GM's downshifts big plans for high-tech wonders in its plants

Worried about the steady erosion of its huge market share, General Motors launched an aggressive modernization program at the beginning of the decade, spending as much as $10 billion to $11 billion a year on capital improvements, much of that in the form of the latest in high-technology assembly methods. Lately, however, it has begun to look as if GM's space-age programs may be grounded. A number of key projects are being delayed, cut back, or canceled altogether.

That includes GM's highly publicized plan to best the Japanese at their own high-quality, low-cost game.

It was January of 1985 when GM chairman Roger Smith unveiled the carmaker's new Saturn Corporation subsidiary. The division would design and build subcompact cars that could, in his words, ``leapfrog'' the best of the imports.

Mr. Smith promised to spend as much as $5 billion on Saturn, and the subsidiary launched a hot and highly publicized national search for an assembly site.

After repeated delays, company officials settled on the small town of Spring Hill, Tenn., where they promised they would build - at a cost of up to $3.5 billion - the most advanced automotive manufacturing complex in the world, employing about 6,000 and producing 500,000 subcompacts a year.

Even as work slowly moves ahead at the Saturn site, a former horse ranch an hour's drive from Nashville, the project's goals are being slashed.

``You can't start it out with a big-bang approach,'' says Richard G. LeFauve, Saturn's president. ``You start it up with a schedule that allows you to solve every problem that pops up.''

Initial employment, Mr. LeFauve says, will be barely half the original target, while production will start at only 200,000 units - less than the output of a typical GM auto assembly plant in the United States. The capital investment in the Spring Hill site will be stretched out, though LeFauve insists it is not being cut.

In an interview in September, the GM chairman noted that some work, such as engine castings, which Saturn hoped to perform in Spring Hill will instead be turned over to existing General Motors plants.

Perhaps most significantly, both Smith and LeFauve concede that the Saturn car will no longer be aimed at the market segment first planned. One key reason the project originally received so much national attention is that GM promised Saturn would be a bottom-end subcompact able to beat the Japanese in both cost and quality.

Now the cars will be larger and more upscale, and General Motors will effectively abandon the bottom end of the economy market in terms of US production, relying instead on so-called ``captive imports'' built by its affiliates in South Korea, Taiwan, Japan, and elsewhere overseas.

What has happened to humble Saturn? There is a variety of problems. For one thing, there is the automaker's current cash crunch. Though General Motors posted a $263.7 million profit during the third quarter, it also recorded a $338.5 million loss on its domestic new car operations. That accelerated GM's announced intention to close 11 GM factories.

Top corporate officials are coming under increasing pressure to cut back on their capital investments, which could top $11 billion this year, $2 billion over budget. Much of that spending has been earmarked for high-tech programs that have been resulting in questionable gains.

1 | 2

Next