Under Jack Smith, things began to hum
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After staggering losses in 1990, 1991 and 1992, the company made a profit in 1993 and stayed out of the red through 2004. Yes, the recovery owed much to rebounding market conditions overall and surging sales of high-profit trucks in particular. But the directors' action had laid the foundation for a leaner, more streamlined and cost-effective organization.
The link between the board coup and the improved results was the new president and CEO, Jack Smith.
From his first day as president — April 7, 1992 — Smith showed why he had a reputation for getting things done. His first meeting that morning was with Mark Hogan, head of truck product planning, part of a rump group of midlevel planners and managers who had put together an unauthorized blueprint for restructuring GM.
Smith wanted to carry out the plan.
'Fundamental Change'
The plan, "Fundamental Change," called for the creation of a North American Operations strategy board to tie the seven domestic marketing divisions and the various operating groups into a better-functioning whole. Smith had used a similar setup with success at General Motors Europe as president in the 1980s.
"He called me because he knew that I knew how the strategy board worked in Europe, and he asked if I could help him put it together here," Hogan, now 57, recalled in a May interview. "So he made me director of business planning for the NAO strategy board."
CEO Bob Stempel, who would resign under pressure that October, had seen the plan in early 1992 and given it lukewarm support. Such a reorganization would require two, possibly three, years to enact, he told the group.
But Smith had the board up and running at the end of his first week, kicking off months of 18- and 20-hour days and six- and seven-day workweeks as the group got into the nuts and bolts of fixing the company.
Action came at a lightning pace. On April 24, just two weeks after the NAO board's first meeting, Smith announced the dismantling of the dysfunctional Chevrolet-Oldsmobile-Pontiac and Buick-Oldsmobile-Canada car groups. Stempel had planned to phase them out over a couple of years.
The new order
The two groups had been created by former CEO Roger Smith in the mid-1980s, in what many considered an enormous blunder.
The plan was intended to give responsibility for small cars to GM's Chevrolet, Pontiac and Canadian divisions and responsibility for large cars to the Buick, Oldsmobile and Cadillac units. But it quickly resulted in miscommunication, confusion and costly duplication of effort among the divisions.
In place of the car groups, Jack Smith set up a one-stop centralized engineering and manufacturing organization to oversee all North American production.
Similarly, oversight of the seven marketing divisions, including the semi-independent Saturn, was put under a sales and marketing chief, as was purchasing, which became a global function.
Smith also dismantled GM's layered committee structure, which had required multiple approvals of requests and slowed decision-making to a snail's pace. Now decisions on North America would flow to the 14-member NAO strategy board, while GM corporate decisions would be made by a five-member President's Council.
Putting it all together
"Until the NAO reorganization, there were a lot of things that the car division general managers got together and worked out" themselves, recalls Mike Losh, who headed Pontiac and Oldsmobile in the 1980s and who became the first head of NAO marketing. "Now, at last, we had a formal organization catching up with what the informal organization had been trying to do."
Meetings of the new board began at 7:30 a.m. daily and, in the early months, could last all day. Issues ranging from reducing the number of platforms to unwinding unprofitable rental-car deals to slashing the headquarters head count were tackled and resolved.
The key to the board's success, recalled a participant in those early meetings, was Jack Smith's insistence that all opinions were welcome and were to be aired freely, and that decisions were to be made quickly.
"We'd always have six or eight things that we were going to do," F. Alan Smith, who retired in late 1992 as executive vice president, recalled in an April interview. "We couldn't leave a meeting until the list of priorities was decided on. So here we had the leader we had needed."
But one important area — product development — proved to be beyond Smith's ability to fix definitively.
Said Hogan: "That was something Jack wrestled with his entire tenure. I think that we're starting to see the fruits of a product development process that is fixed and is working, but it took more than 10 years from '92 to get things back in order."
