GM's top `trouble-shooter' wants to shed high-cost tag
Detroit — Finishing his meager breakfast, a couple of spoonfuls of fruit cocktail and a sip of orange juice - hold the eggs and bacon, please - Robert C. Stempel began his first day on the job with a visit to the firing line, an early-morning question-and-answer session with Detroit's automotive press corps. ``I didn't know you were all that tough,'' Mr. Stempel, General Motors Corporation's new president, began with a smile; ``but the chairman [GM chairman Roger Smith] says you are, so I'll make believe you are this morning.''
Although Stempel was named to the second-highest office at the nation's largest carmaker at the annual GM stockholders meeting last May, he assumed the post only last week, the day after his predecessor, F.James McDonald, retired as GM president.
At 54 years of age, Stempel is the youngest man to assume the presidency of the giant automaker since before World War II.
Trained as an engineer, and often termed GM's top ``trouble-shooter'' by those who have worked with him, he served a nearly two-year stint as head of GM's West German-based Adam Opel car manufacturing subsidiary, setting in motion changes that have helped Opel become a significant contender in Europe, rather than an also-ran trailing far behind such competitors as Ford of Europe.
As head of Chevrolet, Stempel trimmed massive losses - once estimated at $1.5 billion a year - in half. And as head of the so-called ``big-car division,'' the Buick-Oldsmobile-Cadillac group, he helped smooth the difficult reorganization of the company's passenger car divisions.
But now, as president of the entire company, Stempel is going to face a lot more than just a roomful of ``tough'' reporters:
As of the end of July, General Motors' share of the new car market stood at just 37.6 percent, down 4.8 percent from a year earlier.
According to a report by PaineWebber, General Motors spends about $10,170 to produce a typical new car, compared with $9,357 at Ford and $8,999 at Chrysler.
GM's earnings are down substantially. Second-quarter profits were a higher-than-expected $980 million, still 3 percent below the previous year's level.
Analysts say that, on top of its other troubles, GM is almost certain to face a strike by the United Automobile Workers union in a month or so if the current negotiations between the UAW and Ford result in a settlement that GM insists is far too costly, especially in the area of job guarantees.
``Do we plan to go for more market share?'' Stempel asked at his breakfast news briefing. ``Yes, we do. Will it come back easily? No it won't.'' Stempel acknowledged that GM's use of look-alike cars, so-called ``badge engineering,'' has turned off many previously loyal buyers, and to win them back the carmaker must renew its effort to ``know what the customer wants.''
But GM must also rid itself of the dubious distinction of being the highest-cost carmaker in the United States. ``The issues of cost and value are high on [my] list,'' he said.
One area ripe for cost cutting is GM's huge component operations. The carmaker now produces about 70 percent of the parts used on its assembly lines - ranging from body panels to door locks - while its chief US rival, Ford, makes less than half its own parts.
Stempel said he does not foresee a wild rush away from component manufacturing, which he says has long been one of GM's strengths.
``In some cases,'' he added, GM's parts plants ``are world-class. These kinds of divisions, we want to encourage their growth.''
A second group of parts plants, however, will have to be consolidated, Stempel said, as he sees no way to make them competitive. Though he declined to discuss which specific plants GM is likely to close, he did say he expects to ``consolidate'' the carmaker's diesel operations. Diesel sales have all but dried up as a result of relatively stable gasoline prices and supplies.
The fate of a third group of component plants is still up in the air, according to Stempel, depending on what can be done to improve quality and lower production costs.
``One of the last things on my agenda is to close everything,'' he emphasized. ``My objective is to get competitive, and not outsource and close.''
But Stempel said he does not intend to delay dealing with the component-plant problem: ``There's a sense of urgency out there. I would expect you'll see the majority of this work completed in the next 12 to 18 months.''
Though he stressed that hourly workers are not the only reason GM's costs have risen so high, for those who attended the breakfast meeting Stempel's message was clear: a warning to the UAW that it must cut back on its demand for job security guarantees and a 3 percent wage increase as part of a new contract.
In fact, while Stempel says he is not ``wedded to the idea,'' he appears to favor the creation of a two-tier wage structure, in which GM's component plant employees would receive lower pay than those at the company's more profitable assembly operations. The UAW has flatly rejected a two-tier wage scale.
Cautiously hopeful that a strike can be avoided, Stempel nonetheless made it clear he will not simply accept a contract patterned after a Ford settlement in order to achieve labor peace.
``We've each [Ford and GM] got to have our own agreement,'' he said. ``More and more, we're getting away from pattern bargaining. Everybody's got to do their own thing.''
In this case, it may be that one of Stempel's first big chores will be holding the fort during a lengthy strike that auto analyst David Healy of Drexel Burnham Lambert estimates could cost GM as much as $250 million a week in lost profits.