SMALE IS PUTTING HIS BRAND ON GM

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John Smale is making a mark on General Motors Corp.'s marketing.

Mr. Smale took over as chairman of GM two years ago amid speculation that the former Procter & Gamble Co. chairman-CEO would be a catalyst for sweeping marketing changes.

Because the non-executive chairman has stayed behind the scenes and doesn't make day-to-day decisions, it has been hard to judge his influence.

But as marketing initiatives add up, it's clear that Mr. Smale is stimulating some fresh thinking.

Topping the list: a drive to make regional advertising more consistent with national messages; the beginnings of a brand management system based in part on P&G's structure; and package pricing initiatives that have enabled GM to move away from brand-diminishing rebate offers.

At Mr. Smale's insistence, GM has been considering outsiders as well as insiders for a key marketing post. The current favorite is John Middlebrook, VP-general manager of GM's Pontiac division, although an outsider could emerge.

Despite Mr. Smale's impact, the jury is out on whether GM is sensitive enough to the marketplace to consistently develop and promote successful products.

"There have been some steps in the right direction, but I don't think there's been a fundamental change," said John Bissell, managing partner with Gundersen Partners, a Bloomfield Hills, Mich., management consultancy. "What's missing is a real commitment from top management to be a consumer-driven company."

It was Mr. Smale who headed a revolt by outside directors that led to the Oct. 26, 1992, resignation of Robert Stempel as chairman-CEO. Mr. Smale becamechairman and John F. "Jack" Smith took over as president-CEO.

At the time, GM bordered on financial collapse. Demonstrating the overall financial turnaround, GM posted third-quarter 1994 earnings of $552 million last week, reversing a loss of $113 million in the year-earlier period. For the first nine months of 1994, GM's consolidated net income was $3.3 billion, up 154% from 1993.

GM's North American automotive operations have improved, but remain weak. GM trimmed its losses in North America to $328 million in the third quarter, compared with $1.1 billion in losses in the third quarter of 1993.

GM has increased its commitment to advertising since Mr. Smale became chairman. Measured U.S. ad spending topped $1.1 billion in 1993, up 14.4%, according to Competitive Media Reporting. This year's spending is expected to be at least 10% higher than last year's.

At the same time, the automaker has moved to make buys more efficient. Philip Guarascio, VP-general manager of marketing and advertising for North American Operations, oversaw a consolidation of media buying earlier this year. National broadcast and national print buying are now handled by GM Mediaworks, a new Interpublic Group of Cos. unit in New York and Warren, Mich.

A looming problem is last week's ruling by U.S. Transportation Secretary Federico Pena that GM's 1973-87 pickup trucks pose an "unreasonable" safety risk because of concerns about the design of fuel tanks. A public meeting is scheduled for Dec. 6 on whether GM must recall the trucks, at an estimated cost of more than $1 billion.

"Considering the PR ramifications, it's one of the company's biggest challenges," said Jim Wangers, senior managing partner with Automotive Marketing Consultants, Warren.

The pickup truck crisis illustrates how longstanding, lingering problems impede efforts by GM's current leadership to generate positive momentum.

Nevertheless, "there have been some significant marketing changes that you have to look at as positive," Mr. Wangers said.

Mr. Smale's role has usually been to raise issues with marketing executives, rather than to direct specific changes.

"In my interactions, he always says, `This may not apply in your business, but this is something I've learned over the years in mine,"' said Pontiac's Mr. Middlebrook in a recent interview.

Pontiac was the first division to adopt a P&G-style brand management structure, in which managers have broad responsibility for developing product features and ad programs that match a vehicle's image.

The change-stimulated by Mr. Smale's questioning of auto industry assumptions about what makes a brand-has long-term implications for future products.

Conventional thinking holds that Pontiac, for instance, is the brand and Bonneville and other lines are just Pontiac models. Now, Bonneville is being treated as a brand, something with a specific image that needs to be nourished today and carried over into future product planning.

Regional marketing is another area where Mr. Smale is said to have raised concerns. Advertising by regional dealer ad groups, who hired their own agencies, sometimes contradicted the image presented in national campaigns.

GM's divisions now are trying various solutions, ranging from getting national agencies more involved in regional advertising to consolidating advertising at fewer independent agencies.

Consistent with his style of leaving final decisions to Mr. Smith's management team, Mr. Smale apparently hasn't insisted an outsider be hired for the VP in charge of North American sales, service and marketing. J. Michael Losh held the post until he was promoted to exec VP-chief financial officer July 1.

"If he really pushed, Smale could have gotten it any way he wanted," said one insider regarding the selection process. "A number of people have talked to him about why it would be difficult for any outsider, the way the job is structured."

Nevertheless, Mr. Smale will probably have regular contact with the new appointee, as he reputedly did with Mr. Losh.

"People around GM hold John Smale in high regard," said one GM agency executive. "His influence is definitely being felt through the organization."

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