Another View of the Business of America

THE OPEN MIND
Host: Richard D. Heffner
Guest: Roger Smith
VTR: 5/17/84

I’m Richard Heffner, your host on The Open Mind. When I started this program 28 years ago, the distinguished American management genius Alfred P. Sloan, Jr. was just retiring after 33 years of directing the destinies of that giant American enterprise, General Motors. For decades, Sloan and GM had set a pace not just for the automotive industry and for American transportation itself, but for the business of managing business as well. Well, today my guest is Roger B. Smith, the present Chairman of General Motors. And I want to ask him about transportation futures and about managing American productivity.

Thanks so much for joining me today, Mr. Smith. And I really do want to begin by asking you whether we Americans still have that old management know-how that we used to brag about in the old days but that some people are concerned the Japanese and the Germans have taken from us?

SMITH: No, Dick, we still have it. I have to say that we stumbled a little bit in the ‘70s, but I think that we’ve got the ball back and are running pretty well with it now. I think that probably trying to manage the change today is the real challenge for us. But I think America has some tremendous business managers that are going to give us a bright future.

HEFFNER: You say, “Manage the change”. What do you mean?

SMITH: Well, our world is changing at such a tremendous, rapid pace that the real challenge for managers today, Dick, is how to manage change. There are too many people that would still like to cling to the ways that they did things in the old days, and you just can’t do that. You’ve got to plan ahead for the times, a lot farther ahead than we ever had to in the past. You have to accept more radical change than we ever were prepared to accept. And you just have to say to yourself, “I can’t keep things the way they were, and I don’t want things the way they were. I’ve got to learn to live with the change and manage it instead of having change manage you.

HEFFNER: Well you know, I would think in terms of the Japanese and let’s say the Germans too that we were talking about two fairly tradition bound societies or cultures. Have they managed to adapt to change better than we, or just to a certain kind of change?

SMITH: Well, in a way they have, Dick, and you know, I’d say if you stop and think what happened during World War II, they were literally destroyed, their entire industrial system. So while everybody thought that was a great disadvantage, in one way they were forced to start over. And having started over, particularly the Japanese, they decided very wisely I think to aim for high-quality, low-cost on a very disciplined type of management. When I was a child in the dime stores as we called them in those days, the toys that didn’t work were always the Japanese. But once their economy was literally leveled to the ground and they started to build it up, they had a fresh start. In the United States we still went back and reconverted our war machinery into peacetime, and in effect we lived with what we had. Now that was fine through the ‘50s and the ‘60s, but when the electronic age came upon jus, when the energy shortage, when all of the world competition things came into being, we suddenly found that we were behind, that things were changing faster than we were, and that we hadn’t managed change. Change had gotten away from us.

HEFFNER: What signs are there, if there are such signs – or is it just hopefulness – but if it’s not just hopefulness, what signs are there that we’ve managed now to get out of that dilemma?

SMITH: Well I think the best things I see, Dick…our own automobile industry has certainly in the last two to three years…we’ve had an enormous amount of change not only in our products but in our relationships with our employees. We’ve had to handle enormous changes from the government in terms of regulations, in terms of emission controls, fuel economy, safety. All of those things have been coming at a very rapid pace. And that’s helped us get in the mood for change and understand that we have to change. Unfortunately, the last thing we came with was with our employees, and there’s where the Japanese did the best job. But having started on that I think that not only are we catching up with the Japanese and the Germans and other people, but I believe we’ll pass them very quickly.

HEFFNER: You say the Japanese have done the best job with their employees. What was the basis for it? I mean, what was the nature of that job done? What do we need to do, too?

SMITH: Well, Dick, now you’re getting back to what you said earlier. They do have a different nationalism, a different national culture than we do. They are much more disciplined. But we don’t have to do that. I think our people enjoy freedom. And I say we can beat the Japanese at their own game using the innovative mind and the freedom-thinking mind of our American workforce. Our American workers are the best in the world, and I wouldn’t trade them for a Japanese discipline workforce at all because our people can do a better job of thinking their way through things if you give them a chance. And we didn’t really give them the chance. We are now. We’re working away from the old foreman type of department into groups that set their own schedules, decide how they’re going to go about a job, that do their own statistical quality control. And we’re getting our people involved in the product much more and in production decisions.

HEFFNER: It’s interesting that you say that. You talk about discipline, and perhaps that was for time, and may still be the advantage that the Japanese have. But indeed there have been so many people in our own country in recent years who have said that on other labels the lack of discipline has done Americans in. Now you seem to be saying, heck, that is itself a virtue of kind. Now where does the conflict resolve itself?

SMITH: Well I guess maybe it’s over the definition of discipline. Certainly when you put 15,000 parts together, which is what it takes to build an automobile, they have to have a little discipline in which part goes on first. But I think I’m referring maybe to the discipline of doing the pushups in the aisles and singing the company songs as the typical Japanese things. That’s fine for them, but I say we don’t have to do that. We can get the innovativeness and the freedom, and the thinking of our workers will do a better job for us long range than that. But again we have to get away from the confrontation that we had with our people over the past over whose fault was it that the part didn’t go on right. That really wasn’t the problem. The problem was really to get the part in there right. So now once we put that behind us and say, “Okay, what does it take to do this part with high quality, low cost and the most effective way?” I think we’re opening up a whole new era of not confrontation but really cooperation with our people.

HEFFNER: You think that will show in the marketplace in the very near future?

SMITH: I think it’s showing up now in cars like our Fiero that are made really in a new type of atmosphere, and our brand new Cadillacs that we’re bringing out now. If you could see how the Orient Township Plant…our brand new plant is organized by the people themselves. It’s an entirely different way than we’ve ever done it.

HEFFNER: Now can that new way stand the need for huge quantities of product? Can it carry that burden?

SMITH: Well, I’ll tell you what we’re doing. We’re finding that out by very carefully increasing our line rates. In other words, we said quality’s got to be number one. As a matter of fact, we weren’t happy with the original quality, nor were the workers. So we shut the plant back down again, went over everything again. We have over a million hours of training with those people at their new machinery. And bit by bit as quality comes then we’ll increase production. Now I’m really happy to say that I think that the attitude of the workers…they really understand quality, they know quality, and they finally are beginning to believe that we the management are all gung ho for quality. And I can’t say in some cases that wasn’t always it. And in some cases back in the ‘70s it was, “Let’s get the thing out the door.”

HEFFNER: But you know, I’ve wondered whether if I were standing on a production line, standing next to Joe Robot, and if robotics was beginning to play a major role in the production of automobiles or anything on a mass scale, whether I could possibly have what you consider the proper morale, the proper feelings about my work.

SMITH: Oh quite definitely, because Dick, the robot’s your friend. He’s bending over and reaching into a part of the car that you can’t do to put a weld joint in while you stand there and make sure he does it right. He checks the job as it comes along. If any tolerance is off, he goes back and automatically readjusts it. He’s in the paint booth where it’s hot and he’s spraying paint where you, if you were in that paint booth, would have to be in there wearing a hood and all kinds of equipment that really aren’t too comfortable.

HEFFNER: What happens when he puts me out of work?

SMITH: Well I don’t think he’s going to do that. What he’s going to do, Dick, and what I’ve always said, if you don’t have robots there won’t be any jobs, because our competition is coming with robots all over the world. So we’ve got to out-robot them. We have to be better than they are.

HEFFNER: What do you see then as the future of a nation – the population isn’t getting smaller – but technological unemployment is a scare phrase but one that may be very realistic that we hear more and more of?

SMITH: Well it can be, Dick, a scare phrase. But what we’ve got to do as a nation, not just as a company or any person, we’ve got to do a tremendous amount or retraining. There shouldn’t be anybody who gets left out of the technological revolution because of his skills. So that’s why we take people, and where robots, when we train the people to use the robots. Now it does take a lot of training to do that. But in most cases we’ve been very successful. Now number two, I’m looking forward to great things for the United States. We’ll build and sell somewhere between 14 and 15 million cars and trucks this year as an industry in the United States in total. I believe that by 1990 we’ll be up to 17-1/2 million, and by mid-nineties, 20 million right here in the United States. And that’s going to be a big future for all of us here in the United States.

HEFFNER: Is any part of that projection due to protectionism on the part of the government?

SMITH: No, this protectionism is a phase we’re going through now trying to balance things around. We have terrible unbalances in this world. Our trade deficits here in the United States are shocking. But our dollar relationships makes it very difficult for exporters like General Motors to export out into the other world because the dollar’s so high it’s very easy for foreign competitors to under price us in the Mideast. But these things will have to come back in balance. And I think that again that’s the job that I believe our government should be addressing the most, is how do we fit into the international scale here in the United States? The high dollar is good for some things. It brings foreign capital in and helps us float our debt. But the high dollar is bad for exports. The yen-dollar relationship is just crazy. How do you go about addressing those things? Well, that’s what I think our government has to help us with.

HEFFNER: Do you feel that the present administration, the Reagan administration is doing the right things in this area?

SMITH: I think they’re trying to do the right things. Let me say it’s very difficult. There are some things that you cannot just pass a law that says starting on Monday the yen will be the right value to the dollar. I wish that we could solve things like that. But I can see the difficulty they’re having trying to get the budget deficit handled down there. They can’t get spending down to a reasonable level, and they don’t want to just increase taxes without cutting spending. And I think that’s right. But in our political system, which I say is the best in the world in some respects and the worst in the world in others, but I don’t want to trade it, it is difficult to get those things done.

HEFFNER: Well again let me go back to trends. Let’s take the question of protection. How do you react to what the administration has done in the area of protection? Your industry.

SMITH: Well, let me say I think at the time that they did it and that the Japanese did it voluntarily. It was a very smart thing for the Japanese to do because it was very clear to me if they did not…

HEFFNER: Voluntary quotas?

SMITH: Voluntary quotas. If the Japanese had not done that voluntarily, I believe we’d have had a local content law which I’m afraid would have been the start of a great trade war. And that’s what…all the big things my high school teacher always told me started the Great Depression in the ‘30s…was some of the Smoot Holley tariffs that went in. When you start erecting paper barriers, you get into big trouble. General Motors has always said the voluntary restraints are going to have to go sometime, but I just don’t want to throw them away. I say let’s get something for them. If we take off these voluntary restraints, which I say they should come off, now how about saying to the Japanese, “Okay, let us ship our cars into your markets on the same basis you ship into ours, which is the phrase that has now become around is “The level playing field”. And I think that’s only fair. So I don’t feel very good when people just say, “Well let’s throw out the restraints.” I say let’s trade them for something.

HEFFNER: Do you feel that we must have more of a national economic policy, a national industrial policy? Can we? Should we?

SMITH: Well, of course we’ve got a pretty healthy one right now.

HEFFNER: For good or for bad?

SMITH: Well I think the way we’ve got It now is pretty good. I don’t want to see a national industrial policy that goes out there and all of a sudden picks winners or losers. I think the free enterprise system that we’ve had has made our county great. And when I look at other people with national industrial policy like Russian and some of these other ones, I don’t want any part of that. So I think our free market where 160 million people vote every day when they go to the market and to the store is the best thing. I don’t think you can replace that with even them most super-intellectual people in Washington saying, “All cars next year will be pale blue.” I don’t want that.

HEFFNER: You know, talking about people in Washington saying that all cars next year should be pale blue, if I remember correctly it was Henry Ford who said, “I’ll make any color car you want as long as it’s black.”

SMITH: And if you stop and think about that, at that time Ford was the number one car manufacturer in the United States and General Motors was way down on the bottom of the pack. And Mr. Sloan said, “Heck, we’re going to make them any color they want.” So what happened? We went right by Ford like he was standing still in the ‘20s, because Mr. Sloan’s idea, he wanted a car for every purse and every purpose. And that I think is, even though Mr. Ford has invented the assembly line, Mr. Sloan took the assembly line and put it together with marketing and went right by Ford.

HEFFNER: You really feel that even in as interdependent an economy as the world has today that free enterprise as you call it will prevail?

SMITH: It’s the only way I know to get a winner. And I’ve looked around and studied. And General Motors operates all over the world. And I’ve seen the controlled economies. I’ve seen the trouble they get you into. And I say no, we don’t want any of those. I’ve seen protectionism. In Brazil you cannot ship a car in; you have to build it locally. So people in Brazil pay a higher price for their cars than you’d buy them here in the United States. Now, they got themselves what they wanted which was a nice, big automobile industry, but people paid a high price for it.

HEFFNER: You know, going back to this question of robotics and technological employment/unemployment, what do you think about the numbers of people who five years from now, a decade from now will be employed in the automotive industry in this country, as compared with 10, 15 years ago?

SMITH: Well I’d look forward to comeback and increase. Two reasons…

HEFFNER: Not robots, but people?

SMITH: People.

HEFFNER: Okay.

SMITH: Two reasons. First of all, as I told you, I think our market’s going to grow. Second of all, cars ten years from now, Dick, you won’t recognize them, I absolutely guarantee it. They will have so much more electronics on them, be so much easier to drive, be so much better and so different. And to do all that’s going to take a lot of people. You will have laser collision avoidance measures in your car. You will have, I’d say you probably won’t even have a steering wheel in your car by then. You’ll be driving it with just a simple little stick. And you move the stick forward to go forward, and back to go back, and side to side to steer. There’s so much that can be done with automobiles now that we know and understand and are starting to begin now to get into the technology of electronics.

HEFFNER: Is there any obsolescence built into production now?

SMITH: Not really. Things are changing so fast right now we’re all struggling to keep up with it. But I think that the cars now have reached a peak in terms of some of the types of things that you won’t see what they used to call what they used to call in the old days “the built-in obsolescence factor.” But people will always like to drive a good looking car. You don’t have to drive something that looks like a box on wheels.

HEFFNER: You know, I think back because I’m old enough to do so to the World’s Fair of 1939 and the World of the Future, and it seems to me that though I can go to the movies now and contrast the automobiles of the ‘20s and ‘30s with mine today and see such a shocking difference, it seems to me that it never quite made the vision of 1939. Is that a fair…

SMITH: Well, it is in a way, Dick. I’m the same with you in that. But they showed up in different places, not always on one car. And what I mean is, some of the things of the ‘30s that we had in there, the automatic transmissions, did turn out to be realities. But what I call the roving eye headlight that was supposed to go around the corner with you never made it because it just wasn’t any good. It looked good to us in 1939. We have some of those things today that, boy…our engineers come up with something they’re very proud of and we take it out and put it on the market, it doesn’t go. So we go back and try something else. But…piecemeal…some great advances. If you compare the car of today with the cars of the ‘30s or even the ‘20s, you know, people say, “They don’t build them like they used to.” Well we took a 1929 Chevrolet, ran it into our brick wall at the proving ground there and it took a dustpan to get it back together. And so maybe it’s in some ways a good thing we don’t build them like we did in the old days.

HEFFNER: You think maybe it’s in the eye of the beholder?

SMITH: I don’t know about you Dick, but I know my memories of things are far greater than the things really were when you get down and sort them all out.

HEFFNER: well I’ve been waiting though for you to turn out a modern electronic car with a running board and a rumble seat. When you do that I’ll feel a heck of a lot better.

SMITH: (Laughter) Well I don’t think you’re going to see the rumble seat. You got a little bit of problem on some of those things with safety standards these days. And I think we’ve gotten the cars down so that they aren’t so high that you need the running board anymore.

HEFFNER: About safety standards: How do you feel about government regulation, government intrusion, government involvement, whatever word you choose?

SMITH: Well, I feel good and bad. I’ll put it to you this way: We absolutely need government regulations on emission controls, because people would not buy the emission controls if they were not mandated. So we do need clean air, and that’s the good part of it, that we do have those. Now I feel bad because we don’t have the right emission requirements. They’re too stringent in some areas and not in enough. But this again, Dick gets back to the political process that set these controls. Our politicians are great in some respects, but they’re not scientists. When you run into a problem like that we should go as a country to the National Academy of Sciences and say, “Tell us what it takes to get clean air and we’ll do it.” But in this case we’re operating now with a law really that was started in 1970 and has not really been changed significantly. And here we are. We’re 14 years smarter, but we haven’t been able to put that in the cars because of our problems we have with getting our politicians to turn that over to what I say the scientific minds.

HEFFNER: But aren’t the objectives shared? Aren’t they the same? And if they are the same, why haven’t we been able to bring the politicians and the technicians together?

SMITH: Well, that’s the wonderful working of our political system. I think most of the politicians down there would agree that the law is outdated and it does need fixing, but literally in our political process we can’t quite seem to resolve that. I wish I knew why. Now safety standards are a different matter. We’ve always been strong on safety standards and been able to sell them. If you look for example at…the safest cars in the world are made right here in the US by US manufacturers. Almost all the tests that you see will come out and the top ten cars that are the safest are American made. And that’s been one of our strong suits. Now maybe we haven’t merchandised that very well, but I don’t think that we have to take a back seat to anybody on that kind of safety. The great technologies of all-steel bodies, four-wheel brakes and all of those things were all invented here in the United States.

HEFFNER: What about the business of speed? What’s your own personal feeling about that and the effort to limit us to 55 miles an hour?

SMITH: Well I tell you, I feel a little bit like I do on the emission controls there too.

HEFFNER: Good and bad?

SMITH: Yes, because I think the idea of a speed limit is okay, but to put the same speed limit on all the roads I think is bad. There are roads that have 55-mile limits on that you shouldn’t be driving 40 on. And I do on the other hand feel that on some of our ultramodern freeways you can travel at faster than 55 in safety. Now we know, we have to say this, Dick, overriding everything you have to remember that the higher the speed you travel the more dangerous it is in terms of human life. So if you were the czar in charge of saving lives in a hurry, you’d probably push the speed limit down. But I say again, don’t do it all level. Just look at the roads and say which road ought to be where.

HEFFNER: If you had to pick though one limit, would it be the 55-mile limit?

SMITH: Well, at the time the 55-mile limit was put in, I would say yes. But again, now that we’ve had time to study it a little, I think that probably with the cars we’re building today and if people wear their seatbelts we could stand a higher limit particularly on the freeways.

HEFFNER: You say, “If, if people wear their seatbelts.” You wage a campaign about that. You feel pretty strongly about that, don’t you?

SMITH: Absolutely. I tell you, when you hear the state policeman say he never unbuckled a seatbelt from a dead person in an accident, that you ought to know that putting on a seatbelt is the easiest, safest thing you can do. As a matter of fact, Dick, you may or may not know this, we felt so strongly about it we have with every car purchased after April 1st of ours we give you an insurance policy. And that says if you wear your seatbelt and you’re killed in a crash while you’re wearing a belt we’ll give you $10,000. Now, that’s kind of a negative way of doing it…

HEFFNER: Yes.

SMITH: …but I don’t know any other way of showing people that we think seatbelts do save lives.

HEFFNER: Let me ask you about that. Is there any indication that the percentage of drivers wearing seatbelts is going up or going down, staying the same?

SMITH: It’s going up.

HEFFNER: It is.

SMITH: And I tell you, thanks to the younger generation. I believe that the young people who come through school and driver training…I know my own children, the first thing they do when they get in the car, they buckle their seatbelt without being told. I think they do I just as a matter of course.

HEFFNER: And what about that new device, that balloon? What’s your feeling?

SMITH: Well, even if we put the airbags back into cars or the new balloon device, you’d have to wear a belt. And I think that the belt is the cheapest, most effective way of doing it. And think of this Dick, they’re already in cars. You don’t have to go out and take ten years to develop them and put them in. The cost is already there. But you’re right; somehow we got to get people to use them.

HEFFNER: I want to thank you very much for joining me today, Mr. Smith.

SMITH: Well thank you. It’s a great pleasure.

HEFFNER: And thanks too, to you in the audience. I hope you’ll join us again next time. Meanwhile, as an old friend used to say, “Good night, and good luck.”

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