General Motors Changes Drivers

New leaders as the auto giant faces troubled times

Auto industry observers scrutinize executive promotions at General Motors the way that Kremlinologists study the lineup of Soviet leaders at the annual May Day parade. This year the stakes were especially high. With Chairman Thomas A. Murphy and President E.M. Estes both nearing their 65th birthdays and required to retire in December and January, the firm's two top jobs would be opening up for the first time in six years. The giant automaker last week cut short the executive-suite guessing game. It announced that Roger Bonham Smith, 55, will replace Murphy as chairman of the board and chief executive officer; Francis James McDonald, 58, will succeed Estes as the company's operating boss. The two men were long regarded as the leading candidates.

GM's new men at the wheel have a combined company experience totaling 71 years. Thus no sudden policy shifts are expected. Short, red-haired and informal, Smith is a contrast to the tall, austere Murphy. Both men, though, are off the same GM management assembly line. Like Murphy, Smith moved steadily up through the company's financial ranks, traditionally the test track for future chairmen. He became an executive vice president and began running GM's financial operations in 1974.

Jim McDonald, the next president, is a manufacturing specialist, which is a sensitive area in Detroit these days. Japanese auto executives on a shopping trip for U.S.-made auto parts last week warned that Americans should not expect any great increase in overseas sales until they improve the quality of their cars. That has been McDonald's concern throughout his career. For the past six years he has headed GM's most important division, its North American car and truck operations. In winning the presidency, McDonald nosed out another executive vice president, Howard Kehrl, 57, who takes over the vacant post of vice chairman.

If Smith serves out his full ten years until retirement, he will have held GM's top job longer than any other man with the exception of the legendary Alfred P. Sloan, who ran the company from 1937 until 1956. Smith faces an especially difficult tenure. Although GM had sales of $66 billion last year and produces two out of every three cars coming off U.S. assembly lines--nearly three times as many as second-place Ford--the company's profits as a percentage of sales have ebbed steadily over the past decade. Wall Street analysts predict that this year the giant firm could lose up to $800 million. Smith's main job will be to restore GM's profits on sales of small cars back to the levels it once enjoyed on bigger models.

That goal, however, could run into some buyer resistance. Drivers continue to be stunned by the price tags on the new models rolling out of Detroit. Ford announced last week that its new subcompact Escort would cost at least $5,128. That is over $1,000 more than the Pinto it replaces and will be about $200 more than a 1981 Toyota Corolla. GM's hot-selling Chevrolet Citation four-door hatchback at $6,282 will cost 9.6% more this autumn; the price has risen almost 40% since it was introduced 1 1/2years ago. To make the price increases more palatable,GM announced that it is doubling the warranty to 24,000 miles or 24 months. The imports, though, continue to be tough competition. The Government last week announced the 1981 fuel economy ratings, and Japanese-or West German-built cars captured the first ten places.

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