License Suspended

IT IS PERHAPS A MEASURE OF HOW BAD THINGS HAVE become at General Motors: when America's biggest automaker posted a third-quarter loss of $753 million last Thursday, the announcement, incredibly enough, was taken as relatively good news. After all, the shortfall was $100 million smaller than predicted and $300 million less than the company lost in the same quarter last year. Rival Ford also reported a loss: $159 million for the quarter.

But the changes in GM's bottom line were nothing compared with the changes at the top. After months of bitter skirmishing with GM's board of directors, chairman and CEO Robert Stempel finally quit. It was Detroit's bloodiest boardroom drama since Henry Ford fired Lee Iacocca in 1978, and it marked a turning point for the once mighty U.S. manufacturer now struggling to reinvent itself.

In his brief tenure atop GM, Stempel presided over two consecutive years of red ink -- including the largest annual loss ever by an American company, $4.5 billion in 1991. Stempel had tried to stanch the bleeding with a plan to close 21 plants and eliminate 74,000 jobs, but a year later the company had trimmed only 35,000 jobs and had still not decided which plants to shut.

GM's board is expected to split Stempel's job in two, promoting president John Smith to CEO and installing as chairman John Smale, retired Procter & Gamble chairman and leader of the directors aligned against Stempel. But GM's problems go back to the free-spending 1980s, when the company invested billions in computer and aircraft firms rather than finding new ways to build better cars, and it will take more than a boardroom coup to turn that around. (See Cover Stories beginning on page 42.)