"I'M Not Asking for Sympathy"

By STEPHEN KOEPP and WILLIAM MCWHIRTER DETROIT Robert Stempel

Q. When you came into office 18 months ago, you were a quiet team player who was going to take a noncombative approach to invigorating morale. Have circumstances changed?

A. What got to me was that I really hadn't planned on the invasion of Kuwait my second day on the job. I supported the President, but I told my colleagues, "This is not good for car and truck sales." It was not good for the country.

My timetable? Yeah, it's moved up. It's going to be a lot faster than it was because I don't see the actions in this country that can really get us roaring ahead again. What I did see in this period of time was a challenge coming from Japan that indicated they weren't going to stop. They weren't interested in a portion of this market. They were interested only in the total market. I became convinced that we are targeted, just like television, just like video cameras, radios and cameras. I don't mind sharing the market. I do object to being told that "we're going to take you out." I'm not asking for sympathy. I just want to compete fair and square.

Q. Your colleague Lee Iacocca has made it sound like a declaration of war. Do you agree?

A. Iacocca was right on target. What really focused our attention during this downturn was the fact that all manufacturers brought their production in line with demand. Only one group, the Japanese, didn't do it that way. Only one group steadily increased its inventory of vehicles. I'm sure those vehicles aren't going to get thrown in the ocean -- they're going to get sold. And so there's no question about it, their penetration of the U.S. market is going to increase. We told the President and his people back last March that we could see the trend developing. That kind of behavior, in my view, really shouldn't continue.

Q. What happened on the trade mission in Japan? Did anything take place behind closed doors that convinced you something has to be done more urgently?

A. As you know, I was not among the first to accept. I was not particularly revved up for it because I was worried that there would be a focus on autos vs. a focus on trade. I went to our board. I went to the White House. It sounded like it was going to be a pretty positive mission, and so we decided to go. It was nice to be in Japan with the U.S. Government and U.S. business on the same side. I was really cheered by that. I think I saw an honest effort by the President to open up their markets.

Q. When you met your Japanese counterparts, did you feel there was an impasse, or a degree of reasonableness?

A. Those meetings were hard. The Japanese are good businessmen. They're solid. They have one position. They all know it. So those were not easy discussions, but they were meaningful. The numbers are very small -- the size they're talking about is a drop in the bucket. The point is, they are talking about what it would mean to sell cars through their dealers and to reduce the cost of distribution. The other part is up to us. We've got to display our goods, sell our goods, work very hard at whatever it takes.

Q. A popular idea is that Detroit hadn't really tried in the past. It didn't tailor cars to the Japanese market -- for example, by putting the steering wheel on the right side of the car.

A. Didn't it strike you that that's a bunch of media malarkey? The right-hand steering wheel is a red herring. One-third of VW's autos are sold there with left-hand drives. In the upper price classes, the majority are sold that way. When you haven't a chance of really getting any volume in, you don't really go specific with right-hand drive. But I'm encouraged that they will allow more vehicles in. That's why when our Saturn goes to Japan, it will go with right- hand drive.

Q. What about compliance, then? If the Japanese fail to open their marketplace more, what steps would you advocate? What about tax credits for so-called American cars?

A. I think we have to be careful when we start doing selective things like that. We messed ourselves up with the luxury tax. You've seen what it has done to the boat business: it's destroyed it. Why am I worried? Because most of those boats had our engines in them. But I'd like to see the tax deduction for installment loans on automobiles come back as an allowable deduction.

Q. In this country, is the competition simply a matter of dumping, or is it really the quality gap between U.S. and Japanese cars?

A. The American buyer is very sharp when it comes to spending his money. And I think he perceives Japanese cars as the best product. We're challenging that. Our cars generally cost less than Japan's. And then there's fuel economy. The media have done a great job of talking about our gas guzzlers and Japanese fuel economy. But we're actually better in fuel economy than Japan.

Q. Then why have perceptions lagged?

A. I haven't seen anything anywhere -- TV, print media -- that suggests anything done in the U.S. is good. Certainly the automakers haven't had good press on quality, gas mileage, transmission smoothness. I am pleased at the reaction on the new Seville. Finally we've seen some breakthrough.

Q. But surveys show there is still a gap of 2 to 1 in terms of customer complaints.

A. The point is, that difference is so narrow, the average customer can't see that difference. And just hang tight, because we're all going to zero defects. It's not unusual now to see a perfect vehicle at the end of the assembly line. Not so many years ago, people would tell you that was impossible.

Q. And yet GM has still had a relatively high number of recalls, including a recent one of 1.5 million cars with V-6 engines.

A. I got home last night and saw it on TV before my wife could turn it off. It was portrayed as really bad, and so forth. But it was a customer- satisfaction campaign, which is not a safety recall. We're very proud of | the percentage of recalls we complete. The reason is so that on the road out there, you don't have defective vehicles. When you look at those things, relatively few vehicles actually have to be repaired.

Q. But you were criticized because the recall went unannounced, and because it came after there had been some 300 incidents and one death.

A. Three hundred of 1.5 million. How many magazines do you print on a run? Every page is perfect in every magazine? The fact is, every customer received a letter.

Q. What about the manufacturing cost disadvantage between you and the Japanese, which is something like $1,500 a car?

A. There is decidedly a disadvantage for American producers. It's very simple. We're a much longer-established manufacturer with an older work force, a great number of pensioners. When you have a new Japanese transplant, the average age is much younger, with no pension cost and usually a healthier, newer work force. Even if we do better on our production side and do better on our material costs, we've still got that overhang of pensions and health care to take care of. That's something as a nation we'll have to address, because it's going to hurt us competitively if we can't get those costs under control.

Q. By GM's sheer size, whatever you do can have some effect on the economy. You have admitted that before you announced your plans to lay off 74,000 employees and close an additional 21 plants, you consulted the White House and postponed your actions for nearly 10 months at its urging.

A. It was of great concern to us. We went to see members of the Cabinet, the head of the Federal Reserve, to see what they thought. All of our data said one thing, and theirs said something else. You'd hate to make a decision and find out, "My God, those guys were right," that we were on the verge of a recovery. I think we waited as long as we could. It had to be done.

Q. When you announced the layoffs, you didn't specify which plants would be closed, which left a lot of people wondering whether they would have jobs. Why did you do that?

A. We got into a situation where some of the media felt there was supposed to be an announcement. All of a sudden rumors were abounding. The Securities and Exchange Commission doesn't allow those things to happen, so we had to put out a brief announcement, and we followed up in December with more details. Obviously the timing just before Christmas was not good. We knew we were into a miserable retailing season, and certainly we didn't want to add to it.

We still have not completed our decision. It would have been terribly unfair had I just announced those plants all by myself because all the people who are involved have been working for months on how to improve their productivity. We'll review that and make our decision.

Q. It's been portrayed as a plan to play cities and plants against each other. Is that true?

A. I don't want anything from the cities. I don't want anything from the states. I told Texas yesterday, "If it's good for Texas, do it for Texas, but don't do it for General Motors." The issue is us, inside: is that plant going to be competitive? They've got to be the best in the world.

Q. When it comes to making the necessary sacrifices, however, should the top U.S. auto executives make a few of their own? Japanese chief executives supposedly are paid less than their American counterparts.

A. Our executives have had a tremendous downturn in their earnings for the past two years. We did not pay any bonuses at GM last year, and the way earnings are headed I can't see any bonus on the horizon this year either. But I don't really feel sorry for any Japanese chief executive. He enjoys a very good life-style. I'll be happy to exchange pay with any Japanese CEO.

Q. In your Christmastime address to GM employees, you talked about a whole new General Motors. What will that company look like?

A. As we finish up the next two years, our entire work force in North America will be only about half the size it was in 1985. We're steadily reducing the number of layers between the shop floor and my office. We have a vision of being ready for the 21st century, of being leaner and a fiercer competitor.

Q. How is all this going to change the way you build cars?

A. It doesn't mean the worker will work harder. It means fewer pieces to put together, fewer steps to put it together, fewer turns on the wrench. And doing more in design so we do less in assembly.

Q. What do your numbers show now about the recovery in the '90s?

A. I'm very concerned. I look forward to hearing the President's State of the Union message. I think these next couple of months are pretty critical for the American psyche.

Q. When you became CEO, your emphasis was on a low profile. Have you tried to become more visible?

, A. You obviously get more attention when you're with the President, but this chairman is not out to be in the papers. For me the product does the talking. When you look at a new Seville, that's how I want to be remembered. That car speaks for me.