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The revolution is over, and speculation has begun on how General Motors Lordstown will be impacted as the new powers-that-be try to turn around the fortunes of the world's largest automaker.
This month's appointment of John Smale as chairman of the GM board of directors and John F. "Jack" Smith as chief executive officer was the final battle for a group of independent directors who struggled to win control of a company beset by losses totaling $4 billion per year.
In quick fashion, the board also voted to halve the $1.60 per-share dividend, thereby saving more than $500 million per year, and to limit the Saturn Corp.'s autonomy. And, for the first time in 34 years, the board separated the duties of CEO and chairman.
Smale, former chairman of Procter & Gamble, will not be running the company--that responsibility falls to Smith. As a director and chairman of the board's executive committee, Smale commanded a management shake-up seven months ago. Reportedly, he was also the conductor of a faction of outside directors who orchestrated the resignations of CEO and chairman Robert C. Stempel and his top lieutenants.
Stempel had increasingly come under fire for not shrinking capacity and cutting costs fast enough. After 27 months with Stempel at the wheel, the company experienced two years of losses and is headed for another year of huge losses attributed to higher costs, a sluggish car market and failure to capture a bigger share of the auto market with new, improved vehicles.
Mary Ann Keller, a stock analyst with Furman, Selz Inc., New York, says the former management team had to be replaced in order for the company to be restored to profitability. She compares the GM board's actions to the shake-up at Chrysler Corp. in 1979, when Lee Iacocca became chairman and similarly cleaned house. He brought in a fresh group or people who could look at Chrysler's problems objectively, without emotional attachments to any car lines or divisions and would then make sound decisions in a dispassionate manner.
"GM is unfortunately paying the price for many years of mismanagement," Keller says. "For years, they disguised the fact that they were in trouble--they tried to pass it off as some kind of economic blip. Now it's...