Opinion: Lessons from GM's Board of 1992

Yesterday, General Motors announced (that) next year they're gonna begin selling cars in Japan. . . That is good news. And they said today if it works, they may begin trying to sell cars right here in the United States. -- Jay Leno, Dec. 29, 1992

That joke from 16 years ago may make Leno seem like a financial swami, but he was only satirizing the news of the day back then. General Motors, the once-great global maker of cars, had a thoroughly miserable year in 1991 -- losing $4.45 billion -- some $9 billion in today's dollars and was fast increasing the crater in 1992. By the time the year ended, GM had lost another $2.66 billion, excluding a $20.8 billion accounting charge, and in June to September, shed some 27% from its share price.

GM's misfortunes were to change abruptly, however, courtesy of its outside board members. The group -- at first considered lame and lazy by many journalists who followed GM at the time -- not only ousted the CEO and many of his top managers, replacing him with a shrewd executive -- but proved handy with a hatchet in reducing the automaker's costs.

Regardless of how fumbling GM's board of 1992 appeared then -- their dismissal of CEO Robert Stempel was public and cruel -- their missteps can be forgiven because of the outcome. They mandated an overhaul of GM and it worked. By the end of 1993 -- 15 months after Stempel's ouster -- GM's profit had risen to $2.46 billion (roughly $4.8 billion in today's dollars) and its stock price had increased 63% to $43.95 a share.