GM Under Smith: Motown Without the Soul (1990)
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Holmes Report

GM Under Smith: Motown Without the Soul (1990)

For the majority of his ten years at the helm of America's largest corporation, Smith has often appeared more concerned with evading the very publics he should have been enlisting in his vision of the future.

Paul Holmes


Roger Smith became chairman of General Motors on January 1, 1981. Two months later, with GM embroiled in the first of the many controversies of his ten year tenure over its plans to demolish the blue-collar multi­ethnic Detroit neighborhood of Poletown, Smith demonstrated his sensitivity by telling Polish jokes to a reporter from the Detroit News. In May that same year he told GM stockholders that, contrary to the evidence of massive public protests, "most of these people were delighted to be rescued from homes they couldn't sell."

In 1990, with his reign as chairman com­ing to end, Smith was still demonstrating his almost complete disregard for public opin­ion While recovering from the PR impact of Michael Moore's documentary film Roger & Me, Smith saw his retirement pension almost doubled, to $1.25 million a year, despite having presided over an 11 % decline in GM's share of the U.S. passenger car market and a dwindling of domestic auto profits. After the new pension plan was approved by shareholders, Smith said the whole issue of his remuneration had been "blown out of proportion" by the media.

Those two events, one at the beginning of Roger Smith's stewardship and the other towards the end, attest to what many observers believe was Smith's insensitivity, indifference to public opinion (indeed, to any opinion other than his own) and impa­tience with the media.

"Roger Smith personifies everything that is wrong with Detroit, and Detroit is a microcosm of what is wrong with American business attitudes," says one motor city PR man. "The attitude, at GM is still what's good for GM is good for America. When anyone questions the company's actions, the company gets indignant. And Roger doesn't understand why everybody is trying to make his job so difficult."

For the majority of his ten years at the helm of America's largest corporation, Smith has often appeared more concerned with evading the very publics he should have been enlisting in his vision of the future. When he realized that he could not escape them, he told them what they wanted to hear, promising them a future that never quite materialized. By the end of his career, he was back in his shell. When he did ven­ture out he sounded bitter, as if the media's coverage of GM was the disease, rather than simply a symptom.

Having said that, Roger Smith is not without his admirers. In 1985, for example, he was presented with the International Association of Business Communicators Excellence in Communications Leadership Award, for his championing of the impor­tance of face-to-face communication with employees.

Detroit PR veteran Jack Casey, former president of Casey Communications, believes Smith will be remembered more fondly as time goes by. "He may not have been the greatest communicator," Casey concedes. "But there was more substance to his leadership than there was to that of some of his competitors. His time at GM was one of innovation. He took the company into new areas, and achieved profits in the face of tremendous changes affecting the U.S. auto industry.

"Most people, with the exception of Ralph Nader, believe GM did all it could for the population of Poletown. And what was the right way to handle Roger & Me? In the end that storm just blew itself out. What you have to consider is corporate culture. GM is a huge company. People talk about the difficulty of turning a big ship around. Well, as [General Motors vice-president of public relations] Jack McNulty says, GM is not just a ship, it's a convoy."

Even some of GM's competitors are pre­pared to admit the difficulty of controlling PR in a community as closely scrutinized as Detroit.

"Detroit has its own press corps," says James Tolley, formerly Lee Iacocca's PR chief at Chrysler and now an independent consultant. "I don't think there's another industry, except maybe the entertainment industry, that has so many people watching it so closely on a day-to-day basis. All the major papers have staff there. There are a hundred or more reporters watching every move you make, and because GM is the biggest player it gets the most attention. Everyone is scrambling for news, and that can make life very difficult."

It is worth considering too, that when Roger Smith took the reins at GM in 1981 the company's image was already one of a powerful but unfeeling monolith.

Jack McNulty, who took over GM's top PR post in 1979, concedes that this is so, and credits Smith with radically changing a ponderous corporate culture. "General Motors had always had an adversarial rela­tionship with labor," McNulty says. "In the '50s and '60s it would design the cars it liked and expect the public to buy them. I think Roger Smith recognized that these attitudes would not work for the company of the '90s and set out to change them."

If Smith did set out to change GM's cul­ture and its image, most company-watchers would agree that he was not entirely suc­cessful. Perhaps the task was simply too big for one man. Perhaps he met with more resistance than he could handle. Perhaps, when the going got tough, he reverted to GM type, hiding from the glare of public scrutiny. Or perhaps, as Jack Casey says, his legacy cannot truly be assessed until long after his departure.

The major contributing factor to GM's pre-Smith image was probably the Corvair crisis of the early '60s. The Corvair, acclaimed for its sporty design and cutting­ edge engineering, was difficult to control at higher speeds and when cornering. The company's stance, despite a spate of acci­dents and internal criticism, was summed up in the advice of then VP for public relations William Hamilton, who reportedly told a colleague: "We are not going to do any­thing. We are going to ride this out."

Leading the internal criticism at that time was a young hotshot called John De Lorean, whose memo to Smith's predeces­sor Thomas Murphy in 1972, shortly before his res­ignation, summed up some of GM's problems.

"I honestly feel that most of our executives are a prod­uct of corporate inbreeding and lack a real perspective on the relationship of General Motors to America," De Lorean said. "I might recount a few incidents in my own career that illustrate the point that GM lacks social respon­sibility and conversely that a strong sense of social respon­sibility is not only the proper posture for General Motors but actually would make her more profitable."

He went on to cite Oldsmobile's retention of its long, pointed-rocket hood ornament, despite it being "at the perfect height to impale a child's brain or spear out an eye"; defects in a Pontiac motor mount; and, of course, problems with the Corvair, and the destruction of corporate documents pertaining to those problems. It was clear that, whatever De Lorean's prob­lems may have been after departing GM, he had a keener insight into the modern busi­ness environment than many of his contem­poraries.

There were other factors contributing to public hostility towards GM, however. James Arnold, president of The Chester Burger Company, a management consulting firm specializing in communications issues, suggests that the dominance enjoyed by the Big Three automakers prior to Smith's appointment was a major factor.

"General Motors, Ford and Chrysler were a virtual monopoly," Arnold says. "They dic­tated choice. They made big cars and then told people what they wanted was big cars. Their reputation was like AT&T's, of being arrogant and unconcerned with what their customers really wanted. Then, if anyone questioned them, they would call on people's patriotism, and tell them to buy GM or Ford because they would be buying American.

"What really damaged GM's credibility, however, was the way the company respond­ed to Ralph Nader~ book about the Corvair, Unsafe at Any Speed. They handled it very, very badly, hiring a private detective to fol­low Nader around, claiming he was a homo­sexual. There was a backlash, Nader sued and won, and GM went into a very defensive posture. That was the situation Roger Smith inherited."

Smith also inherited the Poletown debacle. The Mayor of Detroit, Coleman Young, had announced in 1979 that GM planned to build a new plant within the city limits. Unfortunately, it soon became apparent that clearing the 352-acre site for the new plant would involve tearing down 1,500 homes and displacing 3,400 people in the half-black half-white neighborhood of Poletown. Although GM shielded itself behind Young, the people of Poletown detected the hand of GM guiding the Mayor's actions, as did many others.

Harvard Business School professor Joseph Auerbach wrote in the May June 1985 Harvard Business Review that GM had not met its responsibilities to the communi­ty. Smith was invited by a Poletown pastor, Father Joseph Karasiewicz to take a tour of his soon-to-be-demolished church. Smith declined. Protestors picketed Smith's house, asking him to give up his home for the new site. Smith was not in (as he would not be in, ten years later, to Michael Moore and his camera.)

Other PR problems followed. In 1981, Smith's first year, GM recalled seven million vehicles with possible defects, more than it turned out in the same year. In April, the new chairman ordered the shutdown of GM's air bag development unit, having already taken the lead in lobbying against proposed safety regulations. Next came the launch of the J-Car, the first new product unveiled under the Smith regime. Production delays meant the media hype ran out of steam before the product was available, and reviews were poor.

This was the first evidence that Smith—whose background was almost exclusively in finance--had a grasp of marketing strategy that was limited at best The J-Cars suffered more than ever from the GM disease: the Chevy, Pontiac, Oldsmobile and Buick ver­sions all looked alike. Items that had formerly been extra-cost add-ons came as standard, upping the sticker price. GM then offered to underwrite new car loans at 12.8%, but refused to include people who had already ordered the new models but not yet taken delivery in their offer. Buyers threatened lawsuits and took their stories to the newspapers.

Smith even appointed another finance man, Bob O'Connell, as vice-president in charge of marketing. Tom Adams, former chairman of GM ad agency Campbell ­Ewald, recalls O'Connell asking him for "basic textbooks" on marketing in an attempt to learn his new job.

Then, in 1982, came Smith's first round of labor negotiations, and a clear indication that his grasp of internal communications strategy was going to cause as many prob­lems as his external image management. After persuad­ing the United Auto Workers to give up wage increases and benefits amounting to $2.5 billion, Smith cut his own salary by $135 a month, the same amount shop floor workers would have to give up, and tried to sell that story to the media as evidence that everyone at GM was tighten­ing belts. Almost every publi­cation that picked up GM's press release pointed out the absurdity.

To make matters worse, word was then leaked that Smith and other senior executives were to receive substantial salary increases and bonuses.

"There's a company that doesn't quite understand equality of sacrifice," observed Lee Iacocca, who had himself earned a dol­lar a year for three years of Chrysler's great­est hardship. Automotive News was more blunt: "The company could not have done more to infuriate the rank and file of its workforce if it had set out to do just that."

The negotiations created a second prob­lem, with customers and dealers. Smith announced that any savings from the new contract would be passed on to consumers in the form of reduced sticker prices. Naturally enough, customers postponed purchases until the agreement was signed, anticipating cheaper cars. The dealers suffered and the cheaper cars never materialized.

Smith dearly took the hostile press cov­erage of his first two years to heart, because GM's PR tactics underwent a significant shift in 1982. He told a group of GM man­agers that: "The media have given us a black eye. As a result, many people perceive General Motors as lacking integrity, as being guilty of double-dealing with its employees." Concentrating on new technology and lead­ership in engineering, Smith began to set the media agenda, with some success.

"Roger realized, to his credit, that he had failed to communicate his vision throughout the rest of the company," says Jack McNulty. "He has often said that he set off to lead the charge and when he looked around a few months later no-one was following. He realized his own failure to communicate was partly responsible and from that point on he was much more open with workers."

In their book The Big Boys, Ralph Nader and William Taylor assess Smith's performance thus: "Smith has been praised, almost glorified, in every major newspaper and busi­ness periodical in the coun­try. There is an uncanny similarity between the media techniques perfected by the GM leader and the tech­niques used so successfully throughout the career of his political hero, Ronald Reagan. Smith has become a master of the colorful photo opportunity, the big event, the subtle decep­tion, the touching personal gesture staged to attract maximum coverage."

The new Roger Smith got a free ride from the media for the next four years, turning its attention away from issues such as employee relations and customer safety, focusing instead on GM's technological leadership and the amazing possibilities of the future. He communicated a corporate vision summed up in GM's mission state­ment, which avoids any mention of the company's social responsibilities:

"The fundamental purpose of General Motors is to provide products and services of such quality that our customers will receive superior value, our employees and business partners will share in our success, and our stockholders will receive a sustained, superior return on their investment."

The new GM public relations was typi­fied by the hype that surrounded the launch of the new Saturn division in January 1985. Saturn was established to design and build an American car that could compete with Japanese imports in terms of price and quali­ty. It was launched by Smith amid promises that Saturn would offer workers a level of participation unheard of even in Japanese factories, and that the technology involved would set new standards.

Four months later, Smith won the IABC's Excellence in Communication Leadership Award. In the same period he also picked up Automotive Industries maga­zine's Man of the Year title, Advertising Age's Ad Man of the Year award, and was present­ed with Financial World's Gold Medal for the best chief executive in America. The bubble was bound to burst, and it did, pricked by a Ford ad campaign that drew attention to the GM product of the present and the old problem of look-alike brands.

Fortune asked the inevitable question: "Is GM so preoccupied with its spectacular plans for the year 2000 that it's neglecting to build the right cars in the here and now?"

The Saturn project was cut back. As costs soared, Smith abandoned the idea of building an entry level car, and decided Saturn would focus on the crowded middle-market instead. He admitted the new system would use less automation than had originally been thought.

"In a way, Saturn symbolized what went wrong with Roger Smith's PR," says Jim Arnold. "It was to be a showpiece of American ingenuity. It was to show that American management could do what the Japanese were doing. But as time went on it became clear that there were problems, and delays, and things were scaled back. It began to look more and more like the old mono­lithic GM. In a way, the communications out-distanced the performance."

At the same time, Smith's commitment to quality was brought into question. Workers at a GM plant in Flint told how management had installed a push button system so workers could stop the production line if they spotted a quality defect (an idea borrowed from the Japanese.) But workers who spotted too many defects were shifted to other jobs, and eventually the button was connected to a simple yellow light so the produc­tion line could keep rolling.

Then, in 1986, GM bought a genuinely entrepre­neurial company, Ross Perot's Electronic Data Systems Corporation. There was a massive culture clash. Perot was openly critical of what he believed was Smith's style of leadership. The two parted company, with GM insisting on a gag clause that would force Perot to pay back $7.5 million if he spoke to the media about his time ith the automotive giant The chat clause in itself was sufficiently newswor­y to start a new round of GM-bashing. Perot went public anyway, claiming that

it withheld stock options. He said with had refused to listen to dissenting opinion. In a Fortune article he savaged the GM management style. "I come from an environment where, if you see a snake you kill it," he wrote. "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. You figure, the snake hasn't bitten anybody yet, so you just let him crawl around on the floor."

Perot offered a solution to the compa­ny's woes: "Starting today, GM's relation­ship with the United Auto Workers will be a team relationship, not an adversarial one... GM will listen to its customers, listen to its dealers, listen to the men and women who assemble its cars... Any commitment made to GM people and customers will be kept... Customer problems with GM cars will not be looked upon as legal problems but as service problems that must be solved immediately."

Smith was given an opportunity to respond (although he later claimed he had not been told his comments were to be used alongside a piece by Perot) denying some of Perot's charges about customer com­plaints and claiming "the best cooperation between man­agement and union" in GM history. Nevertheless, he was furious at the article, and a week later GM pulled all its advertising from the maga­zine.

"The purpose of advertis­ing is to try to influence peo­ple in a friendly environ­ment," PR chief Jack McNulty explained at the time. "We felt Fortune was currently not a friendly envi­ronment for a GM message. Research shows us it's coun­terproductive to present our positive message in the same issue or one following a neg­ative story."

Employee morale was at an all time low. Smith's obsession with technology had cost the company $19 billion in 1984 and '85, while rank and file workers saw little or no increase in salaries. Those same workers were coming to the realization that Smith's ultimate goal was to have them all replaced by robots. Despite the advice of his high-tech experts to the con­trary, the chairman insisted that this might be possible by the year 2010. At one point he told the UAW harshly: "Every time you ask for another dollar in wages, a thousand more robots start looking more practical."

Along came Michael Moore, ridiculing GM, its supporters in the Michigan commu­nity of Flint, and Smith himself, using smart propagandist film-making to portray the auto giant as a grotesque caricature of cal­lousness and cynicism. GM allowed the attack to go largely unanswered. Then, with Roger dr Me still fresh in the minds of the media and with images of unemployed auto workers still coming to mind at the mention of the word Motors, the company announced plans to double its chairman's pension. Even Business Week found such a move insensitive and ill-timed.

That Smith would be supported by shareholders was by no means a foregone conclusion. His relationship with the peo­ple who paid his wages—like his relation­ship with every other important public—had been a stormy one. As early as 1982 he had attempted to stage two annual meetings. The first he would oversee, a bare bones gathering with minimal contri­butions from the floor. The second would be held 15 miles away under the auspices of then-president Jim McDonald, and shareholders would be allowed two min­utes each to speak. The Wall Streetlournal saw this as an attempt to avoid corporate governance, and in the end shareholder pressure forced Smith to back down.

In 1986, despite the work of investor relations expert Gershon Kekst, a $10 bil­lion cost reduction plan, and a two-day ana­lysts meeting that featured more than 40 senior GM executives and tours of the com­pany's hi-tech plants, Smith suffered a stormy annual meeting that included several calls for his resignation and a resolution to rescind the Perot buyout. Although Smith won, more than 20% of the votes went against him, the largest-ever support for a management-opposed resolution.

His attitude towards customers appeared to be one of similar disdain. His lack of marketing expertise was demon­strated again and again in finance-driven marketing programs, and his attitude towards additional safety measures was driven entirely by cost concerns. GM has been consistently opposed to airbags (to the point that its resistance now appears to have more to do with Roger Smith's per­sonal obsession than any rational objec­tion) and its recall procedures have left a little to be desired.

When GM learned its 1984 2.5 liter engines were susceptible to cracked blocks and resulting repair bills of up to $2,000, it sent a bulletin to dealers. When the press learned about the problem they blasted GM For its failure to notify owners. GM issued a statement denying that the dealer bulletin was "secret" and informed reporters that car owners could obtain the information by call­ing either the dealers or GM. Clarence Ditlow, of the Center for Auto Safety, posed the next obvious question: "How can owners ask about a problem they don't know any­thing about, or even know exists?"

Even so, Jack McNulty believes GM's customer relations improved under Smith. `We are doing more market research now :ban ever before. We are finding out more about what our customers really want. That sounds simple, but it's something GM had not always done. We have started building more niche models as a result. Customer satisfaction is higher than ever before."

The single most alienated public, however, remains the employees. Roger Smith apparently never realized the simple fact that )productivity depended on people, or if he did, its actions rarely matched his speeches on the object. Employee communications within JM were condemned as appalling, although again McNulty says Smith has improved on )previous chairman to the point that "relations” between management and shop floor have lever been better."

Part of the blame for Smith's inability to seal with the human side of his business must rest with the General Motors culture.

"In a media-centered society, the role of public relations becomes a vital aspect of corporate strategy," says Albert Lee, a former automotive journalist, former GM speechwriter and author of Call Me Roger. `GM, however, created a culture in which leaders were picked specifically for their lack >f charisma. Traditionally, GM has tended :o ignore public opinion. Small heed was )aid to the chairman's role as spokesman and even less, since Roger's ascension, to the PR impact of each decision."

GM's public relations people, who should have been in a position to point out heir chairman's errors, perhaps even find a hew spokesperson for the company, were Lever able to do so, Lee says, partly because of the GM system that would brook no dissent and partly because Smith's capricious nature kept the 160-person PR staff—enough people to make GM a top ten PR agency—in a constant state of confusion.

Typical was his hiring in 1986 of takeovers and mergers specialist Gershon Kekst, presi­dent of Kekst & Co. Smith had heard rumors of a threatened takeover, and ordered all PR events, speeches and press releases to be reviewed by Kekst before being made public. Similarly, there was reported tension between PR boss Jack-McNulty, who was theoretically in charge of corporate advertising, and brand advertising chief Phil Guarascio.

Interestingly, McNulty's background, like Smith's, was financial. He had worked in the investor relations side of GM's business. There was even speculation that Smith had asked for McNulty because he was "untainted" by public relations thinking. Even so, McNulty is a widely respected figure in Detroit, credited with many of GM's more forward-looking poli­cies and particularly associat ed with the company's sponsorship of quality television programming.

The second part of the problem was Smith's personal style, which a Detroit News reporter once described as "brilliance unim­peded by humanity,"

Roger Smith is dearly a complex individu­al, and not an uncaring one. He was the mov­ing force behind the establishment of GM's Cancer Research Awards in 1978, before he became chairman. At Christmas 1981 he issued a $300 special payment to all laid-off workers. Under his leadership GM has devel­oped by far the largest minority-purchasing program in the U.S. With 14 other Detroit companies, GM has revitalized part of down­town Detroit through the New Center Development Project. And the company has also taken a leadership role among U.S. com­panies doing business in South Africa.

"Uncaring might be the wrong word," says Albert Lee. "Arrogant would be more appropriate. Roger was in charge and saw no reason for patience with anyone who was not getting in step with his drummer."

McNulty denies the charges of arrogance, claiming: "I never met anyone who listened as much as Roger. He would take advice from all sides, then he would come to a decision. But the decision would be his, and when it was made he stuck to it. Some people who disagreed with the decision might believe he was arrogant, but that was never the case."

"'Traditionally, GM has tended to ignore public opinion. Small heed was paid to the chairman's role as spokesman and even less, since Roger's ascension, to the PR impact of each decision."

Even McNulty admits that Smith was not a great communicator, however. Certainly he cuts a less prepossessing figure than his successor, Robert Stempel. Smith is short and sandy-haired and ruddy-faced. He has a high-pitched voice that limited his ability as an orator. Stempel is a big man, described by one Detroit PR pro as "John Wayne, but not as good looking," with an imposing presence and a booming voice.

"He's much more eloquent than Roger," says McNulty. "He's much more personable. He's a leader figure. He speaks very well. He's a more dynamic person."

Company watchers hope that Stempel's substance will match his, style; that he will be able to communicate his vision more effectively to a myriad of publics, and that he will be able to restore General Motors to preeminence in the U.S. auto market. Even his supporters, however, concede that he faces a considerable challenge.

"You have to understand," says Tom Adams, former chairman of Campbell Ewald. "GM has never had public relations. They simply have a corporate defense mechanism. They are not out to get good news, but to avoid the bad."

Nevertheless, GM has started to explic­itly acknowledge the sins of its past. A new ad campaign admits that for years GM cars have not lived up to expectations and stresses improvements in quality. Shirley Young, the company's vice president for consumer market development, is credited with the campaign, which has won kudos for its honesty but so far failed to convince the skeptics.
Perhaps the greatest challenge facing Robert Stempel when he takes over at the helm of the world's largest automaker on August 1, will be to tear down the defense mechanism Adams described, and to replace it with a system that transforms GM from an introspective, technocentric company into one capable of responding to the needs of all its audiences: employees, customers, communities and shareholders. And perhaps the most important personnel decision he faces is who will head up the company's new public relations department when Jack McNulty retires two months later.

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