Roger Bonham Smith
Encyclopedia
Roger Bonham Smith was the Chairman and CEO of General Motors Corporation
from 1981 to 1990, and is widely known as the main subject of Michael Moore
's 1989 documentary film Roger & Me
.
When Smith took over GM, it was reeling from its first annual loss since the early 1920s. Its reputation had been tarnished by lawsuits, persistent quality problems, bad labor relations, public protests over the installation of Chevrolet
engines in Oldsmobile
s and by a poorly designed diesel engine. GM was also losing market share to foreign automakers for the first time.
Smith instituted several initiatives that included forming strategic joint ventures with Japanese and Korean automakers, launching the Saturn division, investing heavily in technological automation and robotics, and attempting to rid the company of its risk-averse bureaucracy. However, Smith's far-reaching goals proved too overambitious and overwhelming to actually be implemented effectively, in the face of the company's resilient corporate culture and bureaucracy. Despite Smith's vision, he was unable to successfully integrate GM's major acquisitions, several of which also failed to tackle the root causes of GM's fundamental problems.
Smith's tenure is commonly viewed as a failure, as GM's share of the US market fell from 46% to 35%, and as it took on considerable debt causing it to lapse close to bankruptcy in the early 1990s. As a result, CNBC has called Smith one of the "Worst American CEOs of All Time".
, Smith earned his bachelor degree in business administration at the University of Michigan
in 1947, and his MBA at the University of Michigan
Business School
in 1953. He served in the United States Navy
from 1944 to 1946.
Smith began his career at GM in 1949 as an accounting clerk, and had become the company's treasurer by 1970, and vice president the following year. In 1974, Smith was elected executive vice president in charge of the financial, public relations, and government relations staffs. He ascended to GM's chairmanship in 1981.
and the city of Detroit won a notorious landmark decision
in the Michigan Supreme Court
, Poletown Neighborhood Council v. City of Detroit that allowed the city to use its eminent domain power to raze an existing immigrant neighborhood in neighboring Hamtramck
. It resulted in the condemnation of the homes of over 4,200 residents, along with numerous businesses ( chiefly, the original Dodge
assembly plant, which was opened in 1914 by John and Horace Dodge, for their then-new 1915 Dodge Brothers car . It was called "Dodge Main", and it consumed much of the city block of property in the so-called "Pole Town" area of Hamtramck .), churches and schools so that the land could be transferred to GM for the construction of a new factory. Although the deal predated Smith's tenure as Chairman, he subsequently used the construction of the new Poletown factory, along with plants on a greenfield site in Lake Orion Michigan, and one in Wentzville, MO (an identical twin to Orion) to showcase the technology he felt would lead GM into a new era. Unfortunately, the factories failed to live up to their promised employment goals or their status as a technology showcase, and since they were duplicates of existing GM factories, unable to flexibly produce different models, were ultimately panned by critics as obsolete on the day they opened.
In 1982 Smith negotiated contract concessions with the United Auto Workers
and cut planned raises for white-collar workers. After unveiling a more generous bonus program for top executives that provoked an angry response from the union, Smith was forced to back-pedal. Relations with the UAW, management, and stockholders remained strained. Profits improved in 1983 and Smith began unveiling his vision for reorganization, diversification, and "reindustrialization."
The Los Angeles ( South Gate ) assembly plant was closed in circa 1982 . Its closure was referenced in the low-budget 1983 film "Suburbia
", which was a film whose subject was "squatter punks" .
One of the most controversial decisions made during Smith's tenure was the partial elimination of divisional autonomy in 1984. In the 1920s, Chairman and CEO Alfred Sloan, Jr. had established semi-autonomous divisions within the corporation, each designing and marketing their own vehicles (Chevrolet
, Pontiac
, Oldsmobile
, Buick
and Cadillac
). This was considered a crucial factor propelling GM past market leader Ford
in the 1930s. By the 1980s however, that autonomy (also including Fisher Body
division producing the car bodies, and GM Assembly division building them) were seen as representing a dated business model that had led to needless large scale redundancy, infighting by the divisions, and a bloated internal bureaucracy.
, and GM Assembly into two groups, C-P-C (Chevrolet
, Pontiac
, Canada
) to build small cars and B-O-C (Buick
, Oldsmobile
, Cadillac
) to build large cars, the effort was subsequently criticized for creating chaos within the company. Longstanding informal relationships that greased the wheels of GM were severed, seemingly overnight, leading to confusion and slipping new product programs. The reorganization virtually stopped GM in its tracks for 18 months, and never really worked as intended, with the CPC division building Cadillac
s and BOC building Pontiac
s. The reorganization added costs and created more layers of bureaucracy when the new groups added management, marketing and engineering staff, duplicating existing staff at both the corporate and division levels. Almost ten years elapsed before the 1984 reorganization was unwound and all car groups were combined into one division.
By the 1990s, GM's program of sharing components across divisions that began in the 70s as a way to cut costs grew into a marketing problem. After the 1984 reorganization forced teamwork by the divisions, parts sharing evolved into wholesale sharing of entire designs and simply re-badging
vehicles for each division. Observers suggested that differences between automobiles produced and marketed by the Chevy, Buick
, and Oldsmobile
divisions were less distinct as a consequence. Automotive commentators cited a lack of a distinct brand identity and demographic changes as crucial factors in the demise of the Oldsmobile
division in 2004. Compounding GM's problems was the fact that while entire platforms shared designs, the engineered parts beneath the surface, where customers didn't care or didn't notice were often not shared, which is where money could be saved. Analyst David Cole summed it up: "The engineering was 180 degrees out of phase. GM cars looked alike outside but were all different inside."
, Pontiac
, Oldsmobile
, and Buick
. The plan was huge in scope, calling for seven plants that would each assemble 250,000 of the cars, or 21% of the total U.S. car market. It was badly executed from the start, but the 1984 reorganization wrought havoc on the program and it never recovered. By 1989, the year before the last of the GM10s were launched, GM was losing $2000 on every one of the cars it produced. When asked by Fortune
why GM10 was such a catastrophe, Smith replied, “I don't know. It's a mysterious thing. I've said I'll take my share of the blame on all those things. I was part of the team.”
, GM became the largest manufacturer of robots in the world. Unfortunately, the experience failed to meet the vision, with the new robots famously painting each other instead of the cars, or robots welding doors shut. Ultimately, some robotic systems and automation installed in several plants were removed shortly after their installation. The astonishing sums expended were widely viewed as money wasted. Responding to a 1986 report on 3 year capital expenditures projected at almost $35 billion, VP of finance F. Alan Smith (no relation) opined that the sum could be spent on purchasing both Toyota and Nissan resulting in a bump in market share overnight and openly questioned whether the proposed capital expenditures would pay the same dividends; they did not. By the time Smith retired, GM had evolved from the lowest cost producer in Detroit to its highest cost producer, due in part to the drive to acquire advanced technology that never paid dividends in efficiency.
from its founder Ross Perot
for $2.55 billion, serving two purposes. First was the opportunity to modernize and automate GM to fulfill Smith's goals; second, it was an effort to broaden out of its manufacturing base and into technology and services. As a result of the EDS acquisition, Perot became GM's largest single shareholder, joined its board of directors, and immediately became a source of friction to Smith and a vocal and public critic of Smith and GM's management. In 1986 Smith and the board orchestrated a $743 million buyout of Perot's GM stock at a substantial premium over the market value of the shares. Perot accepted the buyout, but publicly denounced the expenditure as outrageous at a time GM was closing plants and laying off workers. He announced that he would put the money in escrow to give the automaker a chance to reconsider, but never actually sequestered the funds.
This merger is described in detail in the book "Call Me Roger" by Albert Lee, a former GM speechwriter, 1988, ISBN 0-8092-4630-9. The structure of the deal was unusual in that EDS would be owned by GM, but Smith promised it would allow Perot autonomy to run the company. In addition, the stock of EDS became a special 'Class E' GM stock, which was separate from normal GM stock, an arrangement which almost got GM kicked off the NYSE. Perot eventually agreed to the deal, because, as Lee puts it, he was sold on the idea of saving millions of American jobs by helping GM fight off Japanese competition.
As Lee describes, the merger created problems from the start. First, EDS was a 'commando-like' operation, with many military vets, a distaste for bureaucracy, a strict dress and "moral code" (i.e., employees could not cohabit
), and a somewhat egalitarian ethic between managers and workers. GM was the polar opposite, being the model of the large bureaucratic corporation that strongly resisted changes in the status quo. Second, only a small number of EDS employees were sent to Detroit, because EDS needed to hire new staff to provide the level of services GM would require. Although several thousand people would be 'EDS' employees in Detroit, only a few hundred would have been brought up in the EDS culture, with the majority of others being new hires dropped into it without warning. Additionally, the majority of GM's thousands of I.T. employees were transferred to EDS, many losing benefits or pensions, creating clashes with the EDS culture, and resulting in lawsuits, bad morale, and chaos.
The problems with the merger were not only about culture clashes. Although EDS had experience with automatic paper shuffling, it had no experience with engineering control systems, CAD, and other manufacturing uses of computers. Since EDS had its own stock, there was an inherent conflict of interest between the companies- an EDS employee working in Detroit at a GM plant was not primarily concerned about GM's performance, but about EDS performance, so they had a blank check to throw money at problems, bill GM, and watch their EDS stock go up. Finally, as Lee quotes Perot - "GM doesn't honor its contracts" - Smith had said he would not interfere with Perot, but the relationship fractured from the start, with conflicts over promised compensation to EDS executives being rejected by Smith, who also sent auditors to EDS to irritate Perot. GM also refused to give EDS the fixed-price long term contracts it had been promised.
The relationship between Smith, Perot, and the EDS executives ruptured openly in September 1985, during a meeting in Dallas that brought the EDS executive compensation issue to a head. Smith was reluctant to accept the EDS plan, substituting a plan of his own. Described in Irreconcilable Differences by Doron Levin, EDS' CFO was explaining to Smith how they felt GM's plan was inferior, when Smith lost his temper. "People in the room later would remember Smith's angry explosion as being wondrous and terrifying at the same time: wondrous for the extreme colors and sounds it brought to the room, terrifying because none of them had ever seen someone lose his temper so completely in a business meeting. The EDS officers stared in disbelief as the chairman of the world's biggest and most powerful company lost it."
What ensued was one of the most vitriolic corporate battles of the 1980s, with Perot and Smith publicly exchanging barbs using the media, which delightedly splashed the story over every business publication in the U.S.. Perot notoriously lashed out at Smith in a 1988 exclusive to Fortune Magazine, saying: "My question is: Why haven't we unleashed their potential? The answer is: the General Motors system. It's like a blanket of fog that keeps these people from doing what they know needs to be done. I come from an environment where, if you see a snake, you kill it. At GM, if you see a snake, the first thing you do is go hire a consultant on snakes. Then you get a committee on snakes, and then you discuss it for a couple of years. The most likely course of action is—nothing. You figure, the snake hasn't bitten anybody yet, so you just let him crawl around on the factory floor. We need to build an environment where the first guy who sees the snake kills it." Perot went on to needle Smith regarding the opulent 25th floor GM offices in New York, "An entire teak forest must have been decimated for that floor". Smith, who had obviously ignored the irony of the CEO of the largest public corporation in the world complaining about the opulence of the private office (which Perot had personally paid to furnish) of a rival, had responded to Perot's frequent criticism of GM's executive perks a year earlier, "Perot's office (in Dallas) 'makes mine look like a shanty-town. He has Remingtons; he has a Gilbert Stuart painting hanging on the wall. Nobody runs around saying 'Get rid of Ross's office'".
A second large acquisition outside of the automobile industry followed in 1985, when Smith announced the purchase of Hughes Aircraft Company from the Howard Hughes Medical Institute for $5.2 billion. The company was merged with GM's Delco Electronics
to form Hughes Electronics.
Smith's purchases of EDS and Hughes were criticized as unwise diversions of resources at a time when GM could have invested more in its core automotive divisions. GM spun EDS off as an independent company in 1996. After some major acquisitions in the mid-1990s by Hughes Electronics (Magnavox
Electronic Systems and PanAmSat
), GM divested most of Hughes assets from 1997–2003, including sale of defense operations to Raytheon
in 1997, the spinoff of Delphi Automotive Systems in 1999, the divestiture of Hughes Space and Communications to Boeing
in 2000, and acquisition of the remaining communications and satellite operations (mostly DirecTV
) by NewsCorp in 2003.
race and he hired AeroVironment
to build a winning solar-electric vehicle. The resulting car, the Sunraycer
easily won the race at a cost of just under 2 million dollars. The success of the Sunraycer led directly to the AeroVironment-designed GM Impact prototype
which in turn led to the EV-1
.
, where many displaced GM workers called for Smith's retirement. Smith voluntarily retired from GM, and later toured the new Saturn facility in Tennessee, which he brought to fruition, in 1991.
A native of Columbus, Ohio, Smith was married for 53 years to his wife Barbara. They had two sons, Roger B. Smith and Drew J. Smith; two daughters, Jennifer A. Ponski and Victoria B. Sawula; as well as six grandchildren.
General Motors
General Motors Company , commonly known as GM, formerly incorporated as General Motors Corporation, is an American multinational automotive corporation headquartered in Detroit, Michigan and the world's second-largest automaker in 2010...
from 1981 to 1990, and is widely known as the main subject of Michael Moore
Michael Moore
Michael Francis Moore is an American filmmaker, author, social critic and activist. He is the director and producer of Fahrenheit 9/11, which is the highest-grossing documentary of all time. His films Bowling for Columbine and Sicko also place in the top ten highest-grossing documentaries...
's 1989 documentary film Roger & Me
Roger & Me
Roger & Me is a 1989 American documentary film directed by Michael Moore. Moore portrays the regional negative economic impact of General Motors CEO Roger Smith's summary action of closing several auto plants in Flint, Michigan, costing 30,000 people their jobs at the time and economically...
.
When Smith took over GM, it was reeling from its first annual loss since the early 1920s. Its reputation had been tarnished by lawsuits, persistent quality problems, bad labor relations, public protests over the installation of Chevrolet
Chevrolet
Chevrolet , also known as Chevy , is a brand of vehicle produced by General Motors Company . Founded by Louis Chevrolet and ousted GM founder William C. Durant on November 3, 1911, General Motors acquired Chevrolet in 1918...
engines in Oldsmobile
Oldsmobile
Oldsmobile was a brand of American automobile produced for most of its existence by General Motors. It was founded by Ransom E. Olds in 1897. In its 107-year history, it produced 35.2 million cars, including at least 14 million built at its Lansing, Michigan factory...
s and by a poorly designed diesel engine. GM was also losing market share to foreign automakers for the first time.
Smith instituted several initiatives that included forming strategic joint ventures with Japanese and Korean automakers, launching the Saturn division, investing heavily in technological automation and robotics, and attempting to rid the company of its risk-averse bureaucracy. However, Smith's far-reaching goals proved too overambitious and overwhelming to actually be implemented effectively, in the face of the company's resilient corporate culture and bureaucracy. Despite Smith's vision, he was unable to successfully integrate GM's major acquisitions, several of which also failed to tackle the root causes of GM's fundamental problems.
Smith's tenure is commonly viewed as a failure, as GM's share of the US market fell from 46% to 35%, and as it took on considerable debt causing it to lapse close to bankruptcy in the early 1990s. As a result, CNBC has called Smith one of the "Worst American CEOs of All Time".
Beginnings with General Motors
Smith spent virtually his entire professional career working for General Motors. Born in Columbus, OhioColumbus, Ohio
Columbus is the capital of and the largest city in the U.S. state of Ohio. The broader metropolitan area encompasses several counties and is the third largest in Ohio behind those of Cleveland and Cincinnati. Columbus is the third largest city in the American Midwest, and the fifteenth largest city...
, Smith earned his bachelor degree in business administration at the University of Michigan
University of Michigan
The University of Michigan is a public research university located in Ann Arbor, Michigan in the United States. It is the state's oldest university and the flagship campus of the University of Michigan...
in 1947, and his MBA at the University of Michigan
University of Michigan
The University of Michigan is a public research university located in Ann Arbor, Michigan in the United States. It is the state's oldest university and the flagship campus of the University of Michigan...
Business School
Ross School of Business
The Stephen M. Ross School of Business is the business school of the University of Michigan. Numerous publications have ranked the Ross School of Business' Bachelor of Business Administration , Master of Business Administration and Executive Education programs among the top in the country and the...
in 1953. He served in the United States Navy
United States Navy
The United States Navy is the naval warfare service branch of the United States Armed Forces and one of the seven uniformed services of the United States. The U.S. Navy is the largest in the world; its battle fleet tonnage is greater than that of the next 13 largest navies combined. The U.S...
from 1944 to 1946.
Smith began his career at GM in 1949 as an accounting clerk, and had become the company's treasurer by 1970, and vice president the following year. In 1974, Smith was elected executive vice president in charge of the financial, public relations, and government relations staffs. He ascended to GM's chairmanship in 1981.
Poletown plant controversy
In 1981, mayor Coleman YoungColeman Young
Coleman Alexander Young served as mayor of Detroit in the U.S. state of Michigan from 1974 to 1993. Young became the first African-American mayor of Detroit in the same week that Maynard Jackson became the first African-American mayor of Atlanta.-Pre-Mayoral career:Young was born in Tuscaloosa,...
and the city of Detroit won a notorious landmark decision
Landmark decision
Landmark court decisions establish new precedents that establish a significant new legal principle or concept, or otherwise substantially change the interpretation of existing law...
in the Michigan Supreme Court
Michigan Supreme Court
The Michigan Supreme Court is the highest court in the U.S. state of Michigan. It is known as Michigan's "court of last resort" and consists of seven justices who are elected to eight-year terms. Candidates are nominated by political parties and are elected on a nonpartisan ballot...
, Poletown Neighborhood Council v. City of Detroit that allowed the city to use its eminent domain power to raze an existing immigrant neighborhood in neighboring Hamtramck
Hamtramck, Michigan
Hamtramck is a city in Wayne County of the U.S. state of Michigan. As of the 2010 census, the city population was 22,423. Hamtramck is surrounded by the city of Detroit except for a small portion of the western border that touches the similarly surrounded city of Highland Park...
. It resulted in the condemnation of the homes of over 4,200 residents, along with numerous businesses ( chiefly, the original Dodge
Dodge
Dodge is a United States-based brand of automobiles, minivans, and sport utility vehicles, manufactured and marketed by Chrysler Group LLC in more than 60 different countries and territories worldwide....
assembly plant, which was opened in 1914 by John and Horace Dodge, for their then-new 1915 Dodge Brothers car . It was called "Dodge Main", and it consumed much of the city block of property in the so-called "Pole Town" area of Hamtramck .), churches and schools so that the land could be transferred to GM for the construction of a new factory. Although the deal predated Smith's tenure as Chairman, he subsequently used the construction of the new Poletown factory, along with plants on a greenfield site in Lake Orion Michigan, and one in Wentzville, MO (an identical twin to Orion) to showcase the technology he felt would lead GM into a new era. Unfortunately, the factories failed to live up to their promised employment goals or their status as a technology showcase, and since they were duplicates of existing GM factories, unable to flexibly produce different models, were ultimately panned by critics as obsolete on the day they opened.
Reorganizing General Motors
Smith began the reorganization of GM that would define his chairmanship (see below), with the 1981 creation of the worldwide Truck and Bus Group, consolidating the design, manufacture, sales and service of all trucks, buses and vans under one umbrella. 1982 saw the creation of the Truck and Bus Manufacturing Division, which combined all truck manufacturing and assembly operations from their former divisions, but still a separate bureaucracy from that of the Truck and Bus Group.In 1982 Smith negotiated contract concessions with the United Auto Workers
United Auto Workers
The International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, better known as the United Auto Workers , is a labor union which represents workers in the United States and Puerto Rico, and formerly in Canada. Founded as part of the Congress of Industrial...
and cut planned raises for white-collar workers. After unveiling a more generous bonus program for top executives that provoked an angry response from the union, Smith was forced to back-pedal. Relations with the UAW, management, and stockholders remained strained. Profits improved in 1983 and Smith began unveiling his vision for reorganization, diversification, and "reindustrialization."
The Los Angeles ( South Gate ) assembly plant was closed in circa 1982 . Its closure was referenced in the low-budget 1983 film "Suburbia
SubUrbia
subUrbia is a play by Eric Bogosian chronicling the nighttime activities of a group of aimless 20-somethings still living in their suburban Boston hometown and their reunion with a former high school classmate who has become a successful musician...
", which was a film whose subject was "squatter punks" .
One of the most controversial decisions made during Smith's tenure was the partial elimination of divisional autonomy in 1984. In the 1920s, Chairman and CEO Alfred Sloan, Jr. had established semi-autonomous divisions within the corporation, each designing and marketing their own vehicles (Chevrolet
Chevrolet
Chevrolet , also known as Chevy , is a brand of vehicle produced by General Motors Company . Founded by Louis Chevrolet and ousted GM founder William C. Durant on November 3, 1911, General Motors acquired Chevrolet in 1918...
, Pontiac
Pontiac
Pontiac was an automobile brand that was established in 1926 as a companion make for General Motors' Oakland. Quickly overtaking its parent in popularity, it supplanted the Oakland brand entirely by 1933 and, for most of its life, became a companion make for Chevrolet. Pontiac was sold in the...
, Oldsmobile
Oldsmobile
Oldsmobile was a brand of American automobile produced for most of its existence by General Motors. It was founded by Ransom E. Olds in 1897. In its 107-year history, it produced 35.2 million cars, including at least 14 million built at its Lansing, Michigan factory...
, Buick
Buick
Buick is a premium brand of General Motors . Buick models are sold in the United States, Canada, Mexico, China, Taiwan, and Israel, with China being its largest market. Buick holds the distinction as the oldest active American make...
and Cadillac
Cadillac
Cadillac is an American luxury vehicle marque owned by General Motors . Cadillac vehicles are sold in over 50 countries and territories, but mostly in North America. Cadillac is currently the second oldest American automobile manufacturer behind fellow GM marque Buick and is among the oldest...
). This was considered a crucial factor propelling GM past market leader Ford
Ford Motor Company
Ford Motor Company is an American multinational automaker based in Dearborn, Michigan, a suburb of Detroit. The automaker was founded by Henry Ford and incorporated on June 16, 1903. In addition to the Ford and Lincoln brands, Ford also owns a small stake in Mazda in Japan and Aston Martin in the UK...
in the 1930s. By the 1980s however, that autonomy (also including Fisher Body
Fisher Body
Fisher Body is an automobile coachbuilder founded by the Fisher brothers in 1908 in Detroit, Michigan; it is now an operating division of General Motors Company...
division producing the car bodies, and GM Assembly division building them) were seen as representing a dated business model that had led to needless large scale redundancy, infighting by the divisions, and a bloated internal bureaucracy.
1984 reorganization
Smith took on the massive GM bureaucracy with disastrous results. A sea change in how GM would market and build cars in the future, the 1984 reorganization was intended to streamline the process and create greater efficiencies; the reverse actually occurred. Combining the nameplate divisions, Fisher BodyFisher Body
Fisher Body is an automobile coachbuilder founded by the Fisher brothers in 1908 in Detroit, Michigan; it is now an operating division of General Motors Company...
, and GM Assembly into two groups, C-P-C (Chevrolet
Chevrolet
Chevrolet , also known as Chevy , is a brand of vehicle produced by General Motors Company . Founded by Louis Chevrolet and ousted GM founder William C. Durant on November 3, 1911, General Motors acquired Chevrolet in 1918...
, Pontiac
Pontiac
Pontiac was an automobile brand that was established in 1926 as a companion make for General Motors' Oakland. Quickly overtaking its parent in popularity, it supplanted the Oakland brand entirely by 1933 and, for most of its life, became a companion make for Chevrolet. Pontiac was sold in the...
, Canada
General Motors Canada
General Motors of Canada Limited is General Motors' Canadian division. Its national headquarters office, Canadian Regional Engineering Centre, and main manufacturing plants are located in Oshawa, Ontario. GM Canada is 100% owned by GM.As of Apr...
) to build small cars and B-O-C (Buick
Buick
Buick is a premium brand of General Motors . Buick models are sold in the United States, Canada, Mexico, China, Taiwan, and Israel, with China being its largest market. Buick holds the distinction as the oldest active American make...
, Oldsmobile
Oldsmobile
Oldsmobile was a brand of American automobile produced for most of its existence by General Motors. It was founded by Ransom E. Olds in 1897. In its 107-year history, it produced 35.2 million cars, including at least 14 million built at its Lansing, Michigan factory...
, Cadillac
Cadillac
Cadillac is an American luxury vehicle marque owned by General Motors . Cadillac vehicles are sold in over 50 countries and territories, but mostly in North America. Cadillac is currently the second oldest American automobile manufacturer behind fellow GM marque Buick and is among the oldest...
) to build large cars, the effort was subsequently criticized for creating chaos within the company. Longstanding informal relationships that greased the wheels of GM were severed, seemingly overnight, leading to confusion and slipping new product programs. The reorganization virtually stopped GM in its tracks for 18 months, and never really worked as intended, with the CPC division building Cadillac
Cadillac
Cadillac is an American luxury vehicle marque owned by General Motors . Cadillac vehicles are sold in over 50 countries and territories, but mostly in North America. Cadillac is currently the second oldest American automobile manufacturer behind fellow GM marque Buick and is among the oldest...
s and BOC building Pontiac
Pontiac
Pontiac was an automobile brand that was established in 1926 as a companion make for General Motors' Oakland. Quickly overtaking its parent in popularity, it supplanted the Oakland brand entirely by 1933 and, for most of its life, became a companion make for Chevrolet. Pontiac was sold in the...
s. The reorganization added costs and created more layers of bureaucracy when the new groups added management, marketing and engineering staff, duplicating existing staff at both the corporate and division levels. Almost ten years elapsed before the 1984 reorganization was unwound and all car groups were combined into one division.
By the 1990s, GM's program of sharing components across divisions that began in the 70s as a way to cut costs grew into a marketing problem. After the 1984 reorganization forced teamwork by the divisions, parts sharing evolved into wholesale sharing of entire designs and simply re-badging
Badge engineering
Badge engineering is an ironic term that describes the rebadging of one product as another...
vehicles for each division. Observers suggested that differences between automobiles produced and marketed by the Chevy, Buick
Buick
Buick is a premium brand of General Motors . Buick models are sold in the United States, Canada, Mexico, China, Taiwan, and Israel, with China being its largest market. Buick holds the distinction as the oldest active American make...
, and Oldsmobile
Oldsmobile
Oldsmobile was a brand of American automobile produced for most of its existence by General Motors. It was founded by Ransom E. Olds in 1897. In its 107-year history, it produced 35.2 million cars, including at least 14 million built at its Lansing, Michigan factory...
divisions were less distinct as a consequence. Automotive commentators cited a lack of a distinct brand identity and demographic changes as crucial factors in the demise of the Oldsmobile
Oldsmobile
Oldsmobile was a brand of American automobile produced for most of its existence by General Motors. It was founded by Ransom E. Olds in 1897. In its 107-year history, it produced 35.2 million cars, including at least 14 million built at its Lansing, Michigan factory...
division in 2004. Compounding GM's problems was the fact that while entire platforms shared designs, the engineered parts beneath the surface, where customers didn't care or didn't notice were often not shared, which is where money could be saved. Analyst David Cole summed it up: "The engineering was 180 degrees out of phase. GM cars looked alike outside but were all different inside."
GM10 debacle
Smith's major new car program prior to the 1984 reorganization, GM10, has been called "The biggest catastrophe in American industrial history." Beginning in 1982, and costing $7 billion, the plan was to replace all midsize cars produced by ChevroletChevrolet
Chevrolet , also known as Chevy , is a brand of vehicle produced by General Motors Company . Founded by Louis Chevrolet and ousted GM founder William C. Durant on November 3, 1911, General Motors acquired Chevrolet in 1918...
, Pontiac
Pontiac
Pontiac was an automobile brand that was established in 1926 as a companion make for General Motors' Oakland. Quickly overtaking its parent in popularity, it supplanted the Oakland brand entirely by 1933 and, for most of its life, became a companion make for Chevrolet. Pontiac was sold in the...
, Oldsmobile
Oldsmobile
Oldsmobile was a brand of American automobile produced for most of its existence by General Motors. It was founded by Ransom E. Olds in 1897. In its 107-year history, it produced 35.2 million cars, including at least 14 million built at its Lansing, Michigan factory...
, and Buick
Buick
Buick is a premium brand of General Motors . Buick models are sold in the United States, Canada, Mexico, China, Taiwan, and Israel, with China being its largest market. Buick holds the distinction as the oldest active American make...
. The plan was huge in scope, calling for seven plants that would each assemble 250,000 of the cars, or 21% of the total U.S. car market. It was badly executed from the start, but the 1984 reorganization wrought havoc on the program and it never recovered. By 1989, the year before the last of the GM10s were launched, GM was losing $2000 on every one of the cars it produced. When asked by Fortune
Fortune (magazine)
Fortune is a global business magazine published by Time Inc. Founded by Henry Luce in 1930, the publishing business, consisting of Time, Life, Fortune, and Sports Illustrated, grew to become Time Warner. In turn, AOL grew as it acquired Time Warner in 2000 when Time Warner was the world's largest...
why GM10 was such a catastrophe, Smith replied, “I don't know. It's a mysterious thing. I've said I'll take my share of the blame on all those things. I was part of the team.”
Drive for modernization
A defining theme of Smith's tenure was his vision to modernize GM using advanced technology. Some have suggested he was ahead of his time in attempting to create a 21st century organization in a company not ready for the technology. "Lights out" factories were envisioned, where the only employees were those supervising the robots and computers. This was obviously viewed negatively by the unions, and further strained relations. Over the decade of the 1980s, GM spent upwards of $90 billion attempting to remake itself, including a 1981 joint venture with the Japanese robot manufacturer, Fujitsu-Fanuc. With the resulting venture, GMF RoboticsFANUC Robotics
FANUC or is a Japanese electromechanical manufacturer specializing in robotics. It is one of the largest maker of industrial robots in the world. It is part of the Furukawa Group. FANUC had its beginnings as part of Fujitsu developing numerical control and servo systems...
, GM became the largest manufacturer of robots in the world. Unfortunately, the experience failed to meet the vision, with the new robots famously painting each other instead of the cars, or robots welding doors shut. Ultimately, some robotic systems and automation installed in several plants were removed shortly after their installation. The astonishing sums expended were widely viewed as money wasted. Responding to a 1986 report on 3 year capital expenditures projected at almost $35 billion, VP of finance F. Alan Smith (no relation) opined that the sum could be spent on purchasing both Toyota and Nissan resulting in a bump in market share overnight and openly questioned whether the proposed capital expenditures would pay the same dividends; they did not. By the time Smith retired, GM had evolved from the lowest cost producer in Detroit to its highest cost producer, due in part to the drive to acquire advanced technology that never paid dividends in efficiency.
Acquisitions and divestitures
In 1984 Smith oversaw General Motors' acquisition of Electronic Data SystemsElectronic Data Systems
HP Enterprise Services is the global business and technology services division of Hewlett Packard's HP Enterprise Business strategic business unit. It was formed by the combination of HP's legacy services consulting and outsourcing business and the integration of acquired Electronic Data Systems,...
from its founder Ross Perot
Ross Perot
Henry Ross Perot is a U.S. businessman best known for running for President of the United States in 1992 and 1996. Perot founded Electronic Data Systems in 1962, sold the company to General Motors in 1984, and founded Perot Systems in 1988...
for $2.55 billion, serving two purposes. First was the opportunity to modernize and automate GM to fulfill Smith's goals; second, it was an effort to broaden out of its manufacturing base and into technology and services. As a result of the EDS acquisition, Perot became GM's largest single shareholder, joined its board of directors, and immediately became a source of friction to Smith and a vocal and public critic of Smith and GM's management. In 1986 Smith and the board orchestrated a $743 million buyout of Perot's GM stock at a substantial premium over the market value of the shares. Perot accepted the buyout, but publicly denounced the expenditure as outrageous at a time GM was closing plants and laying off workers. He announced that he would put the money in escrow to give the automaker a chance to reconsider, but never actually sequestered the funds.
This merger is described in detail in the book "Call Me Roger" by Albert Lee, a former GM speechwriter, 1988, ISBN 0-8092-4630-9. The structure of the deal was unusual in that EDS would be owned by GM, but Smith promised it would allow Perot autonomy to run the company. In addition, the stock of EDS became a special 'Class E' GM stock, which was separate from normal GM stock, an arrangement which almost got GM kicked off the NYSE. Perot eventually agreed to the deal, because, as Lee puts it, he was sold on the idea of saving millions of American jobs by helping GM fight off Japanese competition.
As Lee describes, the merger created problems from the start. First, EDS was a 'commando-like' operation, with many military vets, a distaste for bureaucracy, a strict dress and "moral code" (i.e., employees could not cohabit
Cohabitation
Cohabitation usually refers to an arrangement whereby two people decide to live together on a long-term or permanent basis in an emotionally and/or sexually intimate relationship. The term is most frequently applied to couples who are not married...
), and a somewhat egalitarian ethic between managers and workers. GM was the polar opposite, being the model of the large bureaucratic corporation that strongly resisted changes in the status quo. Second, only a small number of EDS employees were sent to Detroit, because EDS needed to hire new staff to provide the level of services GM would require. Although several thousand people would be 'EDS' employees in Detroit, only a few hundred would have been brought up in the EDS culture, with the majority of others being new hires dropped into it without warning. Additionally, the majority of GM's thousands of I.T. employees were transferred to EDS, many losing benefits or pensions, creating clashes with the EDS culture, and resulting in lawsuits, bad morale, and chaos.
The problems with the merger were not only about culture clashes. Although EDS had experience with automatic paper shuffling, it had no experience with engineering control systems, CAD, and other manufacturing uses of computers. Since EDS had its own stock, there was an inherent conflict of interest between the companies- an EDS employee working in Detroit at a GM plant was not primarily concerned about GM's performance, but about EDS performance, so they had a blank check to throw money at problems, bill GM, and watch their EDS stock go up. Finally, as Lee quotes Perot - "GM doesn't honor its contracts" - Smith had said he would not interfere with Perot, but the relationship fractured from the start, with conflicts over promised compensation to EDS executives being rejected by Smith, who also sent auditors to EDS to irritate Perot. GM also refused to give EDS the fixed-price long term contracts it had been promised.
The relationship between Smith, Perot, and the EDS executives ruptured openly in September 1985, during a meeting in Dallas that brought the EDS executive compensation issue to a head. Smith was reluctant to accept the EDS plan, substituting a plan of his own. Described in Irreconcilable Differences by Doron Levin, EDS' CFO was explaining to Smith how they felt GM's plan was inferior, when Smith lost his temper. "People in the room later would remember Smith's angry explosion as being wondrous and terrifying at the same time: wondrous for the extreme colors and sounds it brought to the room, terrifying because none of them had ever seen someone lose his temper so completely in a business meeting. The EDS officers stared in disbelief as the chairman of the world's biggest and most powerful company lost it."
What ensued was one of the most vitriolic corporate battles of the 1980s, with Perot and Smith publicly exchanging barbs using the media, which delightedly splashed the story over every business publication in the U.S.. Perot notoriously lashed out at Smith in a 1988 exclusive to Fortune Magazine, saying: "My question is: Why haven't we unleashed their potential? The answer is: the General Motors system. It's like a blanket of fog that keeps these people from doing what they know needs to be done. I come from an environment where, if you see a snake, you kill it. At GM, if you see a snake, the first thing you do is go hire a consultant on snakes. Then you get a committee on snakes, and then you discuss it for a couple of years. The most likely course of action is—nothing. You figure, the snake hasn't bitten anybody yet, so you just let him crawl around on the factory floor. We need to build an environment where the first guy who sees the snake kills it." Perot went on to needle Smith regarding the opulent 25th floor GM offices in New York, "An entire teak forest must have been decimated for that floor". Smith, who had obviously ignored the irony of the CEO of the largest public corporation in the world complaining about the opulence of the private office (which Perot had personally paid to furnish) of a rival, had responded to Perot's frequent criticism of GM's executive perks a year earlier, "Perot's office (in Dallas) 'makes mine look like a shanty-town. He has Remingtons; he has a Gilbert Stuart painting hanging on the wall. Nobody runs around saying 'Get rid of Ross's office'".
A second large acquisition outside of the automobile industry followed in 1985, when Smith announced the purchase of Hughes Aircraft Company from the Howard Hughes Medical Institute for $5.2 billion. The company was merged with GM's Delco Electronics
Delco Electronics
Delco Electronics Corporation was the automotive electronics design and manufacturing subsidiary of General Motors based in Kokomo, Indiana.The name Delco came from the Dayton Engineering Laboratories Co., founded in Dayton, Ohio by Charles Kettering and Edward A...
to form Hughes Electronics.
Smith's purchases of EDS and Hughes were criticized as unwise diversions of resources at a time when GM could have invested more in its core automotive divisions. GM spun EDS off as an independent company in 1996. After some major acquisitions in the mid-1990s by Hughes Electronics (Magnavox
Magnavox
Magnavox is a US electronics company founded by Edwin Pridham and Peter L. Jensen, who invented the moving-coil loudspeaker in 1915 at their lab in Napa, California. They formed Magnavox in 1917 in order to market their inventions....
Electronic Systems and PanAmSat
PanAmSat
The former PanAmSat Corporation founded in 1984 by Reynold Anselmo, was a satellite service provider headquartered in Greenwich, Connecticut. It operated a fleet of communications satellites used by the entertainment industry, news agencies, internet service providers, government agencies, and...
), GM divested most of Hughes assets from 1997–2003, including sale of defense operations to Raytheon
Raytheon
Raytheon Company is a major American defense contractor and industrial corporation with core manufacturing concentrations in weapons and military and commercial electronics. It was previously involved in corporate and special-mission aircraft until early 2007...
in 1997, the spinoff of Delphi Automotive Systems in 1999, the divestiture of Hughes Space and Communications to Boeing
Boeing
The Boeing Company is an American multinational aerospace and defense corporation, founded in 1916 by William E. Boeing in Seattle, Washington. Boeing has expanded over the years, merging with McDonnell Douglas in 1997. Boeing Corporate headquarters has been in Chicago, Illinois since 2001...
in 2000, and acquisition of the remaining communications and satellite operations (mostly DirecTV
DirecTV
DirecTV is an American direct broadcast satellite service provider and broadcaster based in El Segundo, California. Its satellite service, launched on June 17, 1994, transmits digital satellite television and audio to households in the United States, Latin America, and the Anglophone Caribbean. ...
) by NewsCorp in 2003.
Solar Challenge
In 1987, Smith chose to have GM enter in the first World Solar ChallengeWorld Solar Challenge
The World Solar Challenge is a solar-powered car race which covers through the Australian Outback, from Darwin to Adelaide.The race attracts teams from around the world, most of which are fielded by universities or corporations although some are fielded by high schools...
race and he hired AeroVironment
AeroVironment
AeroVironment Inc. is a technology company in Monrovia, California, and Simi Valley, California, that is primarily involved in energy systems, electric vehicle systems, and unmanned aerial vehicles . Paul B. MacCready, Jr., a famous designer of human powered aircraft, founded the company in 1971...
to build a winning solar-electric vehicle. The resulting car, the Sunraycer
Sunraycer
The Sunraycer was a solar powered race car designed to compete in the world's first race featuring solar-powered cars. This race is now called the World Solar Challenge. The Sunraycer, a joint collaboration between General Motors, AeroVironment, and Hughes Aircraft, won the first race in 1987 by a...
easily won the race at a cost of just under 2 million dollars. The success of the Sunraycer led directly to the AeroVironment-designed GM Impact prototype
Prototype
A prototype is an early sample or model built to test a concept or process or to act as a thing to be replicated or learned from.The word prototype derives from the Greek πρωτότυπον , "primitive form", neutral of πρωτότυπος , "original, primitive", from πρῶτος , "first" and τύπος ,...
which in turn led to the EV-1
General Motors EV1
The General Motors EV1 was an electric car produced and leased by the General Motors Corporation from 1996 to 1999. It was the first mass-produced and purpose-designed electric vehicle of the modern era from a major automaker, and the first GM car designed to be an electric vehicle from the...
.
Personal life
Smith's tenure at GM ended in 1990, one year after the release of the popular underground documentary Roger & MeRoger & Me
Roger & Me is a 1989 American documentary film directed by Michael Moore. Moore portrays the regional negative economic impact of General Motors CEO Roger Smith's summary action of closing several auto plants in Flint, Michigan, costing 30,000 people their jobs at the time and economically...
, where many displaced GM workers called for Smith's retirement. Smith voluntarily retired from GM, and later toured the new Saturn facility in Tennessee, which he brought to fruition, in 1991.
A native of Columbus, Ohio, Smith was married for 53 years to his wife Barbara. They had two sons, Roger B. Smith and Drew J. Smith; two daughters, Jennifer A. Ponski and Victoria B. Sawula; as well as six grandchildren.
Death
Smith died in his sleep on November 29, 2007 after a short battle with an unspecified illness. A specific cause of death has never been released.Further reading
- David Halberstam, The Reckoning (New York: William Morrow & Co., 1986)
- Paul Ingrassia and Joseph B. White, Comeback: The Fall & Rise of the American Automobile Industry (New York: Simon & Schuster, 1995)
- Paul A. Witteman, Roger's Painful Legacy, Time, November 9, 1992
- Alex Taylor III, GM Gets Its Act Togerther. Finally. How America's No. 1 car company changed its ways and started looking like ... Toyota., Fortune, April 5, 2004; For an analysis of the 1984 reorganization, and past/present turnaround efforts
- Jon Lowell, David C. Smith GM10; history's biggest car program, Ward's Auto World, March, 1986; For a contemporaneous optimistic view of GM10
- Paul Ingrassia, How Detroit Drove Into a Ditch, Wall Street Journal, October 25, 2008
- Final Offer (Documentary) - National Film Board of Canada, 1985 - Featuring Roger Smith in his Union negotians of 1984.
External links
- Obituary in The New York Times, 1 December 2007
- Obituary in The Times, 4 December 2007
- Roger Smith at Find a GraveFind A GraveFind a Grave is a commercial website providing free access and input to an online database of cemetery records. It was founded in 1998 as a DBA and incorporated in 2000.-History:...