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What's Bad For General Motors...


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WHAT'S BAD FOR GENERAL MOTORS...

It's not as though the problems that prompted the Oct. 26 resignation under fire of General Motors Chairman and Chief Executive Officer Robert C. Stempel are anything new. The giant carmaker has lost $12 billion over the past two years in its North American operations. But when Stempel took over the top job on Aug. 1, 1990, the giant that had long dominated the U.S. auto industry was already in a pickle. The problems that beset the auto maker have been clear for years and have been cussed and discussed by many observers--ourselves included, in a Mar. 16, 1987, cover story.

In the intervening years, GM management and its board of directors laid the blame all mver the place--except on themselves. It was Washington's fault for restrictive fuel standards and antipollution regulations. It was the fault of organized labor for digging in its heels to protect jobs. It was Japan's fault for unfairly pricing cars to gain a big chunk of GM's market share. There was a grain of truth in some of these charges, but the fact is that the real cause of GM's woes has been the mistakes of its own management. And they have been whoppers:

-- Misguided philosophy. In the 1980s, Ford, followed by Chrysler, embraced on the shop floor Japanese-style teamwork systems that gave workers more decision-making power over their jobs. These techniques brought about substantial improvements in quality and productivity and helped make Ford and Chrysler competitive with Japanese rivals. But GM, with its hidebound managerial attitude, instead poured more than $60 billion into automation. When it belatedly tried teamwork systems--especially with Saturn--it at least matched the performance of its competitors. Perversely, General Motors management has been slow to adopt the Saturn example at its other assembly plants in the U.S.

-- Misguided diversification. In the early 1980s, on the watch of then-Chairman and CEO Roger B. Smith, GM went on an acquisition binge in pursuit of diversification. The company coughed up over $8 billion to buy Hughes Aircraft and Electronic Data Systems. While both are contributing to profits at the sorely strapped GM--which had to borrow $6 billion on Wall Street since the beginning of 1991, partly to cover operating costs--heavy auto losses are soaking up much of that money, which could have been better used in the core business. Those heavy losses in the auto business reflect, among other things, management's failure to cut costs.

-- Misguided product development. Everyone knows GM can produce terrific cars. Look at the Saturn, at the new Cadillac Seville, at the Buick Park Avenue, at GM's excellent product line in Europe. But for every plum, there are too many lemons. The once-proud Chevrolet Motor Div. badly needs new models, and its restyled Caprice four-door sedan has been reduced to an industry joke. And Chevrolet's Lumina has not proven to be a strong rival to Chrysler's lh car or Ford's revamped Taurus.

All of these problems were the result of the inflexible mind-set of GM's management. And the board must accept its share of the blame. Ironically, Stempel was a paragon of flexibility, while Smith--the embodiment of the old, rigid ways--still sits on the board that made Stempel the goat.

Let's hope that the new CEO, whoever it is, gets on with the job of restoring GM. Since one out of every seven jobs in America stems from the auto industry, this is an assignment critical to the nation's health.


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