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GM and me (pg. 2)

By Alex Taylor III, senior editor
Last Updated: November 25, 2008: 4:32 PM ET

As a business reporter, I worked alongside future stars like Fortune's Allan Sloan and began to inhale the auto industry on a daily basis. Henry Ford II was king of Detroit, making news whenever he appeared in public. He fired Ford president Lee Iacocca in 1978 with the famous line, "I just don't like you." Iacocca landed at Chrysler in a matter of weeks and went on to lead its successful campaign for a government bailout - the first for an auto company - a year later.

* * *

At GM, conformity was everything, and rebellion was frowned on. I encountered former GM executive John Z. DeLorean in 1979 after a book appeared that he had co-authored and then disowned before publication. Flamboyant by Midwest standards with sideburns, turtlenecks, and flashy girlfriends, DeLorean gained renown developing muscle cars like the Pontiac GTO. He also took an adolescent's delight in flouting GM's rules and was pushed out of the company in 1972.

Seven years later he'd lost none of his desire for attention - poster-size picture of him shirtless with his young son hung in his New York office - but nothing else about him seemed out of the ordinary. He certainly faded after he left GM. His sports car company collapsed in a swamp of recriminations, and he was arrested in 1982 for drug trafficking (he was acquitted of those charges). The last time I saw him, he was sitting on a bench in New York's Central Park, seemingly in no hurry to be anywhere in particular. He didn't seem like much of a revolutionary to me, but at GM they've never forgotten him.

In 1980, I left Detroit for New York City and a plum job writing for the business pages of Time. Under the newsmagazine system, I depended on our local correspondents to report on the industry. I would still go back to Detroit on special assignments and to visit my in-laws. (My wife, Mary, grew up in the city, and we married in 1983. Both her father and her sister worked for GM.)

By then GM had found a chief executive who actually understood the company's problems and was willing to try anything in order to fix them. As a candid internal review of the company, published by the General Motors History Project, points out, GM was still making decisions under the same basic structure that had been put in place 50 years earlier, and it was falling behind.

Chairman and CEO Roger Smith, having risen through the ranks, knew that better than anyone. It was easy to caricature Smith, a finance specialist, as a company apparatchik - and an annoying one at that, with his squeaky voice and pushy manner. When I interviewed Smith, he was always approachable and agreeable, though people who worked for him considered him a petty tyrant, demanding and intolerant of dissenting ideas. A lot of them chuckled at the 1989 movie Roger and Me, in which Michael Moore made vicious fun of the company's travails.

But Smith was a big thinker, and he understood that GM had become too complex and slow moving for its own good. Smith kept us reporters on our toes. He was full of innovative ideas for upending the status quo at GM - but some were badly thought out, and others were badly implemented. To make GM more computer-savvy, Smith bought EDS and got its founder, Ross Perot, on his board of directors; Perot heckled Smith constantly until Smith persuaded him to leave. Smith conceived the Saturn division as a moon-shot effort to find a revolutionary way of making and selling cars, but Saturn turned out to be short of new ideas and never got airborne. Smith spent billions to automate GM's factories with robots. Usually robots permit a car company to produce several different models in a factory. But GM, wanting to keep things simple, configured its plants to produce just one or two models - and ended up with a system that was no more efficient than the old one.

Smith re-arranged North American operations to modernize GM's manufacturing, and paralyzed the company for 18 months because he destroyed the informal networks that actually got the work done in the highly bureaucratized company. The notorious "reorg" so traumatized future CEOs that they never again attempted anything so radical.

* * *

Smith's worst mistake was in not grooming a broad-gauged manager to succeed him when he retired in 1990. Instead the job went to Robert Stempel, a well-liked engineer who came in at a bad time. Market share had declined precipitously under Smith, falling from 43.5% to 35.5%, and the recession of 1990-91 ravaged the company, leading to massive plant closures and layoffs.

The pressure on Stempel was enormous, and he didn't handle it well. Stempel's face would turn red when he got angry, and he visibly worked to control himself. I was the target of his pent-up rage on several occasions. Once I was forced to sit and listen while he read one of my articles aloud, correcting me on every point with which he disagreed.

Under Smith and Stempel, and future CEOs as well, GM was in perpetual turnaround. Time after time it promised that it had finally learned how to make cars that people really wanted to buy and would have them at dealers soon. One critic called it the "maana company." Trouble is, even when GM got the newest 25% of its product line to be competitive, the remaining 75% had to be disposed of at fire-sale prices.

At a Chicago auto show luncheon during the Stempel era, a top executive ordered the lights dimmed so that he could dazzle the audience with images of a seemingly endless number of new Buicks, Oldsmobiles, and Chevrolets. It was a challenge just to stay awake. By the end of 1992, Stempel and his cadre of executives were gone, pushed out by a board of directors' revolt led by retired Procter & Gamble CEO John Smale and board counsel Ira Milstein.

Moving to head the company came an all-new team led by another finance guy named Smith, but one who understood foreign competitors like Toyota, had worked successfully abroad, and wasn't afraid of independent thinking. Jack Smith avoided the media at first, but once he began giving interviews he became a favorite of many reporters, me included. He displayed not a scintilla of ambition or ego, and his relentless common sense, combined with wry humor, won me over. That admiration led to a Fortune cover story in 1994 proclaiming Smith a genius in a gray suit and GM on the road to recovery.

Company Price Change % Change
Ford Motor Co 8.29 0.05 0.61%
Advanced Micro Devic... 54.59 0.70 1.30%
Cisco Systems Inc 47.49 -2.44 -4.89%
General Electric Co 13.00 -0.16 -1.22%
Kraft Heinz Co 27.84 -2.20 -7.32%
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Treasuries 1.73 0.00 0.12%
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