Lutz On Warpath with Media

Posted by: David Kiley on April 17, 2006

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Bob Lutz, GM’s product boss, is angry these days with the business media. He thinks that we are being unfair to GM. Check out this excerpt from a speech he gave last week.

“At GM, we’re positioning ourselves to compete in this global industry by leveraging our vast global resources.

We have streamlined our product development process, and aligned our planning, design, engineering and manufacturing capabilities under global auspices. It’s not possible any longer to operate as GM once did, as four regional and semi-autonomous auto companies.

Now all of our regions will be operating as one company going forward. And that will show in our improved product lineup. In fact, the process has already begun… the products we’ve recently introduced, and the ones to come in the short-term, are the best we’ve ever introduced. But it’s hard to get people to realize that.

Why? Let me give you a few examples of what some people are saying about us. You may have heard of this first guy:

President George W. Bush: “[The U.S. auto industry] needs to develop a product that’s relevant… GM is going to have to learn to compete.”

Another senior administration official told The Wall Street Journal: “The American auto industry needs to focus on producing cars that Americans want to buy.”

Automotive analyst Maryann Keller: “GM has forgotten how to make cars that people want to buy.”

Business Week’s David Kiley: “[GM] is not making very many cars that people want to buy.”

• Are you starting to see why sometimes we think there’s a herd mentality out there? Here are some more…

The Wall Street Journal’s Lee Hawkins: “GM is having a hard time persuading Americans to buy its cars.”

Automotive analyst David Healy: “GM’s problem is that … its products are boring.”

St. Louis Post-Dispatch editorial: “Its real problem is that people aren’t buying GM cars… To be blunt, GM cars are boring.”

Fortune reporter Carol Loomis: “In product design, [GM] lost the magic long ago.”

Forbes Magazine senior editor Neil Weinberg: “[GM’s] biggest problem is product.”

The Wall Street Journal’s Paul Ingrassia: “Robert Lutz has been surprisingly ineffective at GM, as if mired down like a raisin stuck in oatmeal.”

I’m especially fond of that last metaphor — that was a new one for me. I didn’t even know raisins got stuck in oatmeal; I always thought they sort of floated there proudly, going about their business.

Anyway, well, now let’s look at some of our awful, boring products and see just how unpopular they are:

Chevrolet HHR
• We’ve raised our forecasts twice for this model, from about 60,000 initially to now about 132,000 annually.
• March was its best retail month since launch, with very little spent on customer incentives.
• California, Texas and Florida are the top three retail states since launch. Those are not traditionally strong markets for GM cars.
• So far in 2006, HHR has outsold the Chrysler Pacifica, Nissan Murano, Dodge Durango, and Honda Element.
• Our dealers are requesting 200% of our ability to supply…

Chevrolet Impala
• We are building 250,000 of these a year, and demand is running about 300,000.
• March was its best sales month yet. It overtook the Nissan Altima as the third-best selling car in America, behind Camry and Accord.

Buick Lucerne
• March was its best sales month since its launch last year, and 91% of sales were retail, meaning non-fleet, non-rental companies…
• Lucerne has the second-lowest turn rate in the segment, 25 days, trailing the Toyota Avalon by just one day.

Chevrolet Corvette
• The world’s great affordable sports car, Corvette is sold out…

Pontiac Solstice
• Solstice? Sold out. Best turn rate of any vehicle in its segment.

Saturn Sky
• “All available production for 2006 is accounted for.” In other words, sold out.”


Since I was singled out in Bob’s screed, let me just say a few things here. It’s great for GM that some of its newest models are selling well. Success for a new vehicle, however, is not adequately judged in the first six months or first year, but how well it holds up without incentives, or at least low incentives, for perhaps two to three years.

Bob cites several new cars, which dealers are ordering at a good clip. But here are some vehicles Bob, not anyone else at GM is talking about in glad terms as far as sales trend: Pontiac G6, Buick LaCrosse, Chevy Colorado, Chevy Equinox, Chevy Uplander, Saturn Relay, Saab 9-7. And those are products brought out on Bob’s watch.

I agree with Bob that many of the products he talked about in his speech are the best GM has ever brought out. But it’s not like GM’s competition is standing still. They get better all the time too.

And this game of success in the car business is about marketing too. The Impala is a very good car, and apparently selling well. But it’s tucked under a model name that has been known primarily for rental cars for years and years. So, I want to see what happens when the GM faithful have their Impalas and the company needs to make a serious dent in the competition to make it a success over its five year cycle.

I heard a GM exec recently say that the biggest challenge at Buick is making the brand “socially acceptable” for carbuyers under 60 to buy, take home and tell their friends about. The company has remade the Malibu, and by all accounts it’s a great car. But it will be tucked under a name that primarily GM loyalists will consider. If you find a Civic or Camry buyer ready to buy a car called a Malibu, buy a lottery ticket using the numbers on the buyer’s license plate.

Standard and Poors and Wall Street brokerage analysts usually deal in futures, not presents. Yet, the bond rating stays in junk and the stock still hovers around the drinking age in most states.

When people like me say that GM isn’t building enough cars that people want to buy, it means that they don’t build enough cars whose designs can transcend the lack of fashion appeal and social acceptance of most of their brands and model names. That damage has been done over time, and it won’t be undone overnight. Sure, the Sky and Solstice are over-sold. But GM has made a hash of family sedans and minivans and it was unforgivably late to the crossover party.

It’s going to take time and a lot more great executions of design and marketing launches, though, to fix GM. It’s going to take more time for GM to prove itself.

GM is in a hurry to change the news cycle from negative to positive. But that’s GM’s problem, not the problem of the media covering the company.

Reader Comments

solomonrex

April 17, 2006 4:43 PM

I'm actually siding with Lutz here. Toyota and Honda have been criticized for years for their boring cars, and it hasn't hurt them one bit. The real problems are the legacy health care costs. This applies to GM and Ford. No politician wants to take on the unions, so they always pick on management and design, but given the large cost disadvantage they have compared to the Japanese and Korean imports, the American brands are doing well. Plus, Korea and Japan have protected markets, so they don't have to worry about the distraction that GM and Ford do defending their own turf.

This is why both Ford and GM do well overseas, but not in their home country, with their huge group of pensioners. Right or wrong, this is the only relevant answer to why their business is weaker than Toyota, Hyundai and Honda. Mind you, those are all fine companies and they are executing well, but not that well.

Being an armchair CEO is easy, but considering they're both still in business, Ford and GM's legacy health care costs are reason enough to explain this rough patch they are in.

steve baker

April 17, 2006 9:57 PM

Nice line about the lottery ticket

Brett

April 19, 2006 5:00 PM

I haven't bought a domestically built/engineered GM or Ford vehicle in over 15 years. Instead, it has been German and Japanese imports for me and my wife. However, I recently drove a new Trailblazer, a LaCrosse, and purchased a 2006 Corvette as a nice day/weekend car. I am impressed enough with the build qualities of these GM vehicles that I will seriously consider a GM product when it comes time to replace our current daily drivers.

Tim Lucas

April 4, 2007 9:27 AM

Firstly let me just say that as a man in my 20's,I fail to see the appeal of any Toyota product. They're boring appliances. I agree with you that GM were late to the crossover party, but Toyota have only 1 crossover [which is so tragically dull, I cant remember the name of it]

Secondly, you say the Impala and Malibu are not desirable products. I agree, but I see the Saturn Aura [car of the year] as a far more exciting and stylish product to the accord or camry. I would also say the same about the Ford Fusion!

You make a statement like "American car companies are not making cars people want to buy" yet I see them making much more exciting and stylish products than Toyota!!

What do Toyota have to compete with the HHR, corvette, Solstice and sky? I didn't think so!

Tim Lucas

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