Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!americast-post Newsgroups: americast.twt.comment From: americast-post@AmeriCast.Com Organization: American Cybercasting Approved: americast-post@AmeriCast.com Subject: High noon for GM board on Monday Date: Sat, 31 Oct 92 14:00:15 EST Message-ID: \SE C;COMMENTARY;MONEY \SS (WS) \HD High noon for GM board on Monday \BY Jerry Dubrowski \CR REUTERS NEWS AGENCY \DT DETROIT DETROIT - General Motors Corp.'s board of directors is preparing for a showdown in New York on Monday that could result in resignations of several key executives and board members, including former Chairman Roger Smith. GM's 11 outside directors are expected to huddle over the weekend at the Waldorf Astoria Hotel to pick a replacement for Chairman Robert Stempel. Mr. Stempel announced his resignation on Monday after coming under fire from the board for moving too slowly to reform GM's money-losing North American operations. Outside director John Smale, who led the charge to oust Mr. Stempel, is expected to be named chairman while President John Smith moves up to the chief executive spot. Analysts said John Smith, who orchestrated GM's recovery in Europe, could become the sole management representative on the board if the outside directors persuade Roger Smith, 67, to give up his seat. The Wall Street Journal reported yesterday that board members are seeking the resignation of Roger Smith and Vice Chairman Robert Schultz. GM declined to comment on the report and Roger Smith was unavailable. His departure would signal a clean break with GM's past and help restore credibility with shareholders. McDonald & Co. auto analyst David Garrity said Roger Smith may want to avoid the painful process of dismantling the very empire he helped create during his tenure from 1981 to 1990. "One always has to wonder as to how easily someone who devoted his career to building up the company to where it was when he stepped down . . . willingly participates in an effort to essentially undo everything he had done," Mr. Garrity said. Under Mr. Smith's tenure, GM earned $29 billion in profits, but it also spent more than $7 billion to acquire Electronic Data Systems, the firm founded by independent presidential candidate Ross Perot, and defense company Hughes Aircraft Co. In an interview with the Detroit Free Press this week, Mr. Smith defended the acquisitions and denied he left a financial time bomb in Mr. Stempel's lap when he retired in 1990. "We bought EDS for $2.5 billion, and today it's worth roughly $17.5 billion," Mr. Smith said. "We paid $5 billion for Hughes and, now it's worth $9.5 billion. That's not too shabby. I think I gave GM a little bit of money to see 'em through." The GM board's efforts to restructure the company may also extend to its own ranks. Several directors who have been on the sidelines during the latest upheaval reportedly may be asked to step down at Monday's meeting. Industry sources said the board may ask Anne Armstrong and Thomas Everhart to step down and Leon Sullivan and Marvin Goldberger, who both turn 70 this year, to leave before their terms expire at the next annual meeting. Analysts said the move would leave the board with a smaller group of financial experts who have had previous experience restructuring their own companies. Eugene Jennings, professor emeritus at Michigan State University, said the action may also permit the board to improve its credibility with GM management after a series of embarrassing media leaks that culminated in Mr. Stempel's resignation. "The board has to show accountability unto itself if they're going to regain credibility, which has been badly damaged by the order and nature of events that have been released the last two weeks," Mr. Jennings said. All told, the resignations of Messrs. Smith, Shultz, Stempel and the four outside directors would reduce the size of the board almost by half. Salomon Bros. analyst Jack Kirnan said published reports of pending resignations of other GM executives, including Executive Vice President Lloyd Reuss, General Motors Acceptance Corp. Chairman Robert O'Connell and Shirley Young, vice president of marketing, are creating a sense of high drama for Monday. "This thing is just snowballing," Mr. Kirnan said. "The expectation level may be getting out of hand. If they just come out and say, 'Look, the chairman is going to be John Smale, the chief executive is going to be Jack Smith, let's get back to work,' that is a negative for the stock because people want more." This article is copyright 1992 The Washington Times. Redistribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM