars annually -- almost 10% of GM's European capacity. EISENACH REMAINS closed to visitors as it prepares to begin production of the Corsa in May, but Hughes says the plant exemplifies his latest ideas about automation, material flows, and organizing people and machinery. Each of the nearly 2,000 union workers has been handpicked after going through an assessment center that measures social skills along with technical ability. The absentee rate is 2%, vs. 10% at other Opel plants last year. All of Eisenach's workers have formed Gruppen. For now, their take-home pay is only 65% of what their counterparts in the West earn, but the union has won a 26% increase. The plant at Eisenach sends a powerful signal to recalcitrant auto workers elsewhere in Germany. Says GM Europe's top engineer Peter N. Hanenberger: ''Germany is very expensive already. As long as we keep bringing costs down, we can stay here, but you have to question the long term.'' Even at its older German plants, GM is finding ways to improve productivity. At the sprawling complex in Russelsheim, outside Frankfurt, where car production began in 1899, Opel is moving into a postautomation stage by replacing fancy robotized machinery installed in the mid-1980s. Hanenberger has largely banished expensive automatic guided vehicles (AGVs), the motorized platforms that transported engines and cockpit modules between workstations. GM deployed the devices on both sides of the Atlantic, but the costs of installation and upkeep proved ruinous. The AGVs have been replaced by a conventional fixed-conveyor assembly line. GM Europe achieved a 10% increase in output per worker last year. Hughes is aiming for only 6% in 1993 because of the ramp-up of Corsa production. Says he: ''Now that we have Eisenach, we have to make the rest of Europe lean. Period.'' There's good reason to move quickly. Hughes thinks the Japanese will push their market share in Europe from 12% last year to 20% or more by the end of the decade. Other old-line carmakers on the Continent are in some disarray: Volkswagen and Ford of Europe are in the midst of restructuring. Mercedes-Benz is striving to cut costs and product development time. Fiat, Renault, and Peugeot/Citroen, which have long depended on protected national markets, need even more repairs. Observes Hughes: ''We have been warning the industry, you have to get lean. The ones who didn't believe us are really suffering now.'' Hughes continually looks for new ways to sharpen GM's competitive edge. Last fall he led his ten top executives on a five-day Outward Bound adventure in the Swiss Alps. They slept in tents, crossed a river on hand-built rafts, and, at one particularly harrowing moment, lowered themselves by harness from a narrow steel bridge into a 250-foot gorge. ''Horrible,'' engineer Hanenberger, a fit-looking 51, called the bridge descent. On returning safely to the office, though, he promptly ordered up a similar outing for his staff. DAVE HERMAN grumbles that hanging off a bridge ''wasn't a critical moment in my relationship with my co-workers.'' But that hasn't stopped Hughes from retaining a psychologist to train executives in group dynamics. The somewhat mystical nature of the process -- Hughes describes an early session as being ''out of Zen'' -- seems to suit him perfectly. Says he: ''That's what life is all about, having a dream and working towards it.'' And work he does. Hughes spends 25% of his time overseeing International , Operations, which runs all of GM outside North America. There's good news for GM from Japan: It sold 1,564 Opels there in February, passing Volkswagen and BMW to become the largest-selling importer -- because Hughes signed up Yanese, a powerful Japanese distributor, to sell his cars through its 500 dealers. He recently formed an international strategy board of top operating executives that will meet on a different continent every three months. He also belongs to the President's Council -- GM's Gang of Five -- whose other members are CEO Smith, chief financial officer Richard Wagoner, chief counsel Harry Pearce, and executive vice president William Hoglund. Hughes joins its monthly U.S. meetings either in person or via videoconferencing. That's enough responsibility for several people, and Hughes sometimes gives the impression that he's running on pure adrenaline. The payoff, however, is clear enough. If Hughes can accomplish his goals, GM Europe could well add still another name to the ranks of its alumni CEOs in Detroit.

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