GM's $11,000,000,000 TURNAROUND CEO Jack Smith didn't just stop the bleeding. With a boost from rising auto sales, he made GM healthy again. Its best days lie ahead.
By Alex Taylor III REPORTER ASSOCIATE Joyce E. Davis

(FORTUNE Magazine) – BY OUTWARD appearance, there is absolutely nothing remarkable about the president and CEO of General Motors, the world's largest industrial corporation. He is of average height (5 feet 9 1/2 inches) and admittedly overweight at 193 pounds. Despite nagging by his wife, he is prone to sartorial faux pas, such as wearing button-down shirts and wing-tipped shoes with European-style ventless suits. Several friends say that his widow's peak hairline makes him look like the 1960s TV sitcom character Eddie Munster. Even his name bespeaks averageness: John F. Smith Jr. And yet Jack Smith, 56, is engineering the biggest turnaround in American corporate history. In just 2 1/2 years, he has driven GM's core car and truck business back from the brink of financial collapse, overhauled its essential operations, and steered it on down the road not just toward recovery but toward global preeminence. Already Smith's feats rank him with the legendary Alfred P. Sloan Jr., GM's CEO for decades (see box). Cost cutting has been the biggest weapon in Smith's arsenal. Where others tiptoed, he has marched: to close plants, to lay off blue- and white-collar workers, to reduce materials costs, to simplify the product line, to cut way back on special deals and sales gimmicks. But Smith's real achievement has been to find the levers embedded in GM's $188.1 billion of assets and use them to make GM more productive. He has rediscovered the economies of scale in engineering, production, and marketing. "I grew up in the business, and that gives you the confidence that the moves you are making are going to work," said Smith, a 33-year company veteran, during an interview in the CEO's office on the 14th floor of the historic GM Building in Detroit. "You can move quicker if you know this move is going to take a lot of cost out or that move is going to improve your competitive position.'' GM's turnaround violates the conventional wisdom of a whole generation of business people, academics, and (yes) journalists. This quintessential Rust Belt company -- capital-intensive, heavily unionized, slow growing -- has been rescued from the trash heap of history. "If you had told me ten years ago that GM would be in better shape today than IBM, I never would have believed you,'' says Noel Tichy, professor of organizational behavior at the University of Michigan school of business. Smith rescued GM without resorting to the usual bag of turnaround tricks. Nobody so much as whispered "reengineering'' or "total quality management" or any of the other trendy terms in the management consultant's lexicon. Which makes the No. 1 question in Detroit and on Wall Street: Is Jack Smith smart, or is he lucky? For sure, the tides have been running strongly in Smith's favor. He took over as president in April 1992, just as the U.S. auto market was turning up after a four-year decline, and the accelerating value of the yen was temporarily defanging the Japanese. U.S. car and truck sales are expected to reach 15.3 million this year, up from 12.5 million in 1991. In the second three months of 1994, GM, Ford, and Chrysler all made record profits. But sit down with Smith for an hour or so, and you begin to see that this thoughtful, quiet man has made fundamental changes in the way his company operates. Despite its woes, GM has always had the deepest bench in the industry, and under Smith every member of the team is following the same play book for the first time in decades. One illustrative example: GM's chief car designer formerly reported to the corporate vice chairman, which effectively eliminated the need for him to consult with anyone. Now the design boss reports to the head of engineering, and he works closely with product and manufacturing specialists, as well as with marketing personnel, to create new models. Smith also streamlined decision-making and improved coordination by creating a buck-stops-here strategy board, which he chairs. He made a clean break with the past by freely criticizing old mistakes, such as GM's policy of giving rental-car companies deep discounts on fleet sales. And for the first time ever, he began publicly reporting separate financial results for GM's all- important North American operations. At first, the results were dismal. But Smith has led the car and truck business in North America from a $10.7 billion loss (before interest and taxes) in 1991 to a $362 million profit last year. That's an $11 billion swing. Analyst John Casesa of Wertheim Schroder, himself a former GM planner, expects the company to make $1.4 billion this year in North America, after interest and taxes, and up to $2.4 billion in 1995. One leading indicator: After reducing employment in North America by 74,000 people since 1991, GM is hiring again at some plants and for certain technical jobs. Companywide, the results are almost as impressive. After losing $4.5 billion in 1991 and a spectacular $23.5 billion in 1992 (mostly because of an accounting change that required companies to recognize future expenses for retiree health benefits), GM earned $2.5 billion last year. Casesa estimates profits of $4.8 billion in 1994 and $6.9 billion in 1995. This huge swing in earnings has happened even though GM has been losing market share. As recently as July, its share of car sales dropped to 33.4%, vs. 35.5% a year ago. Trucks fell to a 28.4% share, vs. 31.5% in 1993. Sales recovered in August, but factory modernization and production delays have kept GM's share below that of a year ago. In many ways, the company is at the same stage in its turnaround that Chrysler was in 1990. New systems are being installed following a massive overhaul, but the redesigned models that the system will produce are 18 months away from introduction. Even GM's newest models were conceived while Roger Smith was CEO. Nevertheless, "there is more excitement around here than we've had in a long time," says executive vice president Harry Pearce, 52, the veteran litigator who watches over GM's corporate staffs, such as communications and government relations. "It is more than morale; it is a real feeling that people can make a difference. As big as this company is, you can always worry about people feeling they can have any impact, and I sense that this is now not the case.'' What Pearce thinks of as big, the rest of us would call humongous. GM has a worldwide payroll of 710,800. Slightly more than half, or 361,000, work in car and truck operations in the U.S. and Canada -- enough to fill Yankee Stadium six times over or the ranks of Microsoft 31 times. While GM was sinking, its size weighed on it like an anchor. Now that it is rising, that same mass can be used as an offensive weapon to produce real economies of scale. For example, GM markets seven trucks -- Chevrolet and GMC -- through seven independent dealer networks, while Ford and Chrysler have just two distribution channels each. As GM continues to reduce production costs and develop more appealing designs, it will be able to use its distribution strength -- it has 8,600 North American dealerships, vs. 6,000 for Ford, its nearest competitor -- to deliver a large number of cars targeted to specific markets. As GM Chairman John Smale, an alumnus of Procter & Gamble, would put it, the automaker has dominance in shelf space. The company's new energy can be witnessed firsthand at a refurbished warehouse in the industrial Detroit suburb of Warren, where GM teaches manufacturing techniques. Called the Knowledge Center, the warehouse features room upon room of bumpers, suspensions, and other components extracted from competitive vehicles like Fords and Toyotas. The number of workshops staged at the center has quintupled since 1991, and the lessons are sinking in. The front door of the 1995 Chevrolet Cavalier has 50% fewer parts than its predecessor and costs 13% less to build. So how has Jack Smith done it? How has he excavated problems that have taken root over four decades? For starters, he candidly acknowledges the attitudes and behavior that led GM to the brink of bankruptcy. Size and success, he says, led to "complacency, myopia, and, ultimately, decline.'' Money became a substitute for innovation, past successes turned into dogma, and maintenance of the status quo became the measure of success. A giant headquarters bureaucracy, under the paw of the accountants, attempted to coordinate everything but wound up stifling it instead. "'We lost touch with the customer' would probably be the kindest way to say it," observes Smith. Executive vice president William Hoglund, 60, viewed GM's collapse from a variety of front-row seats, including the head of Pontiac and the ill-fated Buick-Oldsmobile-Cadillac group. He speaks heatedly about turf battles, phony accounting, and plain old chicanery. "We used to get the hell beat out of us for lousy profit performance at the divisional level, and then the corporation would come out with great earnings. We never saw the reconciliation of the divisional results with the corporate." By the time Smith became president of GM and head of North American operations in April 1992, the North American business was losing more than $500 million a month. Its costs were the highest in the industry, its factories the least efficient, its car designs the least appealing. Though he wasn't central casting's vision of a captain of industry, Smith nevertheless embodied qualities that were needed to save the company. Because he had turned GM Europe around in the late 1980s by cutting costs, streamlining operations, and developing better cars, he intimately understood the mechanics of a rescue. But because he thought and acted more like a professional manager than an auto lifer, he could take a fresh, unsentimental view of GM's situation. Rather than wax poetic about styling changes or engineering updates -- the product -- Smith prefers to talk about die design or cadenced production -- the process.

MUCH OF SMITH'S self-confidence and common sense can probably be traced to his boyhood job: making and delivering ice cream for eight family-owned "Smithfield" ice cream parlors around Worcester, Massachusetts. Smith started at GM in 1961 after graduating from the University of Massachusetts; his first job was as a payroll auditor at a Fisher Body plant in Framingham. Upon getting his MBA from Boston University in 1965, he moved to GM's finance staff in New York, where he made a mark with his analytical skills and his / early use of computers. In automotive parlance, Smith is a bean counter, not a car guy. But he understands the business from the factory floor up, having begun his career counting metal stampings and body parts in Framingham. With money sluicing out of GM, Smith set "stop the bleeding'' as his immediate goal. Fleet sales were the first to go. GM was selling 800,000 cars a year to rental-car companies to keep factories running and to maintain market share. But after renting out the cars for three or four months, the rental-car companies sold them as used cars with only a few thousand miles on them. As Hoglund noted, customers quickly discovered that they could buy a barely used Cadillac DeVille for the same price as a new Buick Park Avenue, with the obvious effect on Buick sales. Within three weeks of taking over, Smith cut fleet sales from approximately 800,000 cars annually to about 400,000 by the end of this year, at a savings of $400 million. Says Smith: "It looks like an easy decision today, but when we made it, we said 'gulp.' After all, we lost two plants' worth of sales.'' And several tenths of a point of market share. Next came purchasing, which like many other operations at GM was widely dispersed and poorly coordinated. Within his first hours on the job, Smith decided to install as purchasing boss Jose Ignacio Lopez de Arriortua, an energetic Spaniard with whom he had worked in Europe. He also consolidated 27 worldwide purchasing operations into one in Detroit. Lopez squeezed suppliers until they screamed and then squeezed some more. GM estimates he saved $4 billion in 1992 and 1993 because he won big price cuts and got huge volume discounts, which makes slightly more palatable the fact that Lopez subsequently decamped to Volkswagen after first accepting, then rejecting, a big promotion from Smith and took with him trunkloads of secret company data. GM is still pursuing the case in the U.S. and in Europe.

SAVINGS from standardized purchasing cast a spotlight on another GM sinkhole: a wild proliferation of processes, parts, and products that was both inefficient and extremely expensive. Interdivisional strife had allowed individual units to set up their own computer systems and devise their own engineering procedures. Smith declared that henceforth GM would move forward with common parts and common systems. Within weeks, he developed a plan for reducing the number of basic car platforms, from 12 to five. (A platform might be small front-wheel-drive cars - or large rear-wheel-drive cars.) Smith believes new engineering techniques will enable GM to produce individual models with considerable distinctiveness, despite the common mechanical components underneath. Fewer platforms means that GM can operate with fewer engineers, simpler, more flexible factories, smaller inventories, and greater economies of scale. Says Smith: "We didn't need 12 platforms. That's when you go broke." Smith quickly came to feel that he didn't need his headquarters bureaucracy, either. Over two years, he has trimmed it from 13,000 people to 1,300. About half the people transferred elsewhere, and the rest left the company. In another break with the past, Smith declared an end to GM's practice of starting new model programs and then stopping them when money got tight. GM consistently budgeted up to $2 billion a year for development of new models -- and then delayed the cars for a year or more when it couldn't afford to go forward. Says Hoglund: "We had a whole design staff working to create new products that we couldn't afford, so we put them back on the shelf. When we finally came out with them, they were not particularly fresh." Several new Chevrolets being introduced this year as 1995 models, including the Blazer sport-utility vehicle, were delayed for up to three years. By far Smith's most significant contribution to the reinvention of GM has been the creation of a strategy board to run the North American car and truck business. The strategy board is the perfect antidote to GM's old culture of fiefdoms and fighting, because executives in everything from engineering to finance are forced to work together with one common goal in mind. Similar executive meetings were always a hallmark of GM, but they had become as ritualized as kabuki theater -- and exactly that helpful in working out problems. Recalls Hoglund, who sat through hundreds of them in his 36-year career: "We discussed gray-cover reports that had been through so many pre- meetings that there was nothing to discuss. If somebody made a comment about something that did not involve his area, he wasn't being a member of the team.'' On the 14-man strategy board (women and other minorities remain extremely rare at GM's uppermost levels) sit the top executives from manufacturing, engineering, sales and marketing, finance, personnel, logistics, purchasing, and communications. No matter what the issue, it tends to spill over into several functional areas, and the strategy board aims to get everyone involved | in the resolution. The only problem with the strategy board is that it takes so much time that it keeps executives from other duties. Smith tries to focus on strategic and operational issues and keep so-called transactional problems off the agenda. But the board has become a vehicle for everything from business reviews to evaluations of new health care proposals. In 1993 it sat for 600 to 650 hours -- one-third of the work year. G. Richard Wagoner, 41, who took over supervision of the strategy board following his promotion in July to president of operations in North America, describes how the board goes about overhauling GM: "You figure out where the big holes are -- where your costs are out of line or where you are weak in the marketplace. That suggests where you ought to dig. So you get some data together, present them to the board, and kick them around. Some of the issues have been identified by people down in the organization who want to get input from the board. Sometimes there is an issue that affects one area, but you bring it to the board to get it exposed to the other guys. We recently put together a team on health care. They come in every quarter and say, 'Here's what we've been doing, here's our new initiative, here are the early results, here's where we're having trouble, and here's where you didn't support us.' It is so logical. It is not rocket science, but it is changing the way we run the company. It's also fun. You can sit around and crack a joke or two."

For Smith, who hates to give speeches and seldom can be dragged in front of a large audience, the strategy board provides an extremely effective vehicle for leadership. He gets everyone involved in the decision-making in a productive, goal-oriented way. Says Harry Pearce: "Jack motivates people through a humorous, challenging style. He'll catch you kind of off guard with his approach, but he's so incisive about the issues that you know he's onto something. Yet he draws people out because he doesn't intimidate or try to suggest that he's got all the knowledge."

EARLY IN HIS CAREER, Smith was a lot more impatient. Hoglund recalls that he used to "blow everybody aside" in his eagerness to solve problems, a tendency he has learned to temper. Says Hoglund: "Jack understands how to get the organization behind the solution; he doesn't take all the credit himself." Adds Wagoner: "He's humble, and he'll listen to anybody." Despite weak sales when he took over, Smith did not revamp GM's marketing. He didn't fire advertising agencies, execute division heads, or eliminate brands. Even Oldsmobile, the leading candidate for euthanasia, has been given time to develop models that will attract new customers. "A brand is a valuable asset, so you don't want to really fool with it," Smith says. Nor did he jet around the continent trying to rouse his troops. Instead, he has reached out to the work force a few thousand at a time by quietly visiting three or four of GM's 200 plants every month. To communicate directly with senior executives, he organized the top 100 into a leadership council that meets four or five times a year. Smith describes the meetings as "interactive -- not just five guys getting up and making a speech. We take an issue apart and put it back together.'' Smith's goals are clear. He may be unassuming but he is not shy about using the "v" word. As he told shareholders last May, "Our corporate vision is to be the world leader in transportation products and services." Still, the failure to get his message across to all GM employees in the U.S. and Canada may be his single biggest lapse. As he concedes, "It is clearly difficult to push the message all the way down in the organization, and I can't tell you we're there yet." Chalk it up to Smith's inherent unwillingness to be self-dramatizing and all those hours in strategy board meetings. In November 1992, GM's board of directors completed its housecleaning by accepting the resignation of Chairman Robert Stempel, forcing out former president Lloyd Reuss and a few other dinosaurs, and making Smith CEO. Subsequently Smith formed a five-man president's council to oversee the entire corporation. Besides Smith, the council included executive vice presidents Hoglund, Pearce, and Wagoner, and international boss Louis Hughes. As car and truck sales continued to grow, GM's fortunes looked better by the day. In 1993, Smith set a financial target: breaking even, before interest and taxes, on cars and trucks in North America ( which, after those expenses, translates to a $1 billion net loss). By fall of that year, it was clear that a combination of rising sales and plummeting costs would enable GM to hit the mark. Smith decided that the bleeding had been stopped. Now it was time to move to the next stage of GM's turnaround: execution -- that is, getting the realigned organization to actually perform at world-class levels. Execution sounds simple, but it never is at GM, where a plethora of divisions, agendas, and egos makes it extremely difficult to get things done. Size and complexity have a price, and GM pays double or triple the going rate. Says Wagoner: "We probably have been as good as anybody with new ideas and concepts, but we have not implemented them well across the company. We need to make our people understand that the premium is on executing because that's what the customer sees and what flows to the bottom line." While it took roughly 18 months to stop GM's bleeding, Smith figures getting execution right will take until the end of the century. He is setting very high standards. For instance, by 1996, he wants GM to be making the best- quality cars and trucks sold in the U.S. For the 1993 model year, Chevrolets, which account for half GM's sales, had twice as many defects as Toyotas, the industry's quality leader, as measured by J.D. Power & Associates. So did Pontiacs, though GM's higher-priced brands -- Cadillac, Buick, and Oldsmobile -- all had above-average quality. Boosting quality is the ultimate challenge. As Wagoner points out, "When quality improves, the defects you are trying to fix get smaller. " Smith also wants GM to challenge Toyota in manufacturing productivity. That job will take five or six years because it will require GM to tear up a good chunk of its manufacturing operations, mostly in stamping and components, and reorganize them for greater efficiency. Like the rest of the auto industry, GM is moving away from traditional assembly lines into smaller working units known as cells, where workers get more opportunity to design their own processes and thus improve output. But the transition is causing GM a good deal of grief, since the plant redesign is slowing the launch of new models. Growls Pearce: "It is hard enough to get all those new programs in sync with newly put together flexible manufacturing facilities at the same time we are shrinking total production. Then we have to explain to the world why this will hurt our market share in the short term. We can't do what we used to around here to satisfy the analysts, which was to pump out a lot of volume of poor quality." There is considerable talk of Toyota at GM because Smith is pushing his company into benchmarking in a big way. Every new operation must be benchmarked against the best in class, and the class is not restricted to car manufacturers. Says Pearce: "I don't think we in the auto industry make very good benchmarks of anything." GM has a core group of ten people who help coordinate its worldwide benchmarking activities.

DON'T CONFUSE benchmarking with management by the numbers. At the old GM, financial yardsticks were used to measure everything -- whether the measurements were meaningful or not. The company created profit centers as far down as individual models. Enormous amounts of time were wasted arguing over transfer prices and allocations of overhead, which, given GM's size, had more impact on a car's profitability than whether customers actually liked it. Hoglund recalls that the Chevrolet division earned more money making Pontiac Firebirds and selling them to Pontiac than it did selling Chevy Camaros to its own dealers. As Smith has said, that kind of internal competition for resources and rewards "is clearly a formula for disaster." Now the only profit center is North America, where all resources and functions are concentrated. Adds Smith: "The leaders of each area of the vehicle business are working toward the common goal of positive financial results for all of North America rather than just the individual units." With that in mind, GM has begun to look at the numbers a little differently. The main financial goal for North America is return on net assets, known around GM as RONA. In analyzing individual car lines, GM computes what it calls the structural costs -- how much the car costs to build at various levels of factory capacity -- and the contributio n margin what the price should be to achieve a balance between volume and profit margins. Says Wagoner: "We've tried to get around the allocation and transfer-pricing issues and get a clear glimpse from the market of what price we can sell a Cavalier for." That same kind of all-for-one thinking permeates GM's new model-planning process as well. Not even a junior brand manager at Procter & Gamble would have mismanaged GM's product line as badly as GM did in the 1980s. It allowed divisions to market nearly identical cars to nearly identical customers. Thus, Pontiac and Chevrolet went wheel-to-wheel for younger buyers, while Buick and Oldsmobile dueled for the sixtysomething crowd. The most elementary market research sometimes counted for less than the preferences of middle-age, white GM engineers. Smith created a disciplined process to end the model-line cannibalism. Every new car or truck has to hit one of 26 precisely defined market segments -- small sporty cars and full-size pickup trucks, for instance -- and no two vehicles are allowed to overlap. In the case of some especially large segments, such as midsize sedans, multiple GM entries are allowed, but they have to be clearly differentiated by, say, sporty or conservative styling. So when a Buick Regal was proposed that looked too much like a Pontiac Grand Prix, it got sent back for redesign, lest it eat into Pontiac's customer base and miss some of Buick's. Says Hoglund: "In the old days, we wouldn't have made that change. We would have said, 'Nice job, Buick.' But now Buick is making a product for a GM portfolio, not just for Buick.'' Acting as the filter for all design ideas is the newly created launch center at GM's engineering headquarters north of Detroit. Teams of engineers, designers, and marketers evaluate car and truck proposals for cost, compatibility with other GM products, and marketability. Says launch center boss Jerry Collins: "This allows product engineers and manufacturing specialists to become an extension of the design teams and to apply their skills and knowledge to take costs out of the system." There is no better demonstration of GM's turnaround than the remarkable improvements in the design and manufacture of new models. The midsize cars like the Oldsmobile Cutlass Supreme that GM introduced in the late 1980s represented its nadir (see table). Known as the GM-10s, they were so inefficiently engineered and so poorly received by customers that GM has lost about $2,000 on every one it has sold. But the GM-10 replacements, which will begin to arrive in 1997, were developed in half the time for one-third the money, and analyst Casesa believes GM could make a profit of about $1,800 on each. By Casesa's calculations, that could produce an earnings swing of nearly $2.5 billion on one car line alone.

WHERE DID ALL the improvements come from? By using common parts and common systems, GM reduced the number of potential variations of each model and enabled several models to be built in the same plant. The predecessor cars were built in plants dedicated to a single model or two, plants that seldom ran at full capacity. Disciplined work at the launch center has simplified the die-building process and accelerated the development time, which was exceptionally long for the earlier models. And the new manufacturing techniques taught at the learning center helped engineers reduce the number of parts per car, as well as create a vehicle that is easier to assemble. Through 1993 and into 1994, Smith ground away at GM's problems. Instead of driving himself to the office from his home in woodsy Bloomfield Hills, he opted for a driver so he could work en route. He arrives at his desk at 7:30 a.m., and typically remains there until 6:30 p.m. A couple of days a week, he tries to skip lunch and work out in a small gym in the building, but he notes self-consciously: "Usually I just skip lunch and don't work out.'' At home in the evening, Smith spends another 90 minutes going through the mail. "You can really get some tough days when you have a tremendous demand on your time," he says. "You don't have time to breathe; you don't have time to think. I don't think that's good. That's overload." Displayed prominently on a credenza behind Smith's desk is an ornate stone with the following inscription: "A leader is best when people barely know he exists. Not so good when people obey and acclaim him. Worse when they despise him. But of a good leader who talks little, when his work is done and his aim fulfilled, they will say, 'We did it ourselves.''' The words are from the Chinese philosopher Lao-tzu; the stone is a gift from Lou Hughes. Despite the demands on his time, Smith had intended to stay on as head of North American operations until the end of the year. But when Hoglund decided to retire this fall, Smith changed his mind and turned North America over to Wagoner. A Harvard MBA and, like Smith and Hughes, a graduate of GM's New York treasurer's office, Wagoner combines Smith's quiet self-confidence with superb analytical and presentational skills. The changeover allows Smith to spend more time on the rest of GM: its overseas automotive operations, Hughes Electronics (where his younger brother, Michael, is vice chairman), Electronic Data Systems, and GMAC. For all the enormous changes Smith has put in motion, he and others say the turnaround at GM is only about half done. Return on sales reached just 2.7% in the second quarter, little better than half the 5% benchmark Smith has set for the long haul. The new market segmentation system is unproven. GM's giant unfunded pension liability ($22.3 billion at the end of 1993) has helped undermine a balance sheet that now gets the company a less-than-sterling credit rating. Layoffs have left GM with both a very old work force (average age: 46) and towering costs for retiree health care. And the United Auto Workers union resists nearly every company attempt to modernize by strategically shutting down plants. % Morevoer, prominent vestiges of the old GM remain. Ex-CEO Stempel helped engineer a joint venture with a GM supplier on whose board he sat, while ex- president Reuss keeps an office at GM's engineering center. Some managers still exude the same mixture of arrogance and infallibility that got GM into trouble in the first place. Says Pearce: "I constantly worry that we will slip back into the complacency that got us in trouble in the past. We work every day disabusing people of the notion that we have this thing fixed." As the University of Michigan's Tichy points out, success has always proved troublesome for GM. When the profits roll in, spending goes haywire, discipline disappears, and the company acts as if the economic cycle has been repealed. Smith knows that GM must squirrel away sufficient cash during the current sales surge to sustain it during the inevitable downturn in the cycle. While its other sectors are strongly profitable and the overseas operation is booming, nothing has the potential to spew cash like North America. GM also needs a strong market into which it can launch its redesigned cars. New cars are like almost new products: They have a limited shelf life, and if demand is weak when they first appear, they can fade away without ever reaching their potential. Still the world's largest industrial corporation is, contrary to many expectations, on the road back to health and even to prosperity. Its experience raises a couple of interesting questions. One: Could Jack Smith move on to turn around another company? The answer is probably no. Restructuring by cutting costs, selling assets, and streamlining operations is relatively simple. You get rid of what doesn't work. But carefully manipulating the internal machinery of a giant corporation -- coordinating, realigning, simplifying -- to get it running smoothly require the skills of a master mechanic. Someone who has spent years with just this machinery. Question No. 2: could anybody besides Smith have turned GM around? Again, the answer is probably no. Smith succeeded where his predecessors failed because he understood GM intimately yet was sufficiently removed from its day- to-day operations to see where it was broken. In rescuing GM, the young man who started as a payroll auditor in a Fisher Body plant has done the job he trained all his life to do. Besides, Alfred P. Sloan Jr. wasn't available.

BOX: 5 TURNAROUND TIPS FROM JACK SMITH

-- Establish a vision for the whole company. ! -- Set clear expectations for performance at each level of the organization.

-- Construct realistic strategies that don't require rocket science.

-- Develop the capability to execute by reorganizing people and reallocating assets.

-- Focus everything -- all assets, all decisions -- on your customers. They are the ultimate arbiters of success or failure.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: Slightly deceiving numbers? All but $2.6 billion of 1992's loss was due to an accounting charge. The $11 billion swing is in GM's North American auto business.

CHART: NOT AVAILABLE CREDIT: SOURCE: WERTHEIM SCHRODER CAPTION: WHY GM IS GAINING SPEED Initial models of the Chevrolet Lumina, Pontiac Grand Prix, Oldsmobile Cutlass Supreme, and Buick Regal lost money. Their successors will be very profitable.