Comeback by Paul Ingrassia & Joseph B. White

Author:Paul Ingrassia & Joseph B. White
Language: eng
Format: epub
Publisher: Simon & Schuster

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I. Lutz did, on occasion, use ethnic epithets in his speech, say people who worked with and for him. He denies, however, referring to Iacocca in this way.

CHAPTER 12

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GM: THE APRIL COUP

DETROIT IN WINTER ISN ’T the destination of choice for high-powered New York lawyers with vacation homes in Palm Beach. But now, on a snowy January 15, 1992, Ira Millstein found himself headed there for his second visit in less than two weeks. The first had occurred ten days earlier, when the General Motors board of directors met in Detroit. Millstein, who served as legal counsel to the independent directors, had attended, as usual. One man who did not attend, however, was Board Chairman Bob Stempel. He was in Japan, accompanying President Bush on a trade mission. The most memorable moment occurred when Bush vomited into the lap of Japan’s Prime Minister during a state dinner, and had to be hauled off to a hospital. As Stempel had feared from the start, the trip proved pointless.

GM’s independent directors, though, had found Stempel’s absence convenient. They used the company’s monthly board meeting to talk privately among themselves, without the chairman or any other member of management present. They had been doing this, off and on, since the waning months of Roger Smith’s regime in the spring of 1990, but the latest discussion had a particularly sharp focus. GM had lost a mind-numbing $12.5 billion in 1991 in its North American automotive business. 1 In terms of straight cash flow, as opposed to earnings, GM was bleeding at the rate of more than $1 billion per quarter—$462,000 every hour of every day. The company’s share of U.S. car sales had plunged to just over 35 percent from nearly 45 percent just seven years earlier, and it was still sliding.

After years of complacence followed by an aimless, uncoordinated restlessness, the independent directors realized the truth: GM was dying. Someone had to act. During their private powwow, GM’s directors finally had made a decision. Now it was Millstein’s chore to inform Stempel.

When Millstein had called Stempel’s office to arrange the meeting, the chairman’s secretary had tried to put him off, citing her boss’s busy schedule. Millstein then told her he was calling at the request of the board, and begged her to consult with Stempel. After she did, a meeting was set up posthaste, and Millstein promptly made arrangements to fly out from New York. When he landed at Detroit Metropolitan Airport, Millstein didn’t even have to ride into town. Stempel and Harry Pearce, GM’s vice president and general counsel, were waiting for him in GM’s private terminal. The three men adjourned to a conference room to talk.

Millstein began explaining to Stempel that the independent directors were worried. Ten days earlier, he added, on the night before the January board meeting, they decided they needed to know a lot more about what was going on at GM. So they had asked John Smale, the retired chairman of Procter & Gamble and a GM director since 1982, to launch a fact-finding mission.

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