Jack Smith's office at 1660 L. St.,Corp.'s Washington headquarters, is modest compared to his sprawling suite at GM's World Headquarters in Detroit. Not a phone booth, but modest in size and furnishings.
Somehow it fits his personality: A small town boy from Worchester, MA, who despite his lofty title as chairman of the world's largest industrial corporation still clings to his Yankee roots, his New England accent (“cah,” not car) very much intact.
John F. (Jack) Smith Jr. is relaxed and candid as he sits for his first interview since announcing his retirement a few days earlier. He'll retire next April when he reaches 65, capping what will be a 42-year career that began at GM's Framingham, MA, Fisher Body plant.
He plans to spend half his time on Cape Cod, where he has long maintained a home, and in Naples, FL, where at last count nearly 40 ex-GM executives, including his mentor, former Chairman Roger B. Smith, have retirement homes.
His son has an “upscale” grocery business in the Cape Cod area, and he says he'll spend time working with him “on the retail side of the business,” jokingly adding that maybe “I'll brown-bag it” when he shows up for work. He'll also remain on several corporate boards, but fully sever official ties with GM.
That would be a far cry from the high-flying life he's led since moving up rapidly at GM. He served as CEO from 1992 to 2000, was president from 1992 until 1998, and has been chairman since 1996.
Since 1992 he has reshaped GM's organization. After a disastrous $2.6 billion loss in that first year, earnings rebounded to $2.5 billion in 1993 and GM has been in the black ever since, with profits swinging from a low of $601 million in 2001 to a high of $6.9 billion in 1995.
Although 2001 was a squeaker, GM still managed to make money in a tough year during which its two domestic rivals,Motor Co. and DaimlerChrysler Corp., dripped red ink.
Hefty incentives following 9/11 get much of the blame for GM's 2001 slide. GM introduced “0% financing” on most of its vehicles, quickly followed by others. Asked at the annual meeting how much the 0% program cost GM, Smith snaps: “It's the best thing we've ever done; we weren't selling any cars.”
Smith's career has taken as many twists and turns as the test tracks at GM's Milford, MI, Proving Grounds. During a lengthy, free-wheeling discussion Smith touched on several controversial subjects, including the sudden and bizarre departure of purchasing chief J. Ignacio (Inaki) Lopez de Arriortua toAG in 1993.
Smith had scheduled a press conference at which Lopez was to be elevated to NAO president. The enigmatic Spaniard failed to show, turning up the next day at VW. Later he was charged with stealing sensitive GM documents, creating a legal firestorm and his downfall at VW.
Admitting that he was shocked by Lopez's no-show, Smith says he still likes the Spaniard. “The part of the story I've never told,” he tells Ward's, “is that about 5:30 the next morning he called me from the infirmary at VW and he was crying and saying he wanted to come back. But I told him, ‘Inaki, the ship has sailed.’” Moreover, he can't understand why Lopez stole the documents. “He didn't need to do that. He knew the system better than anyone else. There was no reason for it.”
Smith credits Lopez with creating GM's global purchasing scheme by combining 27 separate purchasing operations into one and dramatically slashing costs even as he upset GM's suppliers to the point of near mutiny. Lopez reportedly saved GM billions and is widely credited with its early 1990s turnaround.
Smith says Roger Smith, then head of financial analysis in New York, persuaded him to take a finance job in New York in 1966. It “was an interesting place,” he recalls. “Boy, everybody was in dreadful fear of Fred Donner (GM's tough New York-based chairman from 1958-'67), whose office was right above ours.”
One of his jobs was writing remarks for Executive Vice President Roger Kyes to deliver to the board of directors. Kyes had the personality of a pit bull. “He was one sweet dude,” Smith muses. “So one time I wrote them up and he turned to me and said ‘Young man, I'm not even going to look at this. I'm just going to go in there and read this. And for your sake, there had better be nothing wrong. Phew! I ran downstairs and checked every number. He was a spooky guy.”
Another turning point came in 1981 when his boss (then F. Alan Smith) called and said, “The operating people want you to go over and head product planning. I said ‘I don't know, why would I want to do that? That job is not as good as the comptroller's job.’ So I turned it down.” Smith finally was literally ordered by Roger Smith to take the job in February 1982.
“It was a good move, but the staff was brutal over there. I spent most of my time (at first) rebuilding the staff,” he says. But within a few monthsMotor Corp. asked GM to consider a joint venture “and I got the assignment.” Smith spent two years as product planning chief, moving on to become president of GM of Canada and then into international operations.
Despite major hurdles, the GM-talks created New United Motor Mfg. Inc. (NUMMI) based in Fremont, CA, where GM had shuttered a problem-plagued assembly plant.
Smith had never visited Japan before, but he soon was “immersed in the Japanese production system and everything else. But the more important thing is I learned exactly where we were from a competitive position, both in the car and components. And boy was that bad news — bringing it back to GM's operations people. They didn't believe me. They were in denial.”
Among other things, Smith soon discovered it took GM 5,500 people to assemble 60 cars per hour on two shifts. Toyota needed only 2,200 for the same output. “I come back and tell them we're not competitive, and they were about to run me out of town,” he says.
GM put a task force together to reconcile head counts at the now-defunct Fisher Body and GM Assembly divisions, and was shocked to learn that “we had 700 people no one would account for.” Each blamed the other.
GM got another lesson when it bid on parts for the cars that NUMMI, with Toyota in command, would build for both companies. “We won about seven parts; Toyota won all the rest,” he laments.
GM's ill-fated 1984 reorganization “might have been pulled off if they'd been more inclusive. We needed one organization, but we wound up with a bunch. We lost the benefit of what was common at the time. So when all was said and done we were worse off than better.”
GM's brand management strategy, adopted under former Chairman John Smale, has been overplayed by the press, he maintains. “Detroit automotive is special, and any time you try to change it you get beat up pretty bad. But the logic involved makes a lot of sense.”
GM's U.S. market share during his decade at the top has skidded from 34.3% to 28.1% through May of this year, but Smith is philosophical about that. “It's a global market, and you've got to be able to compete in all of their markets and in all segments on a global basis.”