Former GM Chairman John Smale.
He was often seen as the outside interloper within the Detroit community, but when it came to marketing consumer goods perhaps no one was the more consummate insider than John Smale, the one-time junior executive in the toilet goods department who eventually rose to become CEO of consumer goods giant Procter & Gamble.
Smale, who died over the weekend at 84, had a second, if seemingly unlikely, career as the non-executive chairman at General Motors, where he oversaw an aggressive effort to transform the increasingly troubled automaker using a consumer goods model borrowed from P&G.
A workaholic who seldom relaxed before 10 or 11 PM – even on weekends, Smale once told an interviewer from a magazine at his alma mater, Miami University in Ohio, that he was “having a really good time” only when he was “totally immersed in what I was doing.”
And at P&G, that intense focus helped firmly lock the company into the leadership role when it came to everything from toilet goods to toothpaste. A Canadian, Smale joined the Cincinnati-based firm in 1952 and by 1974 was running its entire U.S. operations. He was named CEO in 1981 and added the chairman’s post to his title five years later.
During his tenure at P&G, Smale oversaw a variety of acquisitions, including Richardson-Vicks, and pushed for a global expansion that helped it cement its lead in the consumer goods segment.
But when it came time, in 1989, to step down Smale wasn’t about to retire. He had GM to think about as a board member of a company that was increasingly in trouble. The maker was undergoing its own management transition, the hard-driven Roger Smith handing over control to his second-in-command Robert Stempel. But the new GM Chairman and CEO was off-balance from the start.
The U.S. economy was faltering. And then Saddam Hussein ordered the Iraqi army to invade Kuwait. Already facing a sharp decline in its sales and market share GM needed some aggressive leadership but Stempel faltered, unwilling or unable to order the plant closings and job cuts analysts demanded.
What was long seen as a rubber-stamp board of directors – which Smale had joined in 1982 — finally came to life. With bankruptcy suddenly a real possibility Stempel was ousted in October 1992, along with some of his key lieutenants. Smale was appointed chairman at the maker’s November board meeting, Jack Smith taking over Stempel’s CEO duties. Smale was the first non-executive chairman since Lammot du Pont resigned in 1937.
Both Smale and Smith were seen as outsiders; while the latter executive had a career as a GM employee most of his time had been spent away from corporate headquarters in Detroit, including a long stint in Europe.
While Smith took on day-to-day managerial duties it was clear that Smale was calling many of the shots during his three-year term as non-executive chairman. And much of what Smale had in mind was what he had learned during a third of a century at Procter & Gamble.
There was no question GM needed to shift gears. Between 1990 and 1993 its core North American operations would lose $17 billion. By then, market share in the U.S. had tumbled by nearly 10 points over the prior decade. And by various in-house and external estimates it could anywhere between $800 and as much as $2,000 per core more for the maker to produce a vehicle than import rivals like Toyota.
Hoping to satisfy investors and analysts Smale put an emphasis on shareholder value. He also pushed to satisfy increasingly frustrated consumers – who were abandoning the maker in record numbers. But critics would later contend that while the former P&G chief talked a good game about issues like quality, design and engineering, his real legacy was as much as anything one of smoke and mirrors.
One of Smale’s most important decisions was to hire Ron Zarrella, the former chief at Bausch & Lomb, as GM’s marketing czar and, later, president. In turn, Zarrella reached outside for a marketing team made up of executives who were largely automotive outsiders — like Karen Francis, a one-time pencil marketer, and another who had marketed cookies and baked goods.
Initially, the approach seemed to work, Smale and Smith rolling up record earnings of $4.9 billion in 1994. But the consumer product focus was not backed up by the sort of product turnaround needed to sustain that financial momentum.
At the end of 1995, Smale retired from the chairman’s post, Smith adding that assignment to his role as CEO. The former P&G boss remained on the GM board until 2002. By then there’d be more significant changes underway.
Having derided GM products – like the much-hated Pontiac Aztek — as “angry appliances,” former Chrysler president Bob Lutz was brought in as the giant automaker’s car czar, Zarrella resigning a few months later.
Most of the Smale-era marketers were already gone or shifted to increasingly insignificant positions. With Rick Wagoner replacing Smith as CEO and then chairman, GM began putting more emphasis on product development, with marketing seen as a tool to promote world-class products. Nonetheless, the maker’s long decline was already well in motion, leading to its eventual bankruptcy – and rescue using nearly $50 billion in federal loans.
By then, Smale was entirely out of the picture, though his legacy is likely to be a source of business school debate for decades to come.