Beginnings with General Motors Smith spent virtually his entire professional career working for General Motors. He was born in
Columbus, Ohio, the son of Besse Belle (Obetz) and E. Quimby Smith. Smith earned his
bachelor's degree in business administration at the
University of Michigan in 1947, and his
MBA at the
University of Michigan's
Ross School of Business in 1953. He served in the
United States Navy from 1944 to 1946. Smith began his career at GM in 1949 as an accounting clerk, and had become the company's treasurer by 1970, and vice president the following year. In 1974, Smith was elected executive vice president in charge of the financial, public relations, and government relations staffs. He ascended to GM's chairmanship in 1981.
Poletown plant controversy In 1981, mayor
Coleman Young and the city of
Detroit won a notorious
landmark decision in the
Michigan Supreme Court,
Poletown Neighborhood Council v. City of Detroit that allowed the city to use its eminent domain power to raze an existing immigrant neighborhood in neighboring
Hamtramck. In order to transfer the land to GM for the construction of a new factory, the city condemned the homes of 4,200 residents as well as numerous churches, schools, and businesses, including the original
Dodge assembly plant opened in 1914 by John and Horace Dodge for their then new 1915 Dodge Brothers car ("Dodge Main"). Although the deal predated Smith's tenure as chairman, he subsequently used the construction of the new Poletown factory, along with plants on a greenfield site in
Lake Orion Michigan, and one in
Wentzville, Missouri (an
identical twin to Orion) to showcase the technology he felt would lead GM into a new era. Unfortunately, the factories failed to live up to their promise and since they were duplicates of existing GM factories, unable to flexibly produce different models, were ultimately panned by critics as obsolete on the day they opened. In 1982 Smith negotiated contract concessions with the
United Auto Workers and cut planned raises for white-collar workers. After unveiling a more generous bonus program for top executives that provoked an angry response from the union, Smith was forced to back-pedal. Relations with the UAW, management, and stockholders remained strained. Profits improved in 1983 and Smith began unveiling his vision for reorganization, diversification, and "deindustrialization." One of the most controversial decisions made during Smith's tenure was the partial elimination of divisional autonomy in 1984. In the 1920s, chairman and CEO
Alfred Sloan, Jr. had established semi-autonomous divisions within the corporation, each designing and marketing their own vehicles (
Chevrolet,
Pontiac,
Oldsmobile,
Buick and
Cadillac). This was considered a crucial factor propelling GM past market leader
Ford in the 1930s. By the 1980s however, that autonomy (also including
Fisher Body division producing the car bodies, and GM Assembly division building them) were seen as representing a dated business model that had led to needless large scale redundancy, infighting by the divisions, and a bloated internal bureaucracy.
1984 reorganization Smith took on the massive GM bureaucracy with disastrous results. A sea change in how GM would market and build cars in the future, the 1984 reorganization was intended to streamline the process and create greater efficiencies; the reverse actually occurred. Combining the nameplate divisions,
Fisher Body, and GM Assembly into two groups, C-P-C (
Chevrolet,
Pontiac,
Canada) to build small cars and B-O-C (
Buick,
Oldsmobile,
Cadillac) to build large cars, the effort was subsequently criticized for creating chaos within the company. Longstanding informal relationships which had greased the wheels of GM were severed, seemingly overnight, leading to confusion and slipping new product programs. The reorganization virtually stopped GM in its tracks for 18 months, and never really worked as intended, with the CPC division building
Cadillacs and BOC building
Pontiacs. The reorganization added costs and created more layers of bureaucracy when the new groups added management, marketing and engineering staff, duplicating existing staff at both the corporate and division levels. Almost ten years elapsed before the 1984 reorganization was unwound and all car groups were combined into one division. including a 1981 joint venture with the Japanese robot manufacturer, Fujitsu-Fanuc. With the resulting venture,
GMF Robotics, GM became the largest manufacturer of robots in the world. Unfortunately, the experience failed to meet the vision, with the new robots famously painting each other instead of the cars, or robots welding doors shut. Responding to a 1986 report on 3-year capital expenditures projected at almost $35 billion, VP of finance F. Alan Smith (no relation) opined the sum could be better spent on purchasing both
Toyota and
Nissan resulting in a bump in market share overnight and openly questioned whether the proposed capital expenditures would pay the same dividends; they did not. By the time Smith retired, GM had evolved from the lowest cost producer in
Detroit to its highest cost producer, due in part to the drive to acquire advanced technology that never paid dividends in efficiency.
Acquisitions and divestitures In 1984 Smith oversaw General Motors' acquisition of
Electronic Data Systems from its founder
Ross Perot for $2.55 billion, serving two purposes. First was the opportunity to modernize and automate GM to fulfill Smith's goals; second, it was an effort to broaden out of its manufacturing base and into technology and services. As a result of the EDS acquisition, Perot became GM's largest single shareholder, joined its board of directors, and immediately became a source of friction to Smith and a vocal and public critic of Smith and GM's management. In 1986 Smith and the board orchestrated a $743 million buyout of Perot's GM stock at a substantial premium over the market value of the shares. Perot accepted the buyout, but publicly denounced the expenditure as outrageous at a time GM was closing plants and laying off workers. He announced that he would put the money in escrow to give the automaker a chance to reconsider, but never actually sequestered the funds. The relationship between Smith, Perot, and the EDS executives ruptured openly in September 1985, during a meeting in Dallas that brought the EDS executive compensation issue to a head. Smith was reluctant to accept the EDS plan, substituting a plan of his own. Described in
Irreconcilable Differences by Doron Levin, EDS' CFO was explaining to Smith how they felt GM's plan was inferior, when Smith lost his temper. "''People in the room later would remember Smith's angry explosion as being wondrous and terrifying at the same time: wondrous for the extreme colors and sounds it brought to the room, terrifying because none of them had ever seen someone lose his temper so completely in a business meeting. The EDS officers stared in disbelief as the chairman of the world's biggest and most powerful company lost it.''" What ensued was one of the most vitriolic corporate battles of the 1980s, with Perot and Smith publicly exchanging barbs using the media, which delightedly splashed the story over every business publication in the U.S.. Perot notoriously lashed out at Smith in a 1988 exclusive to Fortune Magazine, saying: "''My question is: Why haven't we unleashed their potential? The answer is: the General Motors system. It's like a blanket of fog that keeps these people from doing what they know needs to be done. I come from an environment where, if you see a snake, you kill it. At GM, if you see a snake, the first thing you do is go hire a consultant on snakes. Then you get a committee on snakes, and then you discuss it for a couple of years. The most likely course of action is—nothing. You figure, the snake hasn't bitten anybody yet, so you just let him crawl around on the factory floor. We need to build an environment where the first guy who sees the snake kills it
." Perot went on to needle Smith regarding the opulent 25th floor GM offices in New York, "An entire teak forest must have been decimated for that floor''". Smith, who had obviously ignored the irony of the CEO of the largest public corporation in the world complaining about the opulence of the private office (which Perot had personally paid to furnish) of a rival, had responded to Perot's frequent criticism of GM's executive perks a year earlier, "''Perot's office (in Dallas) 'makes mine look like a shanty-town. He has Remingtons; he has a Gilbert Stuart painting hanging on the wall. Nobody runs around saying 'Get rid of Ross's office''''". A second large acquisition outside the automobile industry followed in 1985, when Smith announced the purchase of
Hughes Aircraft Company from the Howard Hughes Medical Institute for $5.2 billion. The company was then merged with GM's
Delco Electronics to form
Hughes Electronics. Smith's purchases of EDS and Hughes were criticized as unwise diversions of resources at a time when GM could have invested more in its core automotive divisions. GM spun EDS off as an independent company in 1996. After some major acquisitions in the mid-1990s by Hughes Electronics (
Magnavox Electronic Systems and
PanAmSat), GM divested most of Hughes assets from 1997 to 2003, including sale of defense operations to
Raytheon in 1997, the spinoff of
Delphi Automotive Systems in 1999, the divestiture of Hughes Space and Communications to
Boeing in 2000, and acquisition of the remaining communications and satellite operations (mostly
DirecTV) by
NewsCorp in 2003.
Solar Challenge In 1987, Smith chose to have GM enter in the first
World Solar Challenge race and he hired
AeroVironment to build a winning solar-electric vehicle. The resulting car, the
Sunraycer easily won the race at a cost of just under 2 million dollars. The success of the Sunraycer led directly to the AeroVironment-designed
GM Impact prototype, subsequently planned for 25,000 vehicles, which in turn led to the
EV-1. ==Legacy==