The automaker -- battered by a recession, the first Gulf War and steady market share losses -- lost more than $17 billion in North America from 1990 to 1993.
Costs were out of control. Factories were running well below capacity. The automaker was increasingly slow to bring new models to market.
According to an internal study, GM spent $800 more per car on labor than rival Ford Motor Co., while producing lower-quality vehicles.
In a potential blow to the world's biggest automaker, Wall Street was threatening to strip GM of its top-grade investment rating, a move that would make it much more expensive for the automaker to borrow funds for daily operations. And GM shares were trading at a 4 1/2-year low — below $30.
The change in management atop GM was viewed by many corporate governance experts as a landmark in a shift of power from managers to corporate directors, who traditionally had acted more as yes-men than decision-makers.
The moves by GM's outside directors also spurred a revolution in corporate governance among Fortune 500 companies, with the boards of IBM, American Express and Westinghouse Electric, to name a few, later ousting their CEOs.
'There are, in fact, very few 'acts of God' behind business failures. The fault is not in the stars but in ourselves,' Smale often said, borrowing from Shakespeare.
Under Smale and Smith, GM slowly regained financial footing and posted record profits of $4.9 billion on sales of $154.9 billion in 1994.
Smale joined the GM board of directors in 1982 when he was president and CEO of consumer goods giant P&G. He became chairman of the board of P&G in 1986 and retired in 1990.
Smale continued to serve on the boards of several companies, including GM, after his retirement from P&G.
Smale often cited a favorite quote, from Aristotle, to describe GM at the time: "Whom the gods want to destroy, they send 40 years of success."
It was Smale's way of describing how GM got itself into the fix of losing 10 points of U.S. market share under former Chairman Roger Smith, and the $9.6 billion in operating losses under Stempel's watch.
Smale was among the directors who former GM director Ross Perot derided as 'pet rocks' in a 1986 interview with The Wall Street Journal.
Perot told the paper the board wasn't a rubber stamp for Smith's plans: "We'd have to upgrade it to be a rubber stamp."
Smale said he was motivated to step in after the biting criticism from Perot, gentle prodding from former GM board member Marvin Goldberger, advice from New York attorney Ira Millstein, and the automaker's precarious financial condition and market share losses.
As chairman, Smale reformed GM's staid management and put a renewed focus on shareholder value and customers, with a special emphasis on design, marketing and sales.
He hired an outsider -- Ron Zarrella -- as marketing czar and advocated stronger brand management.
Vehicle line executives were put in charge of GM's car and truck lineup, with responsibility for profits and sales.
In 1995, GM directors agreed to Smale's request to assume a lesser role and he retired as chairman at the end of that year. He was succeeded by Smith on Jan. 1, 1996.
Smale continued to serve on the GM board until 2002.
Smale was born in Listowel, Ontario, on Aug. 1, 1927, and was a graduate of Miami University in Oxford, Ohio.
His wife of 56 years, the former Phyllis Weaver, died in 2006. He is survived by four children, John Gray Jr., Peter, Catherine Anne Caldemeyer and Lisa Smale Corbett; and five grandchildren.