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MURPHY, THOMAS 1915-

EXECUTIVE, GENERAL MOTORS

Difficult Times

Thomas Aquinas Murphy was chairman and chief executive officer of General Motors (GM) from 1974 to 1980, arguably one of the most difficult times in the company's history.

Lifetime of Preparation

Beginning his career with GM in 1938, Murphy worked his way up the corporate ladder through the financial department. An accountant by training, Murphy was chosen in 1959 by then-chairman Frederick C. Donner as a possible future chairman. His subsequent positions—controller, treasurer, vice-president and group executive of the car and truck division, vice-chairman—were expected promotions for a man intended to lead the company.

Immediate Problems

When Murphy took the helm in 1974, replacing Richard Gerstenberg, GM was reeling from the Arab oil embargo of 1973 and the ensuing economic slowdown. The heart of the product line, the profitable big cars, were sitting unsold on dealership lots. The rising price of gasoline was generating a shift in consumer preference in favor of smaller, more fuel-efficient cars. The shift played against American manufacturers, all of whom had concentrated on larger vehicles, and benefited Japanese carmakers. Industrywide, domestic auto production fell by 22 percent in 1973 and a further 24 percent in 1974. The Big Three, GM included, were in trouble. In 1975 the unemployment rate among GM workers was 36 percent.

Smaller Cars

To combat the decline in sales and production, Murphy oversaw the introduction of smaller cars, the most important being the Chevrolet Chevette. The subcompact, an American version of a car built by German GM affiliate Opal, was not as big a seller as had been expected, but it proved to be an important stopgap product. Gerstenberg, Murphy's predecessor, had been the impetus behind the shift to smaller cars, but Murphy was able to claim the results. GM did not have the time or the capital to introduce a completely redesigned line of cars immediately, so Murphy and GM president Elliot Estes introduced the idea to downsize the GM line: merely reduce in size and weight the existing product line.

The Iranian Crisis

By 1977 the strategy had raised GM's earnings to $800 million in the first quarter alone. The good earnings continued through much of 1979, until the Iranian oil crisis raised the prospect of even higher gasoline prices and demands by consumers for cars which were even more fuel efficient. Ford and even Chrysler responded quickly with their respective Escort and K-Cars, vehicles that GM could not match.

Bleak Future

As Murphy approached the mandatory retirement age, the future did not look as bright as recent results might have indicated. The downsizing program was reaping diminishing returns, and that called for a massive reworking of the entire GM line. The estimated cost of the redesign program was $40 billion over five years. All in all, Murphy had been a competent, if not brilliant, chairman. He was probably not the man to deal successfully with the assortment of problems that GM faced at the time, but it is doubtful that the consensus style of management at GM could have produced any other.