General Motors Corp., the world's largest auto maker and the second largest U.S. industrial corporation, yesterday revealed that an internal investigation uncovered evidence of possible improper foreign payments that amounted to an "insignificant portion" of compensation to some of its overseas agents.
Company chairman Thomas A. Murphy also disclosed, in a speech to Baltimore business and civic leaders, that GM will start construction later this month on a new passenger car factory in Oklahoma City - the 19th GM assembly division plant in the country.
Murphy said, in his speech, that a worldwide internal investigation of all business operations had confirmed in all material respects that law and "high ethical standards" have been followed - with minor exceptions - for the five years ended last Dec. 31.
In a separate annual report required by the Securities and Exchange Commission, and filed here last night, GM elaborated on the Murphy - statement and revealed that.
Commission paid to non-employee agents overseas, in connection with sales of nonautomotive products, "may have improperly transmitted to government personnel or purchasing executives at least a minor portion of their commissions." Total commissions for the products involved averaged $3.5 million a year over the five years and GM was unable to determine how much money - if any - was spent improperly. GM said it believes "no more than an insignificant portion" could have been used wrongly.
GM first became aware of the situation early last year and since has revised a sales agent agreements to forbid improper payments.
In "many parts of the world," GM has made "facilitating payments to minor government personnel" in small amounts to expedite shipments of people and goods through customs and to perform routine government functions. These payments averaged $250,000 a year over the five years when overseas sales averaged $6 billion a year.
The auto maker said it has asked local officers to reduce such payments to a minimum and to account for them accurately. One partly owned overseas firm has made "facilitating " payments of $85,000 a year as well as payments to government officers, a portion of which went to "higher echelon" persons to obtain favorable action, a practice GM said it has been able to correct only in part.
Some credit balances due overseas customers have been disbursed at request to third parties in countries other than those in which the transactions took place. This practice has been halted because it could lead to "improper pratices" by the customers in question, presumably avoiding local money and tax regulations.
GM's new auto in Oklahoma City will cover about 3 million square feet with about 70 acres under roof. Murphy said he expects initial production to start in two years, "the most ambitious construction schedule GM . . . has ever undertaken." The GM expansion comes at a time when some economists have expressed fears about the lack of adequate business capital programs.
First proposed in 1973, the Oklahoma City project was deferred in March 1974 because of recession and the oil embargo. It will be GM's first new assembly plant since 1964, when construction was started on a Lordstown, Ohio, plant.
Murphy said up to 1,200 vehicles a day will be produced in Oklahoma City with initial employment of 2,700 rising to 5,000 when two shifts are on duty.
Murphy said the internal investigation was started six months ago and was conducted by GM's general counsel under direction of the board of director's audit committee, aided by the accounting firm of Haskins &-Sells and outside lawyers.
"I am proud to say there were no 'off-book' accounts or secret 'slush funds.' No director-officer of the corporation was involved in any illegal or improper activity during the more than five years covered by the investigation. And there were no illegal political contributions of corporate funds," Murphy told the Baltimore audience.
On other points yesterday, Murphy said:
GM will come out this fall with a new 200 cubic inch, 3.3 liter, V6 engine to be built at Tonawanda, N.Y.
U.S. economic recovery continues to be strong and should carry well beyond 1977.
Motorists should not be required to bear a "disproportionate" share of the burden in a new national energy policy.
Murphy objected to the concept of penalizing large-car purchasers with a heavy excise tax or encouraging small-car purchases with rebates. The "only solution" to long-term energy needs is to remove regulation and price controls from energy industries, "from coal pit to hydroelectric dams," coupled with conservation, he said.