Bob Stempel: A first-rate engineer who rose to the top in tough times

Tenure as CEO was complicated by thorny problems: Reorganization, recession, falling share

In January 1958, a 6-foot-4-inch former college football center walked into Oldsmobile's Lansing, Mich., headquarters with engineering drawings under his arm.

"I knew right from the time I started talking with him that I wanted to hire him," said George Jones, former Oldsmobile product engineering chief, in the book Setting the Pace: Oldsmobile's First 100 Years.

"I started picking his brain a little, (asking) him how much money" he wanted, said Jones. "He said, 'Mr. Jones, I'm not looking for any particular job. What I really want is an opportunity.' "

The young engineer looking for an opportunity was Bob Stempel, who would become one of the most influential engineers in General Motors history.

Stempel moved up the corporate ladder in the glory days of GM's market dominance, but later found himself at the top of a corporation facing unprecedented global competition, mounting financial losses and an impatient board of directors. The last would be his undoing.

Early days

Stempel was born in 1933 in Bloomfield, N.J., the son of a banker and a homemaker. He began to tinker with cars as a youth. He won a few local drag racing trophies and worked summers in a service garage.

After college at Worcester Polytechnic, a small, private technical school in Worcester, Mass., he joined General Electric Corp. and then the Army Corps of Engineers.

After hiring on at GM in 1958, Stempel quickly established himself as a hard worker in the drafting room of Oldsmobile's chassis department. He came to work early and stayed late. He took business classes to round out his skills.

In the early 1960s, Olds management asked Stempel to design the front suspension and develop the engine and transmission mounting system for the 1966 Oldsmobile Toronado, the first front-wheel-drive car to be built in the United States in nearly 30 years.

The car was a success, and Stempel rose rapidly within Olds' engineering ranks.

Catalyst for the converter

Stempel's hard work and talent were noticed by senior executives. President Ed Cole picked Stempel to coordinate work on emission control devices that led to development of the catalytic converter.

Cole "said he had to have somebody at the division level who could work with the product development and research people to find out which catalysts are really going to work," Stempel said.

Stempel's job was to oversee the development of GM's version of the device and put it into GM's lineup. He also had to communicate the benefits of the device to various audiences.

GM staged a press conference in a Cadillac dealership in New York and put three converter-equipped vehicles up on hoists. Stempel deftly explained the complex exhaust system to the media in layman's terms, recalled a colleague.

To observers, it was clear that Stempel's easy manner, think-on-his-feet communication skills and technical knowledge would put him on an accelerated career path.

In 1974, GM appointed Stempel chief engineer for Chevrolet engines and components. In 1975, he became director of Chevrolet engineering. His job was to downsize Chevrolet's lineup of large vehicles and sell dealers on the smaller, more-fuel-efficient replacements.

Bruce MacDonald, a former GM public relations executive, said Stempel organized his department into teams and relied heavily on the strong skills of his vehicle engineering managers.

Stempel recognized Chevy needed more planning, and he set up a war room filled with information on future product plans for Chevrolet and its competitors, MacDonald said. "He was not comfortable with Chevrolet being the No. 1 brand; he was looking out for what was coming."

In November 1975, Stempel's personal life took a perilous turn. His 13-year-old son, Timothy, was kidnapped at gunpoint. The press agreed to hold off on covering the incident until the boy was returned. Later, Timothy was rescued from the trunk of a car, and the kidnappers were caught. Colleagues said the incident made Stempel more closed about his life outside GM.

Having received a master of business administration degree from Michigan State University in 1970, Stempel was more than qualified for his first nonengineering position as general manager of Pontiac in 1978. At Pontiac, Stempel won approval for the 1984 Fiero, a fuel-efficient midengine sports car.

In 1980, GM sent Stempel to Europe to run its Opel unit in Germany. At Opel, Stempel began to see the need for a global GM that would become more efficient by sharing engineering and product resources.

Chevy's GM

In 1982, he returned to the United States to become general manager of Chevrolet. The country was mired in recession, and the auto industry was under heavy pressure from imports. GM and its domestic competitors closed plants and laid off thousands of workers.

Stempel relied heavily on his managers and held them to high standards. Guy Briggs, former Chevrolet manufacturing manager and later GM group vice president of North America manufacturing and labor relations, recalled when GM stopped hot-testing every engine and went to "audit tests" of select engines during the important launch of the redesigned 1984 Corvette.

"Are you confident this is going to work?" Stempel asked Briggs.

"Yes sir," said Briggs.

Then, according to Briggs, Stempel put his massive finger on Briggs' chest and said: "Because if we have a problem with the Corvette engine, I'll know who to come to."

In addition, Stempel brought motorsports into the mainstream of Chevrolet's product development and marketing programs.

Reorganizing the giant

In 1984, Stempel and fellow engineer Lloyd Reuss were asked to head two groups of vehicle divisions. Stempel led the Buick-Oldsmobile-Cadillac Group; Reuss ran Chevrolet-Pontiac-Canada. Reuss had been Buick general manager.

At first, both men were perplexed by the plan. "We both thought we were fairly strong general managers; we both fought over who got Camaros and who got Firebirds," said Stempel. "And it was, 'You got to be kidding — we're going to put those divisions together? Why would you do that?' "

But Stempel began to see the benefits of leveraging GM's economies of scale. After his methodical reorganization of Buick-Oldsmobile-Cadillac, in 1986 he rose to executive vice president of the Truck & Bus Group and Overseas Group and joined GM's board of directors.

In 1987, it was no surprise to many within the corporation when GM Chairman Roger Smith selected Stempel as president and COO and made him heir apparent. Stempel rounded out the management duo with his strong listening skills and engineering background; Smith was an autocratic finance man.

Pursuit of quality

Stempel promised outgoing president Jim McDonald that he would continue to work on GM's nagging quality issues. But unlike McDonald, he welcomed help from quality guru W. Edwards Deming, who helped Japanese makers improve quality after World War II.

"Several of our people at that time became Deming disciples," Stempel said.

Stempel worked with UAW Vice President Don Ephlin to establish the Quality Network, a joint salaried-hourly effort to reduce quality glitches and give workers more power to resolve problems.

Stempel established a more cooperative working relationship with the UAW. As president, he required that all reports of fatal plant accidents be viewed by GM's top brass rather than only by lower-ranking employees.

Although he received high marks for benevolence and integrity, colleagues found Stempel's decision-making painfully slow as he pored over his copious, handwritten notes. And critics say Stempel sat at Smith's side as the chairman spent billions on shortsighted projects.

Reaching the top

Upon Smith's retirement in 1990, Stempel was named chairman and CEO. The press applauded the move, believing a "car guy" could shake up GM's product lineup and help increase its U.S. market share, which had fallen from 44.5 percent to 35.5 percent under Smith's tenure.

The prized job would be no joy ride. One day after Stempel became chairman, Iraqi dictator Saddam Hussein's forces invaded Kuwait. The U.S.-led military response pushed an already fragile U.S. economy into recession, and car sales plunged.

Stempel cut the dividend 47 percent and took a $2.1 billion charge to close seven plants. But the benefits of the cost cutting were washed out by lower sales.

By May 1991, after three straight quarterly losses totaling $4 billion, Stempel had to consider another plan. In December 1991, under pressure from GM's outside directors, he eliminated 74,000 jobs and announced the closing of 21 more plants.

GM lost $4.45 billion in 1991, including a $7.9 billion loss in North America. By early 1992, GM's board was losing confidence in Stempel and began meeting with top managers to discuss GM's problems.

A few supportive board members asked Stempel if he was confident that GM could hold on five more years while Saturn and other innovative programs began to bear fruit. "I said, 'Roger got us this far; now I've got to get us through that hole,' " Stempel recalled.

"As that hole got bigger — not only because of Saturn, but from other investments — people got uncomfortable," he said.

Fall from grace

In the spring of 1992, the board removed Stempel as chairman of the powerful executive committee and forced him to demote his hand-picked president, Reuss, and CFO Robert O'Connell. The writing was on the wall: Stempel no longer had the confidence of the board.

Months later, rumors were swirling in the press that Stempel was next to go. In the fall of 1992, Stempel collapsed in a Washington hotel and was diagnosed with a heart condition. Said Stempel: "My lungs filled up with fluid; it was scary."

After Stempel's return to work, he consulted allies such as GM board member and longtime Detroit bank executive Charles Fisher III.

"You know we can fight this and probably win," Stempel recalled Fisher saying.

"I said, 'No, I think what I ought to do is what's right for the corporation,' " he said.

On Oct. 26, 1992, Stempel resigned.

"I could not in good conscience continue to watch the effects of rumors and speculation that have undermined and slowed the efforts of General Motors people to make this a stronger and more efficient organization," Stempel said at the time.

Some GM employees and industry analysts assailed the board for sacking Stempel. His supporters believed Stempel was saddled with problems created by Roger Smith and was not given enough time to turn the company around. Others applauded the move, saying GM needed new management to survive.

Stempel was replaced as chairman by GM board member and ex-Procter & Gamble chairman John Smale, who had led the boardroom fight to remove him. Jack Smith — no relation to Roger Smith — succeeded Stempel as CEO and also was named president.

A new start

After two years as a consultant, Stempel was wooed by inventor Stanford Ovshinsky to join Energy Conversion Devices Inc., a Detroit-area maker of nickel-metal hydride batteries and solar panels.

Stempel, who was involved in the EV1 electric car project while at GM, signed on as a consultant in 1994 and became chairman in 1995.

Ovshinsky found an engineering soul mate in Stempel. "I could talk to him about anything in science or technology and have him follow and understand and make viable suggestions," Ovshinsky said.

"Going from the biggest company in the world to one of the smallest, there wasn't any transition problem whatsoever. He fit right in," Ovshinsky said.

In his new job, Stempel reached out to many in the auto industry, even to his former GM colleagues. In 1996, he put together GM-Ovonic, a joint venture between Energy Conversion Devices and GM to produce nickel-metal hydride batteries for the EV1, which was phased out in 2000.

Stempel retired in 2007 but continues to promote alternative energy vehicles in every corner of the industry. He frequently is called upon for expert advice on the subject.

"What has been interesting to me is the number of people who have said, 'Well, you have this future vision, but it's not going to happen.' " said Stempel.

"These last couple of years have been interesting. Those same people have come back and said, 'You want to give me a hand with this?' "

You can reach Laura Clark Geist at autonews@crain.com.