General Motors Chief Resigns after Board Turns Up Pressure as in Many Large Companies, GM's outside Directors Have Taken a More Assertive Role

Article excerpt

A STRUGGLE for control of General Motors Corporation ended yesterday with the resignation of its chairman, Robert Stempel.

"I made this decision in the best interest of the corporation and its fine, dedicated employees at all levels of the organization," Mr. Stempel said in a statement released by the world's largest automaker. "I could not in good conscience continue to watch the effects of rumors and speculation that have undermined and slowed the efforts of General Motors people to make this a stronger, more efficient, effective organization."

John Smale, chairman of the GM board's executive committee, responded that the board had accepted Stempel's resignation and asked him to continue as chairman until a successor could be named. Mr. Smale led a group of GM's outside board directors pushing for Stempel's departure. When GM's board meets next Monday in New York, it is expected to name Smale, former chairman of Procter & Gamble Company, as interim chairman.

Behind the resignation are major financial troubles at GM. Last year General Motors lost $3.8 billion on worldwide revenues of $109 billion and assets of $104.8 billion. In North America, the company employed 113,000 white-collar and 258,000 blue-collar workers. It sold 4.54 million cars and trucks. Given its multitude of suppliers, GM's economic impact is huge.

On Thursday, the company is expected to report a worldwide, third-quarter loss of $845 million. The deficit will continue through at least the fourth quarter, analysts say, and they caution that it will be hard for GM to get back into the black until the economy improves. That's because problems are centered in GM's core North American operations. For years, GM was the role model of American industry, building half the cars sold in the United States, rolling up billions in profits and paying out handsome dividends to confident investors. But the recession of the early 1980s and the rise of Japanese carmakers revealed some fundamental weaknesses, including serious quality problems and inefficient and ill-managed factories.

GM's first answer was automation. During the '80s, it invested $40 billion in new factories filled with the latest in robotics. Despite that investment, GM remains "the very- high-cost producer," spending $1,000 more to assemble a car than Ford or Chrysler, according to Detroit manufacturing consultant James Harbour, who recently completed an extensive study of Big Three productivity. …


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