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Wednesday, Oct. 7, 1998
GM announces major reorganization
U.S., overseas divisions to merge in effort to streamline operations
By BRIAN S. AKRE
Associated Press
DETROIT -- General Motors Corp. promoted G. Richard Wagoner Jr. to president and chief operating officer Tuesday in a major reorganization aimed at making the biggest automaker more responsive to markets worldwide.
Jack Smith, who gave up the president's title, remains as chairman and chief executive officer. The move raises Wagoner's visibility in the competition to replace the 60-year-old Smith when he retires.
Effective immediately, GM will merge its two big, independent automotive units for North America and the rest of the world into one unit called GM Automotive Operations. Wagoner will head it.
As the most bureaucratic automaker among the Big Three, GM has long been criticized for the time it takes to develop new vehicles. Smith said a simpler organizational structure is needed to get new products to market faster in response to rapidly changing tastes and needs.
``Intense competition, diverse global markets and the speed with which the world is changing politically, economically and technologically call for a faster and leaner General Motors,'' Smith said.
The new automotive unit will be divided into four regional divisions: North America, Europe, Asia-Pacific and Latin America-Africa-Mideast. Each region will have its own president who will report to Wagoner.
``This theoretically should make GM much more fleet of foot on the product-development side,'' said analyst Joseph Phillippi of Lehman Brothers. ``It just streamlines the organization.''GM's biggest problem
But Phillippi said the reorganization, while needed, will not address GM's biggest problem: ``At the end of the day, they still have too many divisions, too many brands and too many models.''
Smith has said he is committed to keeping each of GM's six North American sales divisions. Phillippi said he expects GM eventually will merge some of those divisions, as it did in 1996 with Pontiac and GMC.
The consolidation of the North American and international automotive operations had been expected. GM recently moved the headquarters of its International Operations unit to Detroit from Zurich, Switzerland, in anticipation of the move.
The change is part of the steady streamlining that began after Smith took control of GM in a boardroom coup in 1992 after the automaker's brush with near-bankruptcy. It is similar to the consolidation of No. 2 Ford Motor Co.'s North American and European automotive operations four years ago.
``It doesn't fall into the category of leapfrogging the competition,'' said analyst Gregory Kagay of McDonald & Co. ``Rather, it's catching up with the competition.''
The merger of the automotive units coincides with GM's cost-saving efforts to produce all its vehicles from just seven global ``platforms,'' the common chassis and parts used for a variety of different cars. GM now has 16 platforms, but they are not used globally.
``Since they're going to global platforms anyway, having two organizations competing with each other really did not make much sense,'' Phillippi said. The first of GM's global platforms, code-named ``Delta,'' will support a line of small cars starting in 2001 in the United States.Board changes
As part of the reorganization, GM will replace the powerful President's Council by consolidating it and several other management boards under the GM Automotive Strategy Board. The intent is to reduce the layers of approval needed for new products. Wagoner, the regional automotive presidents and 13 other top executives will sit on the new board.
``We need to clarify our decision-making process and we need to pick up the pace,'' Wagoner said. ``To satisfy this intent, we've come up with a structure that will be much simpler.''
Wagoner, 45, currently heads North American operations, GM's largest and most profitable unit. Well-respected on Wall Street, Wagoner comes from a financial background rather than the engineering side of the car business.
``He's traditionally not been viewed as a `car guy.' '' Phillippi said. ``But in terms of this structure, that may not be that important.''
Critics often point to the preponderance of financial types in GM's executive suite for the lack of exciting vehicles in its product portfolio. But GM's most recent models generally have been better-received.
Smith said the consolidation would not result in any significant job cuts, though some early retirements may be offered in cases where there are redundant positions.
``It's not a job downsizing,'' he said.
Smith declined to comment on who might succeed him. He said he has no plans yet to retire, but that there were many talented people whom the board could consider as GM's next chairman and CEO.
``It's not my decision,'' he said.
Vice Chairman Harry Pearce had been considered Smith's heir-apparent until he was diagnosed with leukemia earlier this year. Pearce remains under treatment.
``He's rarin' to come back and we expect him back, fully functioning, by the end of the year,'' Smith said.
Louis R. Hughes, who had headed international operations, was named executive vice president for new business strategies, a new position.
Ronald Zarrella, GM's sales and marketing chief, was named to head the North American automotive unit and will report to Wagoner.
The reorganization follows GM's announcements in August that it plans to reorganize its North American sales and marketing staff and spin off its huge Delphi Automotive Systems parts unit by the end of 1999.
The Delphi deal could be complicated by resistance from the United Auto Workers union, who enter national contract talks with GM next June. GM is just recovering from two crippling strikes in June and July, which cut deeply into its U.S. market share.Key facts and figures in the reorganization of General Motors Corp., announced Tuesday:
WHAT: GM will merge its big automotive units, North American Operations and GM International Operations, into a single entity called GM Automotive Operations. WHY: Executives expect the simplified organizational structure will reduce the time it takes to develop new cars and trucks to meet changing tastes and needs around the world. WHERE: The new automotive unit will be based in Detroit at GM's world headquarters. GM International Operations had already been relocated from Zurich, Switzerland, before Tuesday's announcement. WHO: GM's board named G. Richard Wagoner Jr. as president and chief operating officer in charge of the new automotive unit. Wagoner has been in charge of North American Operations since 1994. Jack Smith gives up the title of president, but remains chairman and chief executive officer. Louis R. Hughes, who was president of GM International Operations, becomes vice president in charge of new business strategies, a new position, and reports to Smith. Ronald L. Zarrella, vice president of North American sales and marketing, becomes president of GM North America, reporting to Wagoner. Kathleen S. Barclay, general director of human resource management in North America, becomes vice president in charge of global human resources and president of GM University. At the in-house school, Barclay replaces the retiring Richard G. ``Skip'' LeFauve. Source: GMPost your comments about local news eventsFront Page || Main Index || News || Business || Texas || South Texas Outdoors || Birdwatching || Sports || Entertainment || Selena || Education || South Texas Attractions || World Wide Web