Jack Smith: Leading, quietly, toward a global business plan

After boardroom coup elevated him to CEO, he trimmed waste and launched key initiatives

Retired General Motors Chairman Jack Smith enjoys great personal respect and admiration within GM.

"You hate to say somebody is your favorite, but Jack has probably been the favorite executive that I've dealt with at GM, as far as leadership style and ability to drive the organization," said Bill Lovejoy. Lovejoy, 68, retired in January 2003 as group vice president of GM vehicle sales, service and marketing.

Lovejoy and other admirers give Smith credit for possibly keeping GM from going bankrupt after the 1990-91 recession, when it faced falling market share, high costs, too much capacity, stubborn quality problems and little integration across GM global operations.

Sound familiar? Some critics accuse GM of the same faults today.

"We easily could have gone out of business in the early '90s. It was that serious," says Larry Burns, GM's vice president for r&d and strategic planning.

Burns said Smith faced his problems in such a manner that "every person would walk off the edge of the Earth for him. And it wasn't because he was out there giving speeches to 'Win one for the Gipper' or anything like that. It was because of his character."

From an outside perspective, Smith's tenure was a mixed success, starting almost from the moment he became CEO in 1992. He was CEO from 1992 to 2000, and chairman from 1996 until he retired in 2003.

The boardroom revolt

Ironically, the decidedly unflashy Smith was swept into the CEO office in a high-profile boardroom coup that was national news. It was led by GM's outside directors, who had lost patience with Smith's predecessor, Bob Stempel.

Smith soon faced new problems.

His global purchasing chief, J. Ignacio Lopez, nearly started a war with GM's suppliers by imposing unilateral price cuts. Lopez defected to Volkswagen AG. Then GM accused Lopez of stealing GM documents, which Lopez denied.

And Smith had to kill a plan for GM to buy out and operate dealerships, which had GM dealers up in arms.

In a recent interview, Smith pointed out that on his watch and under Lopez, GM centralized its worldwide purchasing function, similar to the way Smith and Lopez had run purchasing in Europe. That was a major milestone toward achieving Smith's "run common, run lean" strategy.

"Recognizing that we had all different, separate and different purchasing organizations in North America, this was part of getting common," Smith said. "We went from — we must have had 25 purchasing centers in the U.S. at that moment, and we went to one."

GM's long market share slide continued under Smith. There were plant closings and ongoing rounds of restructuring.

Important initiatives

But GM insiders and some outside analysts give Smith, now 70, credit for overcoming GM's notorious inertia, for getting the ball rolling on several important initiatives and getting GM headed in the right direction.

"Run common, run lean" heads the list. Smith left that effort as a work in progress for his handpicked successor, Rick Wagoner, and got GM headed in the right direction. Today GM is saving money by sharing global product architectures and parts across brands and across regions of the world, summed up in the catchphrase "go global."

GM established a solid foothold in China under Smith, even though he was criticized at the time for pursuing a "distraction." GM and its partners last year became China's first foreign joint venture to sell more than 1 million vehicles in a year. More Buicks were sold in China than in the United States last year.

On a personal level, Smith made GM's top-level management more accessible, more accountable and more transparent.

Dave Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich., characterized Jack Smith as a "classic, coaching-style manager." Lovejoy said Smith was good at delegating responsibility, giving his lieutenants the tools to do the job and refraining from micromanaging.

Started at Fisher Body

Jack Smith started his GM career in 1961 at the Fisher Body plant in Framingham, Mass., not far from his hometown of Worcester. Smith never lost his Massachusetts accent or his New England Yankee distaste for big talk.

He was transferred to the financial staff in the New York office in 1966 and became GM comptroller in 1980. In a crucial appointment for his future career, he became director of worldwide product planning in Detroit in February 1982.

In that job, Smith — like so many other students of lean manufacturing — learned from Toyota Motor Corp. some of the lessons that he later would put into practice at GM.

Smith was a GM liaison with Toyota when the two companies formed New United Motor Manufacturing Inc. in Fremont, Calif. Discussions began in 1982, and production started in late 1984.

"We looked up one day and said, 'These (Toyota) guys have eaten our lunch,' " said F. Alan Smith, 77. Smith, no relation to Jack Smith, is a former executive vice president and CFO who retired from GM in 1992.

"They had good cars, good products at a good price. They beat us the old-fashioned way, with true lower cost," he said.

Learning the Toyota way

Jack Smith led the effort to find out how Toyota did it, down to specific details like "how many hits per part with a stamping press," and how Toyota achieved fast die changes to avoid down time, F. Alan Smith said.

A key to Toyota's success is that there's only "one Toyota, everywhere in the world," Cole said. In contrast, GM by the early 1990s had evolved into almost entirely separate companies, in North America, in Europe, in Australia and elsewhere around the world.

In an interview at the Detroit auto show last January, GM Vice Chairman Bob Lutz said that just about the only place GM existed as an integrated company was in the consolidated financial results.

"There was monumental waste," Lutz said.

For instance, he said, GM produced at least five different mid-sized cars similar in size and concept to the Chevrolet Malibu — each of them developed separately.

Jack Smith said there were at least five ways of doing things in North America alone. "When I came in as CEO, North America was a huge collection of technical centers and manufacturing operations that were run separately, and they were not common. So we put a big focus on getting to one engineering center from having five or one way of manufacturing vs. five — this is North America," Smith said.

"And then ... we recognized that one day we would have to do it for the whole world because Europe was running separate, and South American operations were running separate. And, eventually we knew we had to get to a global, common system. So that has happened over time."

Legacy continues

Cole said that under Jack Smith, GM took an important step in the right direction with the first Epsilon platform, which shared some components among GM's global subsidiaries.

Under Wagoner, the second-generation Epsilon platform includes the current Malibu and many other derivatives, with much greater ability to spread costs over a bigger volume of cars.

The E-1 or first-generation Epsilon "was a major step forward, a learning experience," Cole said. "Rick Wagoner has taken the basic philosophy of Jack Smith and really fine-tuned it appropriately."

Cole said GM has the potential to become "extraordinarily profitable" if it can execute the vision of flexible factories that can switch models faster to meet changes in demand. If that happens, he said, "We're going to recognize Jack Smith as one of the architects."

You can reach Jim Henry at autonews@crain.com.