Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!news.media.mit.edu!americast.com!usa-post Newsgroups: usa-today.bonus From: usa-post@AmeriCast.Com Organization: American Cybercasting Approved: usa-post@AmeriCast.com Subject: bonus Wed, Apr 8 1992 Date: Wed, 8 Apr 92 05:46:40 EDT Message-ID: 04-08 0000 BONUS: GM's board takes wheel USA TODAY Update April 8, 1992 Source: USA TODAY:Gannett National Information Network Who is running General Motors? That question hangs in the air after Monday's coup d'etat in which the board dumped GM's president and chief financial officer and replaced them with board favorites. Outside GM watchers say GM board member John Smale, who revived consumer-products giant Procter & Gamble, has become shadow king of GM - and won't be afraid to persuade the emboldened board to lop off more heads to get the struggling car giant back into the black in the North American car and truck market, its biggest. GM lost $12 billion on its U.S. and Canadian auto operations the past two years. HOW DID SMALE COME TO WIELD SUCH POWER AT GM? Smale, engineer of the management changes, was picked by the 16-member board to be chairman of the seven-member executive committee. That job used to be GM Chairman Robert Stempel's. He remains a member of the executive committee. Analysts view Stempel as on probation. A few even think that if GM fails to make money in the next few months, the board - 11 members have no direct ties to GM - would consider booting him and installing Smale to run the car company temporarily. Board members refused to comment Tuesday, as did GM executives. WHAT IS SMALE'S BACKGROUND? Smale, 64, retired chairman and CEO of Cincinnati-based P&G, took over that foundering behemoth in 1981 and revived it with a massive global expansion and emphasis on cost cutting and faster development of new products. GM insists there should be no question that Stempel remains chairman and chief executive officer - and boss. As evidence, GM spokesmen note that the same board that flexed its executive muscles Monday also watered down its own influence. The board redefined its previously omnipotent executive committee as merely "an advisory committee." WHAT ELSE IS GM'S BOARD LOOKING AT? "The GM board is looking pretty closely at the way Goodyear took off when Stanley Gault took over," says Robert Reiser, chairman of management at Babson College and former president of Xerox's international operations. Gault had retired as head of Rubbermaid and was lured out of retirement in June to reverse the fortunes of tiremaker Goodyear. Since Gault took over Goodyear on June 4, the price of the stock has more than doubled. HOW DOES GM FEEL ABOUT GAULT'S RISE? Adds Reiser: "The GM board is very embarrassed. These are high-powered people who've run successful operations on their own - especially Smale - and now are victims of the good-ol'-boy network at GM. They're getting tarred with the same brush. They're probably scared to death that they'd be liable in a shareholders' suit for not paying attention." WHAT WERE THE BOARD'S RADICAL ACTIONS? At a regular meeting in Dallas on Monday, it demoted two key executives. President Lloyd Reuss was bumped down to executive vice president in charge of a collection of new-vehicle projects. Robert O'Connell was reassigned from chief financial officer to head of the automaker's GMAC finance unit. Reuss is blamed for GM's poor North American results. O'Connell was closely aligned with former GM boss Roger Smith and overhauled the automaker's accounting system so often that it was tough to see the extent of GM's troubles. WHAT ELSE DID THE BOARD DO? The board elevated respected international GM executive John "Jack" Smith to president and chief operating officer - the No. 2 job. And William Hoglund, head of GM's parts operation and former boss at Pontiac and Saturn, was named chief financial officer. WHAT DID THE MOVES ACCOMPLISH? Those moves put board-favored executives in place to run the day-to-day GM operations. In fact, it even could be that the real boss at GM now is Smith. He does, after all, have the board's mandate. And, as chief operating officer, he is in charge of the daily business of running GM. Too, his international experience and his tenure at the big auto company mean he knows how to navigate the corridors of power. What isn't clear is whether - and how long - the board will keep its hands off the new team. HAS THE EXECUTIVE BOARD TAKEN THESE KINDS OF PRIVILEGES BEFORE? The executive committee of the GM board - now run by Smale - could have stepped in before. GM bylaws in place since 1989 said the executive committee "shall have, and may exercise, all the powers, authority and responsibility of the board of directors in the management of the business and affairs of the corporation." GM says that committee hasn't met since 1989. WHAT IS THE ROLE OF THE EXECUTIVE BOARD? GM says the board threw out that language Monday and replaced it with: "The executive committee shall act as an advisory committee to provide timely and effective communication between the board of directors and the chairman of the corporate management committee (Stempel) regarding all phases of the corporation's business activities." That, says GM spokesman Terry Sullivan, is a clear signal the board intends to let GM managers manage but talk to them more often. Analysts say better communication could avoid the alienation that spurred the directors' action. WILL SMALE KEEP HIS HANDS OFF? Those who have worked with Smale aren't sure he'll keep his hands off, especially now that's he's become interested and aggressive enough to get involved in the board's revolution. "He's not a walk-away guy. If he has invested a lot of time and thought into trying to direct a change, he will see to it that it's implemented, I have no doubt about that," says Rep. Charles Luken, D-Ohio. Luken, former mayor of Cincinnati, worked with Smale from 1986 to '88 on a project to overhaul the city's operations. "He was a tiger about making sure the recommendations he made that the City Council adopted were implemented. WHAT ELSE DID LUKEN SAY ABOUT SMALE? "If he has gotten into this at GM and really decided to do this, he will stick to it and work at it and see it through. He doesn't do things casually." Nor is he a slave to the kinds of corporate conventions that bind GM. As he prepared to retire from P&G, for instance, he passed over his own president in favor of P&G's international operations chief, Edwin Artzt. And he did not hand over the entire job to Artzt immediately. Smale first surrendered the CEO title, then - a year later - the chairman's job. WHAT DOES THE MOVE MEAN FOR STEMPEL? Stempel fans say the move frees him to tackle GM's wrenching restructuring, which calls for GM to close 21 plants and eliminate 74,000 jobs by 1995. Instead of having to worry about the repercussions of job cuts and power plays, Stempel can put into place the kind of GM he envisions: a lean, mean industrial power that can react quickly to buyers' desires. Investors liked the changes, announced after the stock market closed Monday. GM shares rose 1 1:4 Tuesday to 37 7:8. Bonus Editor: Michele Coleman. (1-919-855-3491) Making copies of USA TODAY Update (Copyright, 1992) for further distribution violates federal law. This article is copyright 1992 Gannett News Service. 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