DETROIT -- General Motors Corp. Chairman Robert Stempel, under pressure from GM's outside directors, rocked the giant corporation by demoting President Lloyd Reuss and Executive Vice President Robert O'Connell.
Stempel said 'more aggressive management' is needed to get the struggling automaker back on track. Monday's move came 42 days after Stempel issued a solid statement of support for Reuss, but GM's board of directors apparently forced him to change his tune.
John 'Jack' Smith, architect of GM's profitable European operation, was named to succeed Reuss, who becomes executive vice president for new vehicles and systems, GM said Monday. Longtime GM executive William Hoglund replaces O'Connell, who becomes senior vice president for GMAC, GM's financing arm, and pension funds.
Stempel himself was stripped of his title as chairman of the board's executive committee. He will be replaced in that role by John Smale, 64, the retired chairman of Procter & Gamble Co.
Smale is one of 11 GM directors who do not work for the company. Six board members are GM executives.
The shakeup was both shocking and unexpected. Since the 1920s, no top GM executives have been demoted so abruptly and at no time since the automaker's early history has the board played such an active role in forcing management to meet the objective of directors.
GM's directors have been distressed by the corporation's poor performance, which included a $4.4 billion loss last year and the announcement that 74,000 jobs would be eliminated within a few years.
It also was the most dramatic management shakeup in the auto industry since Henry Ford II fired Ford President Lee A. Iacocca in1978. Iacocca went on to become chairman of Chrysler Corp.
Smith, 53, had been head of the company's highly profitable international auto operations. He now gets the title of president and chairman of GM's North American Operations Strategy Board, replacing Reuss, 55.
Stempel announced Tuesday morning that Louis R. Hughes, 43, will succeed Smith as president of General Motors Europe, effective immediately. He will also remain as chairman and managing director of Adam Opel AG, GM's German subsidiary, until a successor at Opel is named.
Another survivor among the top rank of GM executives was Hoglund, 57, who had been in charge of the company's extensive worldwide parts manufacturing opeations. Hoglund succeeds O'Connell, 53, as chief financial officer.
Reuss and O'Connell both were given significant cuts in responsibility.
'Regaining profitablity requires a more aggressive management approach to remove excess costs, while keeping GM's focus on customer satisfaction with the new high-quality, high-value vehicles,' Stempel said in a statement released late Monday.
