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Most Expect Smale to Take Over at General Motors

October 27, 1992

DETROIT (AP) _ John Smale, the General Motors Corp. director who reportedly led the boardroom coup ousting chairman Robert Stempel, is the favorite to succeed Stempel, auto industry insiders said Tuesday.

″What you can expect from GM is the expected,″ said Gerald Meyers, former chairman of American Motors Corp. and now a management consultant.

A source with close ties to GM’s board said there was an 80 percent chance Smale will assume the posts of chairman and chief executive when the directors meet next week in New York. Smale is currently the chairman of the board’s executive committee.

Stempel was forced to resign Monday because of the disastrous condition of GM’s finances, its loss of market share and the impression that management was moving too slowly to reverse the automaker’s losses.

GM lost $12 billion in its North American auto operations in 1990-91 and is expected to report a third-quarter loss of $845 million Thursday, mostly because of poor sales in the United States and Canada.

The idea of an outsider taking over as chairman was discounted by analysts Tuesday, but it wasn’t ruled out.

″There is a rump group that has been pressing for over a year to go outside″ for a new chairman, said the source, speaking on condition of anonymity.

General Electric Co. chairman John F. Welch Jr. has been mentioned as one possibility. Another is racer Roger Penske, whose name surfaced earlier this year as a possible successor to Lee Iacocca at Chrysler Corp.

Penske has turned around several small businesses, such as Detroit Diesel Corp., which he since has bought from GM, and Penske Truck Leasing, a joint venture with General Electric Capital Corp. A Penske spokesman said he is not involved in talks with GM’s board.

But observers were looking toward Smale to take over.

″If Smale does not take the chairman’s job temporarily, then all the moves made thus far do not make any sense,″ said Eugene Jennings, professor emeritus at Michigan State University and a GM watcher. ″The only thing that makes sense is for Smale to preside over the completion of this revolution.″

The crisis atmosphere at the world’s largest automaker seemed to be reflected in the movement of its stock, which dropped $1.75 a share to $32.37 on the New York Stock Exchange after climbing 62 1/2 cents Monday.

There was speculation about a mass exodus of top executives, perhaps beginning as soon as Wednesday.

″When you see a chairman go, anything’s plausible,″ said one GM executive, who spoke Tuesday on the condition his name not be used. ″We know we’re all fair game.″

At least 10 executives, most with ties to Stempel and previous chairman Roger Smith, are expected to resign, the source close to the board said.

″Getting the old guard out of there that has been delaying the reorganization of General Motors is the key,″ the source said.

″Assigning them make-work was worse than just firing them,″ the source said, apparently referring to executives demoted in the first stage of GM’s shakeup last April. At that time, then-president Lloyd Reuss, executive vice president F. Alan Smith and former chief financial officer Robert T. O’Connell were all assigned to lower-ranking jobs.

Smale, a former Procter & Gamble Co. chairman who has chaired the GM board’s executive committee since April, has not returned phone calls seeking comment.

Reports that labeled Smale as the leader of board insurgents also suggest he will take the helm for one to three years despite no experience in the auto industry.

Other GM board members with business backgrounds - including former CBS Inc. chairman Thomas Wyman, former Pfizer Inc. chairman Edmund Pratt, and Marriott Corp. chairman J.W. Marriott - are said to be working in concert with Smale. Wyman sits on the executive committee.

The source with ties to the board said there may be a move afoot to get rid of some directors, too. Currently the board consists of 15 members, 11 non- employee directors and four corporate officers. Stempel has indicated he will surrender his board seat.

Other directors with at least 10 years on the board but no background in business likely will be asked to leave, the source said. The eventual goal is an eight-member board with expertise in business, the source said.

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