Those old fossils are cool but GM's Smith looks to the future

In John F. Smith Jr.'s 38th floor office, a room with a view of the Detroit River and beyond, are two large fossil artifacts, a lizard and a fish from way back in time.

"They're from Brazil. I think they're cool," Mr. Smith says of the imprints in stone slabs, one mounted on a window ledge, the other on a stand next to his big desk.

But it is mostly the future which Mr. Smith talks about, General Motors Corp.'s and, more guardedly, his own as speculation looms that he'll be retiring soon as GM chairman and CEO.

It's been a long career journey from working as a boy at his family's ice cream store in Massachusetts to running the world's largest corporation for the last seven years.

Mr. Smith, whose background is in finance, virtually revolutionized the way the automaker does business. He's always kept an eye on the bottom line, assuming his chairmanship in the early 1990s when GM had red ink all over its hands.

He's praised for his competency and amiability. But he has his critics. Among them are dealers who are irked by some GM initiatives of late. Those include a vehicle ordering system that doesn't seem to work quite right, a plan to buy 10% of dealerships and the company taking more control of dealers' regional ad spending.

"Cynical dealers might think that GM at the beginning of the year put together a list entitled 'Things we can do to p-- off dealers,'" quips one GM executive.

But Mr. Smith is credited with transforming a company that was looking more and more fossilized. He cut costs by billions of dollars, restructured operations and reduced an oversized workforce.

He's ranked as one of the better executives who've run GM, beginning with founder Billy Durant. A book on him is in Mr. Smith's office bookcase.

Mr. Smith is brief when talking about his legacy and even more terse when discussing the possibility of retiring next year, despite a buzz that he's fixing to leave.

"I have no plans to retire," he says, "and anything you read in the papers is pure speculation. I've said what I'm going to say. I'm working every day hard, hopefully I'm adding value, but only time will tell."

And what might his legacy be?

"Well, I don't know if it's my legacy, but I think it's the legacy of the GM employees that they've changed General Motors. They've changed every aspect of it so it can move into the 21st century."

That includes centralizing operations and eliminating the fiefdoms of GM divisions with their once powerfully independent general managers who were also company vice presidents.

Lately, Mr. Smith presides over a new design and technology movement to produce vehicles more attractive to the market. Critics have claimed GM's current styling is in general unexciting and uninspired.

Mr. Smith says now that GM's financial house is in order after the money-losing years in the early 1990s, the design and engineering staffs have the wherewithal to work on all-new products.

He says, "We had a big job to do just to update the old product line, and it's only been over the last couple of years that we've been able to really focus on innovation in the product line. We feel pretty good about what's coming. It's innovative and different than the current mix of vehicles we have in the marketplace."

Such upcoming offerings include the Buick LaCrosse, a five-passenger sedan that transforms into an open- bed cargo hauler; the Pontiac Aztek, a combination of sports sedan and SUV due out in the second quarter of 2000; and the Cadillac Evoq roadster.

Mr. Smith calls 1999 a "blockbuster" year with sales of more than 17 million cars and trucks. GM's share in that is about 30%.

Mr. Smith had predicted 1999 vehicle sales of 15 million. "That wasn't very good, was it? But we'll take the 17 million," he says, agreeing that, if you are going to be off by two million, it's better to be off in that direction.

He foresees 2000 as "another good year" with continued consumer confidence and strong spending. "But we expect it to slow somewhat from such a very huge number this year."

After his inaccurate 1999 prediction, he declines to predict how many vehicles might be sold in the U.S. next year.

All those vehicle sales have kept most U.S. dealers busy and profitable.

But a major controversy erupted in October when GM announced that it wants to buy nearly 800 of its franchised dealerships enjoying those brisk sales.

Dealers bristled at that announcement. National Auto Dealers Association brass, who weren't shy about publicly expressing their discontent, met with Mr. Smith to try to talk him out of it.

Later, some news reports said GM would indeed scuttle the program. One Detroit newspaper headline proclaimed, "GM kills dealership plan."

That prompted GM to say in a written statement that it's moving slowly and working with "willing selling dealers to purchase their operations with the objective of improving business performance."

Mr. Smith declines to add to that. He says the statement clarifies GM's position. "I don't want to confuse it," he says.

NADA leaders at that pow-wow said Mr. Smith seemed surprised by the negative publicity and by all the fallout.

"I don't think I'd characterize it that way," he says. "They came in voicing a concern...We had a good discussion."

Basically GM agreed to get dealer input on the matter and not pell-mell into a dealership buying spree. But the plan is hardly dead.

Where does Mr. Smith see the dealer network in 10 years?

"That's hard to say, but I think we're going to see a network focused a lot on the Internet and focused on running the entire dealer network with less inventory in the system. Shorter plans stand to get a car up from the customer order and into his driveway."

The Internet has armed shoppers with all sorts of information, including what dealers pay for their vehicles. Some dealers say that's unfair. After all, they reason, does someone buying a refrigerator know what the appliance store paid wholesale for it?

"I won't debate whether it's fair or not," says Mr. Smith If that information is available and if you're going to say, 'Stop that!', I think you are going the wrong way.

"People are going to know more and they are going to use that information to make a buying decision. So it's part of the changing world. And they'll soon know the invoice price of that appliance, too."

A few years ago, 5% of customers researched vehicles on-line before heading to the dealership, according to Mr. Smith. That's now up to 40% and climbing, he notes.

He says, "Technology doesn't stand still, and so our websites can tell interested people what our products look like, how they compare to the competition, how they can buy that product and how we can get them to a dealer. The Internet will certainly be a factor in the sale of automobiles over time."

Mr. Smith says the Internet will also start appearing in some of those vehicles sold with the aid of the Internet.

The Internet, tied into GM's OnStar system, will be offered in select vehicles, starting in the first quarter of next year.

"It's pretty powerful stuff," says Mr. Smith. "I mean this is the New World coming."

Those mobile Internet systems will be voice-activated. E-mails will be delivered verbally by an electronic voice which is far from lilting. In fact, Mr. Smith says, "It sounds a little spooky."

He says GM and other auto companies are also focusing more on "downstream revenue opportunities." Those include GMAC financing and insurance, not just for vehicles, but also homes and other major purchases.

He says he has no ideal car-truck ratio in mind for GM, but look for those two types of vehicles to find common ground.

Mr. Smith explains, "What we are doing for the future is kind of merging the two. We'll always be saying 'cars' and 'trucks,' but you're going to have to look underneath to see what you got.

"So cars will look more like trucks and trucks will drive more like cars. That's clearly a trend that's coming. You're going to see innovations on trucks and truck platforms, and you're going to see innovations on cars and car platforms that will have the same characteristics as trucks do."

He says GM's product development lead time was once 48 months. That was reduced to 24 months. Now it's 18 months and less from clay design to start of production.

Such timeliness allows the automaker to respond quickly to marketplace trends in a fast-changing world.

Mr. Smith says that despite the changes he's made at GM as well as the changes that are about to come, he doesn't go home and reflect on the utter enormity of his job of running the largest corporation in the world.

"Maybe it's because I've been with the company for so long that I kind of get used to it."

- With Dave Smith