Upheaval at GM
THERE are numbers and there are numbers: $300 billion, the approximate federal budget deficit this year, is a statistic; $4.5 billion, the amount General Motors lost in 1991, is a whale of a lot of money.
GM, America's biggest manufacturing corporation, also was the country's record money-loser last year. The huge automaker is nowhere close to shutting its doors, but it faces a grim short-term future of rapid contraction and employee layoffs.
This week GM's key directors lost patience with Robert Stempel, the executive they installed just two years ago to lead the company out of the wilderness. Mr. Stempel was forced to resign as chairman and chief executive officer; his replacements in those positions will probably be named at a board meeting next week. Although Stempel had adopted a program for cutting costs and product improvement, the directors evidently believed that his plan would staunch the red ink too slowly.
How did General Motors, the company that once was virtually synonymous with America's manufacturing muscle and marketing prowess, fall so far so fast? GM's decline will likely become a classic casebook study that business analysts will pick over for years.
No doubt there are many reasons for GM's woes, but the leading ones include a complacency that settled in during the years when GM set the agenda for the auto industry; a failure to detect the growing threat from imports; and a failure - or an inability - to respond quickly once the import tidal wave hit. By contrast, Ford and Chrysler adapted to the changed competitive environment more nimbly. Today it costs GM $795 more to build a car than it costs Ford.
GM and its people will go through a wringer in the next few years. But with courage and skill it can emerge a far leaner, innovative, and competitive company. If its decline will make the casebooks, why shouldn't its recovery also become a model for corporate America's response to the changing global environment?
GM's travails may be studied for other aspects, as well. First, the company might have to pioneer a new relationship with the United Auto Workers if its cost-slashing plans are to succeed; perhaps this can be a milestone on an improved course for labor-management dealings in the US.
Second, the GM coup has been engineered largely by non-employee directors. Are we seeing the end of the era when "outside" directors - ostensibly the watchdogs for stockholders - took fat fees while letting management do whatever it wished? If so, there will be a healthy reassertion of accountability in America's corporate suites.