Two separate strikes at components factories in Flint, Michigan, could bring most of General Motors' North American operations to a halt. This could hardly have come at a worse time for the world's biggest auto manufacturer. In the next few weeks, GM is due to start switching production to 1999 versions of its biggest-selling product line, the Silverado and Sierra pick-up trucks. It needed the launch to go smoothly.

After a long period of decline, General Motors' share of the US auto market has picked up in the past month or so - but at the cost of big price discounts. Outside the US, it is planning strategic moves in Asia. To add to its worries, GM has announced that Harry Pearce, vice-chairman and a man widely tipped for the top job, had been diagnosed with leukaemia.

In the circumstances, Jack Smith, the chairman and chief executive, seems unruffled. Sitting in his airy office last week at the top of Detroit's Renaissance Center - a marked contrast to the gloomy 14th floor of the General Motors' building that used to be the heart of the empire - he agrees that the company has suffered more than its share of trouble with labour unions in recent years.

"We are not as competitive in our manufacturing base here as our competitors, and we need to get there," he says. That has caused conflict. Moreover, GM still has a huge components operation left over from the days when vertical integration was considered a good thing. "That business is increasingly competitive, and requires utmost dedication to reduce costs."

Mr Smith's challenge reflects the extraordinary dynamics of the US economy today. In a period of sustained non-inflationary growth, old-style manufacturers such as General Motors face a series of gut-wrenching changes.

In spite of enormous productivity gains and tens of thousands of job losses in the past six years, the company is still struggling to squeeze out costs. This year's target is a $4 billion cost cut, and further reductions will be necessary as far ahead as the eye can see.

"We don't give price increases to our suppliers, and the market won't take price increases from us," Mr Smith says. "Since you are not going to get it in price, you have got to keep squeezing costs."

The pressure is relentless, both from low-cost imports and on the home front, particularly from Ford. Mr Jacques Nasser, its president, has driven through product-line changes and profit-driven innovation at a fearsome rate. Ford's profits per vehicle were already substantially higher than GM's, and the gap is widening - which gives it a real edge when there is so much price competition in the salesroom.

In response, GM is speeding up its product development processes, and the number one focus in all its operations is to develop common systems, common vehicle platforms and common parts. But the competition is moving just as fast, often from a more competitive base. And at this stage of the economic cycle - with low unemployment and a more confident workforce - productivity gains must be getting harder to achieve.

All this helps to explain Mr Smith's mantra, repeated in one form or another throughout our conversation: "We have to think fast, and we have to think lean."

Thinking lean is what he has been doing for at least the last dozen years. A life-long GM worker - he started as a payroll clerk near his home town of Worcester, Massachusetts - Mr Smith shot to prominence in the late 1980s when he helped turn round GM's ailing European business and then took on all its international operations.

In 1992, when the whole company was tottering towards financial disaster, his predecessor and most of his team were pushed out in what was then an unprecedented boardroom coup. Mr Smith - the insider with an outsider's experience - emerged as the survivor; and with the top job.

Given this background, he is not what you might expect. Unlike some of his predecessors, Mr Smith is no dictator. His style is low key, friendly and consensual. Some of his closest colleagues have been with him for years. Nor is he one of those industrialists who is always featuring on the cover of business magazines.

He is said to be uncomfortable as a public speaker. Carved on a stone in his room are the words of a Chinese philosopher which end: "Of a good leader who talks little, when his work is done and his aim fulfilled, (people) will say, `We did it ourselves'." Now aged 60, Mr Smith faces strategic choices at least as important as any in his career. The profits recovery of the past few years has built a strong balance sheet. "It's fabulous," he says, which means the company can afford to take a tough line with its labour unions.

It also means GM is in a position to react to the big changes starting to ripple through the structure of the world's auto industry. Mr Smith admits that he was surprised by the Daimler-Chrysler deal last month. He had assumed that Chrysler itself was looking to bid for something. Now the deal is done, he believes it will force car makers around the world to consider the need to be global.

For GM this means Asia, where, according to Mr Smith, the crisis has thrown up opportunities. "We always thought we would have to build our way into Asia, and we started along that route. Now, it seems perhaps there is an opportunity to consider partnerships or acquisitions to do something quicker than we had thought, and in all the markets of Asia, Japan, Korea, you name it."

The company is deep into delicate discussions with Daewoo of Korea. And Mr Smith appears to be thinking deep thoughts about Japan, where he stresses that the focus will be on working closely with GM's existing associates, Isuzu and Suzuki.

In six years, this could look a very different company, with a much bigger presence in east Asia and vastly more efficient manufacturing systems. By around 2004, Mr Smith says, most of its vehicles will be coming off a small number of common platforms. "This will mean a substantial reduction in the engineering and testing effort, and the ability to drive lower costs with purchased components. Some of these platforms will run two million units - the volumes are huge. And that's where the big savings are generated."

But getting from here to there is going to be a hard slog.