GM Moves to Restart Its Restructuring

DETROIT — Presenting a sweeping vision of General Motors’ future, Chairman John F. Smith Jr. said Wednesday that GM will introduce 23 new vehicles in the next three years, build new U.S. assembly plants to replace aging ones and continue to trim its work force through attrition.

Along with GM’s plans announced this week to sell its auto-parts unit and revamp marketing operations, Smith’s remarks amount to a declaration that GM wants to restart its stalled 6-year-old restructuring in the wake of a costly 54-day strike.

Still, skepticism abounds whether the world’s largest auto maker can deliver on its promises. Since 1992, it has been in a slow-motion turnaround that has left it lagging competitors in productivity and profitability.

“We’ve heard it all before,” said Wesley Brown, an analyst with Nextrend, a Thousand Oaks auto consulting firm. “We’ll wait and see.”

Also on Wednesday, GM reported that the two strikes by 9,200 United Auto Workers reduced its July auto sales by 38%. Its market share for the month fell behind that of Ford Motor Co. for the first time since December 1970, when GM was hit by a nationwide UAW walkout. Industrywide auto sales tumbled 8.7%.

The strikes, which ended July 30, closed all but two of GM’s 29 assembly plants. Only one remains idled. Dealer stocks are being replenished quickly but August vehicle sales also will be depressed, GM officials said.

In making his first major public appearance since the strikes began in early June, Smith was answering critics who said GM’s tortoise-like turnaround is faltering and suggested that a management shake-up was in order.

Smith, a low-key New Englander who works quietly behind the scenes, said GM today is a leaner, faster and more clearly focused company. Its North American auto operations went from losing $5 billion in 1992 to earning $2.3 billion last year.

But Smith acknowledged that GM is losing ground to more efficient rivals.

“Despite all the progress, we are still the high-cost vehicle producer in North America,” he said.

To address these problems in part, Smith said, GM will introduce new models, develop new generations of engines, open modern plants while closing out-of-date facilities, and continue to reduce its hourly work force. Smith did not identify which plants will be closed.

Analysts said the changes are needed but may not go far enough or be implemented fast enough.

“They are finally admitting to themselves that they no longer own 40% of the market,” said David Healy, an analyst with Burnham Securities. “They still have too many plants, models, people and maybe divisions.”

The new urgency at GM is prompted by efficiency gains registered by Ford under the direction of President Jacques Nasser and the proposed merger of Chrysler Corp. and Daimler-Benz, which would create another global auto powerhouse.

For instance, a recent manufacturing study by James Harbour & Associates in Troy, Mich., found that GM takes seven more hours to build a car than Ford and that Chrysler earns $500 more per vehicle than GM.

Closing these gaps were at the heart of the recent strikes as GM pushed the UAW to relax inflexible work rules and to improve the efficiency of some of its parts operations.

Smith said the strikes lasted so long because the union’s resistance to changes would have impeded GM’s ability to restructure and reduce costs. He estimates the strikes will reduce GM earnings by $2 billion after accounting for recovered production through overtime.

The most important aspect of the contract settlement, he said, is the agreement for continuous, high-level talks to work out disputes without strikes.

“I know both sides are determined to make this work, but there is obviously no guarantee of success,” he said.

Some of the changes that GM is proposing are certain to arouse UAW rancor. For instance, Smith said that while GM will introduce 23 new car and truck models over the next three years, its overall model offerings will drop, potentially costing some UAW jobs.

While Smith said GM would probably build some new modern plants, it will also close some plants. Smith left the net effect unclear.

Analysts said that many of the planned new vehicles have been on the drawing boards for years and will be largely redesigns of current vehicles. But Smith said “nearly half will be innovative concepts aimed at redefining existing product segments and creating new segments.”

Ronald Zarrella, executive vice president of sales, service and marketing, said GM will introduce more trucks than cars in coming years, as well as hybrids--truck-like vehicles based on car frames.

GM has cut its model offerings from 105 in 1992 to 77 currently. Zarrella said the company will probably reduce that to about 70 models.

The company’s market share slipped to 20.8% in July because of the strikes, the lowest level since November 1970. Ford’s market share was 27.6%. For the year, GM’s market share is 29.9%, according to Autodata Corp.

Smith said the company expects to recover most of the lost share in the next few months. “We are not in a race to shrink the company or shrink our market coverage,” he said. “Rather, we are in a race to grow our business and increase our profits.”

Smith said the new plants would be more efficient, operating 24 hours a day and with adjoining stamping operations. He also said they would be modeled on GM’s new plant in Brazil, which will use a cheaper system that relies on parts suppliers making complete component systems to cut vehicle assembly time.

GM has cut its hourly work force by more than 125,000 people since 1990. Smith said the downsizing will continue, but added that could be accomplished through retirements and without layoffs.

Earlier this week, GM announced two other major restructuring moves. On Monday, GM said it would divest its Delphi Automotive Systems next year by offering 15% to 20% of its stock in an initial public offering and later distributing the rest to GM shareholders.

Then on Tuesday, GM said it would replace its five marketing organizations with a single sales and service operation, and that it will keep its Buick, Cadillac, Chevrolet, GMC, Oldsmobile and Pontiac brand names.

GM shares closed Wednesday at $68.38, down $1.13 on the New York Stock Exchange.