Big Recall at GM

SITTING ON THE BOARD OF A COMPANY THAT HAS lost $6.5 billion in just two years can be an exasperating experience. Last Monday the beleaguered directors of General Motors decided that enough was enough. In the most sweeping top- management reorganization since 1920, they demoted two top executives and sharply circumscribed the powers -- and possibly the future -- of chairman Robert C. Stempel.

Lloyd Reuss, 55, was demoted from president to executive vice president (his successor: John F. Smith Jr., 54, head of GM's profitable foreign operations); Robert T. O'Connell, 53, was bumped from executive V.P. and chief financial officer to senior V.P. Those moves had been expected since late last year, when outside directors began grousing about GM's inability to halt its slide. Last year the company's U.S. operations lost $7 billion, forcing GM to close 21 plants and eliminate 74,000 jobs by 1995.

The management shake-up was orchestrated by retired Procter & Gamble chairman John Smale. In a break with company tradition, Smale became chairman of the important executive committee, a job previously reserved for inside directors. His elevation left many around Detroit wondering how long Stempel, 58, would be at the wheel. Last Thursday Smale attempted to ease Stempel's humiliation by vowing that the chairman retained the "full support and confidence" of the board in his efforts to improve GM's North American operations. That will be no small trick: analysts estimate that GM lost up to $400 million in the first quarter of this year.