Jack Smith Is Already On A Tear At GmJames B. Treece
Jack Smith knows what a makeover means. A few years back, he overhauled General Motors Corp.'s European subsidiary, turning a perennial money-loser into a big profit generator. And while trimming the corporate fat, Smith didn't spare his own: He shed 40 pounds, thanks to a diet featuring apples-only lunches. Then, he found a Swiss wife who spiffed up the Worcester (Mass.) native's drab wardrobe. When he left GM-Europe's Zurich headquarters in 1988, Smith called the staff into the canteen and declared that his stay in Zurich had transformed his life.
Now, Smith is starting to perform a similar makeover on all of General Motors--tout de suite. On Apr. 24, he demolished the corporate organization put in place in 1984 by former Chairman Roger B. Smith, cramming GM's money-losing, three-unit North American auto operation into a single entity that he hopes will be nimbler. Jack Smith's boss, Chairman Robert C. Stempel, had unveiled the new organization in February--but said it would take up to two years to implement. Smith made it effective May 1. He also plans an offering of up to $2.9 billion in new stock to bolster GM's eroding capital position.
EURO-LESSONS. The changes come only three weeks after John F. Smith Jr. became GM's president and chief operating officer in a boardroom revolt. His mandate: fix GM, but fast. Despite taking a previously scheduled vacation from Apr. 17 to Apr. 24 (table), he has already ensured that GM will never be the same. And the unexpected first-quarter profit of $179 million that GM reported on Apr. 28--up from a $144 million loss in 1991's first quarter--can only give him heart.
As he charts GM's new course, Smith is drawing on lessons he learned in Europe. A known hater of bureaucracy, he quickly set up the headquarters of the new North American operation he is creating in Warren, Mich., 10 miles from meddling bean counters in Detroit--and in a building too small to allow much expansion. That's a page out of the GM-Europe book: Its head office was in neutral Zurich, where the difficulty of getting work visas kept staff from ballooning.
Now comes the hard job of getting new management in place--and cutting costs at top speed. Smith already has named a key former European aide, J. Ignacio Lopez de Arriortua, as vice-president for worldwide purchasing. His job is to make huge staff cuts at GM's bloated purchasing operation by collapsing it from five units into one. Darrel Hampton, a vice-president with United Technologies Corp.'s auto-parts unit, calls that "a very positive move and long overdue."
Meanwhile, Smith is huddling with vice-presidents, looking for ways to put the dogs in GM's car lineup out of their misery. According to the newsletter Fast Track News, five GM car models are stacked up on dealers' lots in over 100 days supply--way above the industry norm of 65 days. GM watchers expect Smith to stop wasting dough on the slow movers.
Smith's revved-up reorganization also will force a culling of GM's bloated white-collar ranks. GM is offering attractive early-retirement terms to workers as young as 51--with a tight June 1 deadline. With the pressure on, many managers will probably take the buyout, so you can bet that GM will meet its 1992 target of 9,000 fewer salaried workers, a 10% cut, by mid-year. If more cuts are needed, Smith has never hesitated to hand out pink slips.
LONGER DAYS. As the bureaucracy shrinks, Smith will be hacking at manufacturing costs. He is looking for quick sales of nonessential units such as GM's Allison Gas Turbine Div. Insiders also say he's planning to accelerate Stempel's previously announced plan to shutter 21 GM plants by 1995. This summer, for the first time, GM will put a U.S. plant on a nearly around-the-clock, seven-day schedule. That's another European wrinkle. Smith pioneered a similar move while he was in Zurich.
His next step will be to drive accountability down into the ranks. With his soft, New England voice, Smith seems laid-back. But when he delegates authority, he expects to get results pronto. He's not the type to have his secretary call ahead, either. "He'll call the guy who is responsible himself and want a three-minute answer immediately," says Lehman Brothers analyst Joseph Phillippi.
How long before all this pays off? Smith has clearly been mulling his moves since being passed over as president two years ago. But he knows that a comeback may take several years, as it did in Europe. Asked once what made the European turnaround work, Smith replied: "Everyone was sick of struggling." A lot of GMers must feel that way today. Now, it's just a question of who can keep up with Jack Smith.