Big Plans for a Small Car

By S.C. Gwynne/Detroit

The new chairman had been on the job for only a few hours. But when big, rangy Robert Stempel appeared at his first press conference as head of General Motors last week, he left no doubt about who was in charge. Stempel, 57, an engineer whose booming baritone and engaging manner offer a stark contrast to his diffident predecessor Roger Smith, immediately put into effect a top-level reorganization of the slumping giant. Removing a layer of executive management, he launched a campaign to put decision-making power into the hands of the automaker's eight divisions and dozens of subsidiaries.

Stempel's arrival at the top brings a new management style to the world's largest industrial corporation (1989 sales: $126.9 billion). Though decisive, Stempel is regarded as a masterly team player, while Smith was known as a solitary autocrat whose temper often got the better of him. The Smith years shook GM down to its chassis. In a massive corporate restructuring in the mid- 1980s, Smith changed the job descriptions of virtually everyone in the company, downsized all his products twice, and invested billions of dollars in high technology and robotics.

Smith spent an estimated $77 billion on new investment, a spree that included the $5 billion acquisition of Hughes Aircraft and the $2.5 billion buyout of Electronic Data Systems. While Smith's organizational upheaval achieved increases in the quality of GM's products, it also created new problems, most notably a series of unexciting, look-alike car models. During the '80s, GM's share of the U.S. auto market declined from 46% to as low as 32%.

Yet the product Smith considers to be his crowning achievement, Saturn, is just now heading toward the marketplace. An entirely new nameplate, Saturn is a $3 billion gamble that GM can design, build and sell small cars to compete with Japanese automakers. The day before his retirement, Smith fulfilled a five-year-old promise to drive the first Saturn car off the assembly line at the company's new plant in Spring Hill, Tenn.

Saturn is the product of a unique labor-management partnership, in which the United Auto Workers union participates in every management decision. Saturn's workers, who were chosen from unionized plants across the U.S., are among the best in the GM system. The new line of small cars, priced in the $10,000-to- $12,000 range, aims at the heart of traditional Japanese strength. "We intend to be better than Honda Civic right out of the box," says Saturn president Richard ("Skip") LeFauve. Early reviews of the car in the automotive press have been favorable.

Stempel is starting out on a steep uphill grade. While its market share has rebounded to 36%, GM faces growing rivalry from Japanese plants in North America and from its innovative crosstown rival, Ford. Last week GM said its second-quarter profits declined 36%, to $900.1 million, compared with the same period a year ago. Yet the most ironic road hazard ahead is the growing prospect of a U.A.W. strike against GM plants in September, which could disrupt critical supply shipments to Saturn and may cripple its early production.