GM: Death of an American dream

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    Smith's worst mistake was in not grooming a broad-gauged manager to succeed him when he retired in 1990. Instead the job went to Robert Stempel, a well-liked engineer who came in at a bad time. Market share had declined precipitously under Smith, falling from 43.5% to 35.5%, and the recession of 1990-91 ravaged the company, leading to massive plant closures and layoffs.

    The pressure on Stempel was enormous, and he didn't handle it well. Stempel's face would turn red when he got angry, and he visibly worked to control himself. I was the target of his pent-up rage on several occasions. Once I was forced to sit and listen while he read one of my articles aloud, correcting me on every point with which he disagreed.

    Under Smith and Stempel, and future CEOs as well, GM was in perpetual turnaround. Time after time it promised that it had finally learned how to make cars that people really wanted to buy and would have them at dealers soon. One critic called it the "mañana company." Trouble is, even when GM got the newest 25% of its product line to be competitive, the remaining 75% had to be disposed of at fire-sale prices.

    At a Chicago auto show luncheon during the Stempel era, a top executive ordered the lights dimmed so that he could dazzle the audience with images of a seemingly endless number of new Buicks, Oldsmobiles, and Chevrolets. It was a challenge just to stay awake. By the end of 1992, Stempel and his cadre of executives were gone, pushed out by a board of directors' revolt led by retired Procter & Gamble CEO John Smale and board counsel Ira Milstein.

    Moving to head the company came an all-new team led by another finance guy named Smith, but one who understood foreign competitors like Toyota, had worked successfully abroad, and wasn't afraid of independent thinking. Jack Smith avoided the media at first, but once he began giving interviews he became a favorite of many reporters, me included. He displayed not a scintilla of ambition or ego, and his relentless common sense, combined with wry humor, won me over. That admiration led to a Fortune cover story in 1994 proclaiming Smith a genius in a gray suit and GM on the road to recovery.

    Immediately, a nasty and expensive strike broke out in Flint, and the new GM began to look more like the old one again. It wouldn't be the last time I allowed my personal view of a chief executive to color my assessment of a company. GM was still Balkanized when Smith took over; by his count, for instance, there were 27 separate purchasing organizations that eventually had to be consolidated into one. Smith slowly started pulling the units together so that GM could deploy its vast economies of scale.

    The prosperity of the '90s helped keep GM solidly profitable until the end of the decade, although it never reached Smith's target of a 5% net profit margin. He also kept shrinking the company (helped greatly by the spinoff of the Delphi parts-making unit). Total employment, which stood at 757,500 when Smith took over, had fallen to 388,000 by the time he left office. But Smith's elfin charm wasn't enough to stop warring factions among engineering, manufacturing, and design from undermining one another's work.

    And Smith failed to address such looming problems as why GM still had divisions like Pontiac, Buick, and Oldsmobile. With its market share down to 30% and falling, it didn't need all those brands, and ensuring that each model was distinctive remained a constant headache. The problem of "look-alike cars," brilliantly revealed in a memorable 1985 Fortune cover photograph, continued to bedevil GM.