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GM merging divisions
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October 6, 1998: 11:02 a.m. ET
North American, International units to be combined; Wagoner named president
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NEW YORK (CNNfn) - General Motors Corp. Tuesday confirmed it will merge its North American and international automotive divisions under a new global organization that will bring down costs and speed up production time.
The new global organization, GM Automotive Operations, will be comprised of four regions and will be supported by a consolidated strategy board that will take the place of several existing boards, councils and alliances.
Detroit-based GM, the world's largest automaker, named G. Richard Wagoner Jr. to head up the new division.
Wagoner, who currently is president of GM's North American automotive operations, also was selected Monday as GM's new president and chief operating officer, making him the likely heir apparent to Chief Executive John Smith.
Smith will retain his chairman and CEO titles under the restructuring.
"Coordination of global decisions between these two entities has required a lot of meeting time and travel time," Smith said. "We've had to create a number of ad hoc forums and alliances to bridge these two organizations together on specific programs and strategies. The resulting structure and processes do not enable us to make decisions as fast as we want to run, and the way we can run, to respond to the competitive challenges in our industry."
GM Automotive Operations will consist of four regions: Asia/Pacific, Europe, North America and Latin America/Africa/Mid-East. Each will be led by a regional president who will be responsible for all operations in that area and will sit on the strategy board.
The reorganization is part of GM's long-term strategy to reduce the time and money GM spends on new models. Its newly announced consolidation largely mirrors the reorganization that Ford Motor Co. (F) implemented four years ago.
GM, which has the highest production costs of Detroit's Big Three automakers, has been eager to cut costs in the face of growing competition and industry-wide consolidation, such as the recent merger between Chrysler Corp. (C) and Daimler-Benz (DAI).
"Intense competition, diverse global markets and the speed with which the world is changing politically, economically and technologically call for a faster and leaner General Motors," Smith said. "We are moving swiftly to a delayered and simplified automotive structure, one that more clearly identifies leadership and accountability for performance."
However, analysts say streamlining GM's U.S. and overseas operations may be easier said than done.
GM, for example, could save hundreds of millions of dollars by designing a single family of engines that could be used at home and abroad. But other issues, such as styling, may be more efficient if they remain separate.
"On paper, it could make GM more efficient, but what may work in terms of an engine may not work in terms of styling," said Burnham Securities analyst David Healy.
GM has about 14 global vehicle platform, the basic chassis for an automotive vehicle. Recently, Smith said the company would like to cut that number in half.
Earlier this year, GM shifted the International Operations base to corporate headquarters in Detroit from Zurich, Switzerland, and announced plans to cut its European workforce of 86,000 employees by 20 to 30 percent over the next five years.
Shares of GM (GM) were trading up 11/16 at 54-7/16 on the Big Board following the announcement. 
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General Motors
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