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GM Chairman Stempel Resigns Under Pressure

October 27, 1992|DONALD WOUTAT | TIMES STAFF WRITER

DETROIT — The curtain fell on an era at General Motors Corp. on Monday when Robert C. Stempel, 59, saying he hoped to end the "chaos" engulfing the world's largest company, resigned as chairman and chief executive under intense pressure from the board of directors.

But the disarray promises to continue as dazed employees look over their shoulders and the board, trying to undo decades' worth of mistakes that have driven GM into deep financial trouble, scramble to line up a new management team for the $123-billion-a-year company.

It was the bloodiest episode in Detroit's auto boardrooms since Henry Ford II fired Lee A. Iacocca from the presidency of Ford Motor Co. in 1978. But the Stempel move carries a historic industrial significance that the bitter Ford-Iacocca feud lacked.

The first such beheading at GM since founder William C. Durant was fired twice, in 1910 and 1920, Stempel's departure marks a passage of sorts for a once-dominant company struggling to reinvent itself in the new global economy.

Stempel said he was resigning both posts immediately, but the board asked him to stay until his successor is named. That is expected within days, perhaps at next Monday's regular board meeting in New York.

The most likely scenario has GM's president and chief operating officer, John F. Smith Jr., assuming the CEO's title and John G. Smale, retired Procter & Gamble chairman and leader of a group of GM directors aligned against Stempel, becoming chairman.

Another strong possibility for the chief executive's post is William Hoglund, former head of GM's Saturn Corp. That would leave Smith free to continue focusing on the North American car and truck business, the source of virtually all of GM's woes.

Stempel's departure has seemed a foregone conclusion since Thursday, when Smale, rather than denying rumors in the news media, all but confirmed the board's intention to replace him.

Many expect additional changes in the second tier of management, but analysts expect no drastic change of direction at GM. They predict instead an acceleration of efforts already under way to hack away at the company's bloated middle-management ranks, to change attitudes, close plants, slash costs and develop new cars and trucks more quickly and efficiently.

But they will also face the task of leading a shellshocked work force of nearly 400,000 North American employees now being subjected to their second reorganization in seven months, capping nearly a decade of tumultuous but ineffective attempts to change GM at its core.

On Monday, Stempel said he was resigning because "I cannot 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."

"I went to a GM-UAW meeting the other day and came away so disheartened, because all these people are on tenterhooks," said Douglas Fraser, retired president of the United Auto Workers.

A manager in one of GM's car divisions said Monday that "this whole company is paralyzed."

Stempel's authority has been diluted since a board uprising in April, when the faction led by Smale forced the demotion of Stempel's handpicked president, Lloyd E. Reuss, and installed Smale in place of Stempel as head of the board's key executive committee. Hoglund was elevated to chief financial officer.

Smith, the new president, has since been running GM's day-to-day operations. Stempel has been all but paralyzed in his post two weeks after unchallenged news accounts that the board wanted him out. He was briefly hospitalized with high blood pressure on the day of the first such report.

The biggest and once the best of Detroit's Big Three auto firms, GM now brings up the rear in both financial and strategic competitiveness. The company lost a staggering $4.45 billion last year and is expected later this week to report an $850-million loss for the third quarter.

More ominous is the fact that GM is losing market share this year despite a falloff by Japanese auto firms, serving up extra business to domestic competitors Ford and Chrysler Corp.

Though many observers argue that Stempel was changing GM in fundamental ways for the better, "he was a symbol of what GM had been historically," said David Cole, head of an auto industry think tank at the University of Michigan.

The son of a New Jersey banker, Stempel, who played football at Worcester, Mass., Polytechnic Institute, is a career GM executive who was the first engineer to hold GM's top post. All the others have been financial executives.

An affable but publicity-shy man whose emphasis on teamwork brought complaints that he wasn't enough of a leader, Stempel headed GM's Pontiac and Chevrolet divisions, its European operations and one of two mega-divisions created in an ill-fated 1984 restructuring before being tapped as chairman in 1990.

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