For the past seven years, Roger B. Smith has been leading a revolution at General Motors Corp. The auto maker's chairman has been pushing increased competitiveness, cost-cutting, automation and diversification into nonautomotive fields such as defense electronics.

Smith enjoyed a honeymoon period with critics as he began to foment the revolution at GM. New products such as the Chevrolet Beretta and Corsica and the recently introduced GM-10 car line and Quad-4 engine, as well as a raft of manufacturing improvements, indicated GM's ability to become more competitive.

But there have been failures, setbacks and disappointing sales levels as well, and lately there has been an increasing amount of skepticism as to whether the unprepossessing executive can attain his grand vision for the company -- or even whether that vision itself is correct.

Last week, shortly after GM agreed to a new contract with the United Auto Workers Union that swaps job security for cost-saving measures, Smith discussed GM's revolution with staff writer Mark Potts in Hot Springs, Va., where Smith was attending the semiannual meeting of the Business Council. Here is an edited transcript of that conversation:

You've been at this revolution now for seven years. Have you made the kind of progress you had expected you'd make by this time?

In some respects, we've come a lot further than I thought we would; I'd also say it's been a lot harder in a lot of respects than I thought it was going to be.

But I think our new assembly plants, our new model program, our new press plants, our paint systems, all of those things -- the big money that's in there now is really starting to pay off. We can see it in quality; we can see it in costs.

When do you think you're going to start seeing it in market share?

Well, I'd say in 1988, in '89 certainly. We won't have all the models that we want out in '88. ... I'm the last one in the world to say look at the 10-day {sales figures}, but in the last part of September, we're starting to come toward that 40 percent {of industry sales} mark.

I don't know what's going to happen to market share in this fourth quarter, because I think it's going to be a testing time for all of us.

When you acquired Electronic Data Systems and Hughes Aircraft, a lot was made of their ability to help improve GM itself from systems and technology standpoints. How has that gone?

Fantastic. {EDS} came into our M-van plant, sat down and rewrote the program for the whole plant, and right now that and the truck plant in Ft. Wayne are running on the same identical program run by EDS.

And you know, here's something we never even thought of -- Hughes took that program {and} ran it on their simulator, and made some changes in it by working with EDS. We actually ran it on a simulator out there {in California} and that thing started up and ran without a hitch ... that old program thought it was building cars. ... And we found some things, and the EDS people said, "OK, that's right, let's go change that," and we've had the best start-up we've ever had on that truck {plant}.

You mentioned that there are things that haven't progressed as well as you'd like. What are they?

Well, I think that if we were doing it all over again, we didn't do as good a job in communicating with the people as we should.

We did our reorganization from the bottom up ... and we did it the way the people wanted it done. So we thought, oh boy, this thing is just going to roll.

But the thing we missed is what I sometimes call that "frozen middle" -- there were a lot of people out there who said, "I don't want to do this differently. I like what I've been doing, been doing it for 30 years, and I make a good product at good cost. I don't want to change."

We did not communicate well enough to get those people, as I say, to let go of that rock and swim across the river of change with us.

We went from a $700 million loss to a $4 billion profit, and we thought, that's great. But we had to keep going. A lot of people said, "Wait a minute, we're there. What kind of a nut would want to change, now that we're making $4 billion?"

Well, we were shooting to be No. 1 in the 21st century. So, in effect, the very thing that we were trying to change hurt us, when our profits came up so fast and so far, and people said, "It's all over, it's all done, we're OK," and that made it doubly hard for a guy to say, "What, change? Look at what we've got."

We knew that we had to get a lot of changes still to get to the 21st century. These new GM-10 cars and some of these things we're seeing now came as a result. But you can still find a guy who's got a Fisher Body tattoo on his chest and there is no Fisher Body anymore.

I think that the system is really coming together.

Do you worry that in trying to bring this revolution about, you might have been distracted from the market at a time when the Japanese and Ford were coming on strong?

No. If we hadn't have done the {new GM-10 models} and some of those, we would really be in market share problems. But don't forget this: General Motors in the 1987 model year outsold Chrysler, Ford and AMC all together.

But that doesn't mean you can sit there with anything. That's why you've got to keep changing.

WWhat is the progress of the Saturn car project? There has been some speculation that rather than design it from a "clean sheet of paper," as you said, the plans have been rolled back, that it is not quite as unique, but rather is being done more in the mainstream of GM.

I'll tell you where I think that comes from, and I think that people misunderstand it. The Saturn people themselves have got a lot of high-risk things in there. ... There's something like 52 or 58 projects that are going to go into Saturn that are in other parts {of the company} right now.

Opel has a machine that installs the dashboard automatically through the front, and it's actually a Saturn machine. The idea is, let's see if it works, so that we can reduce the risks.

There's a lot of that going on. I suppose you can say that gets some of the uniqueness out of it, but what it does, to my mind, is lower the risk. If you're going to make a car at a profit, in the United States, you've got to take some risk.

How does the new contract with the UAW fit into your vision of changing GM?

I think it's going to help, and I'll tell you why: We're going to get better working relations with the UAW out of the thing.

Anything that you do to increase job security automatically does work for you. It makes your employes a closer part of the unit.

The best thing the Japanese did for us, they made us work closer with our own people, and the other way around, too. It made our people understand. The guy in Flint, he thought his competition was over in Dearborn. His competition isn't Dearborn. His competition is sitting over there in Toyota City, and now they realize that, and maybe they didn't before.

There's been a lot of criticism of you in recent months, and some rumors of board dissatisfaction with you. Are you worried about being able to stay the course?

No. We do our strategic planning, and we do it with the board, and they've got their option right there to either buy in or tell us to change it. They're the ones who put their John Hancocks on spending the money for these things.