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GM Chief Maps Company's Future

General Motors' chief wants to eliminate models, shed workers and shut older plants to transform GM into a nimbler, more competitive automaker.

Separately, GM said July U.S. sales fell 37.7 percent - meaning it falls behind Ford Motor Co. for the first time in 28 years. And in a forecast reflecting its recently ended eight-week strike, GM said it expects a "tough month" in August.

While analysts have been critical of what they see as GM's tardiness in restructuring, they welcomed remarks by Chairman John F. Smith Jr.

"The strike and the financial damage it caused may have accelerated their plans," said David Healy of Burham Securities. "GM has too many models, too many plants, too many people and maybe too many divisions."

Smith told an audience at the University of Michigan Management Conference, the company in the next few years will:

  • Introduce 23 new car and truck models while reducing the overall number of offerings, now at 77.
  • Introduce five new advanced engine and transition systems between now and 2005 to replace the 10 major existing ones. That will shave "structural costs" and expand market presence, he said.
  • Continue to re-configure GM's manufacturing process to boost capacity utilization above the current 94 percent level, while making production faster and more flexible through a sharp reduction in the thousands of parts needed to construct each vehicle.
  • Build some new assembly plants to replace older plants. The new assembly plants will operate 24 hours a day and will include metal-stamping operations.

"The bottom line is that we are moving even faster now than we did in the previous six years to transform General Motors into a different company," Smith said. "Speed and agility will be the hallmarks of this new General Motors."

Already, GM has announced some major steps. On Monday, the company said it would spin off its huge Delphi Automotive Parts Systems, which would remove 200,000 workers from its payroll and dispose of some of operations that have made GM the least efficient of the Big Three.

And on Tuesday, the automaker said it would consolidate its five marketing divisions into one organization, combining sales, marketing and service staffs. That would eliminate 1,000 jobs while saving the company up to $200 million to $300 million annually.

"Yes, we will need to make more changes, but we have shown that we are willing and determined to get where we need to be, whatever it takes," Smith said.

But Smith also said GM isn't in retreat. "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."

To achieve its goals, Smith said GM is prepared to work more closely with the United Auto Workers union to prevent a rehash of the recently ended strike. The standoff forced the company to shut down nearly its enire North American operations and cost it about $2 billion in lost profits.

GM and the UAW "are committed to an on-going high-level dialogue to work through our differences over competitiveness and productivity issues without resorting to costly work stoppages," Smith said. "Both sides are learning many lessons from this summer's strikes. Those lessons will be the foundation for progress."

He assured workers that there will be no layoffs, but he reasserted the company's right to continue to trim its workforce through attrition - not filling the spots of retiring workers. Since the end of 1990, GM has reduced its payrolls by 125,000 through attrition. More than 15,000 workers could be retiring annually over the next few years, analysts say.

Written By Jeffry Bartash

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