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GM chief cites strategies

General Motors Corp. Chairman Jack Smith said his company is poised for an ambitious push overseas following a major turnaround over the past few years.

"In order to go global you need to have your house in order, and we had a lot of cleaning to do over the past few years," Mr. Smith said at a September 19 talk in Kresge Auditorium entitled "Preparing for the Millennium: Go Global or Go Bust." The seminar was co-sponsored by the School of Engineering and the MIT Sloan School of Management.

GM underwent a major reorganization in 1992 that turned a $4.8 billion loss in 1991 into a profit of $6.8 billion in 1995. During the transition, GM reduced its central management bureaucracy by 90 percent to the current 1,300 people.

The company also managed to improve its customer satisfaction rating by pollster J.D. Power and Associates from No. 6 in 1991 to No. 1 for the past two years, said Mr. Smith. GM has more than 650,000 employees and sells 8.6 million vehicles in 170 countries. Revenue is $169 billion.

Two key components of GM's global strategy are to use its large size to get purchasing discounts, and to cut by half the number of car architectures or "platforms" from 14 this year to seven in 2005. However, it still takes 30 months to create a new GM car. "The Japanese carry a good 40 percent over from model to model. We need to do this to drive down our development time," he said.

Though GM buys about $70 billion worth of parts and materials each year, it only recently began consolidating its purchasing strength to get high-volume discounts. Since 1992, GM has saved $10.3 billion by using its purchasing clout. "This was critical to our turnaround," he said.

GM will sell an electric vehicle next year in California, an early adopter of tough emission standards. But battery technology needs to be further developed before electric cars make sense in the cold Northeast, Mr. Smith said.

A version of this article appeared in MIT Tech Talk on September 25, 1996.

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