GM's Latest Challenge: Losing Lutz

Bob Lutz announces his retirement. Without its legendary product czar, will GM continue to push exciting new designs?

By David Welch

It will soon be the end of an era, not just for General Motors (GM) but for the entire auto industry. At the close of this year, GM's car czar—the charismatic and controversial Robert A. Lutz—will retire.

GM announced the decision Monday morning, Feb. 9, naming Thomas G. Stephens, who heads up the automaker's engine and transmission works, as Lutz's successor in the job of vice-chairman of global product development. Stephens will take over on Apr. 1, when Lutz moves into an advisory role.

Lutz, who turns 77 on Feb. 12, said he told Chairman and CEO G. Richard Wagoner Jr. last fall that he would take a smaller role starting this year. At his age it was time to slow down. But a bigger tipping point for Lutz was the government's increasingly hands-on role in how cars will be made. Lutz said he was looking ahead at engineering and designing new cars to meet tougher government-mandated fuel economy rules rather than strictly to spark passion among car buyers—and thought it would be a good time to start moving out. "What I have proven to be best at is the psychological and emotional end of the business, designing what people want," Lutz said in an interview. "We're seeing an increase in regulation. This is one reason I think it will be a good time to retire. I won't have to worry about that stuff."

One GM manager who is close to Lutz said the legendary car guy also wanted some time to himself to fly his plane and ride motorcycles—both lifelong passions.

Insiders say Lutz is still a very effective executive. For his career longevity, he credits a healthy diet that excludes red meat. But some say that at his age he was beginning to slow down. And the job is a demanding one. Overseeing product development all over the globe, Lutz spent a lot of time reviewing new models in GM's far-flung operations. In 2007 he logged four times the air travel of CEO Wagoner, according to the company's proxy statement.

Design Renaissance

When Lutz leaves at the end of the year, Stephens will have big shoes to fill. Under Lutz, GM embarked on a design renaissance that pushed through some strong new models with sharp designs such as the Chevrolet Malibu, Buick Enclave, and Cadillac CTS. GM also got in step with better cabins and interiors as the company quit cutting corners on things that delight car buyers the most. During an interview in 2003, about two years after Lutz took over, he told BusinessWeek his new rule was: "No more boring cars."

Stephens, a career engineer, will have to pick up Lutz's push for style and his ability to ram projects through GM's bureaucracy. But at least he has the rank of vice-chairman to give him clout. And in a regulatory-driven car business, Stephens may have the right résumé. He's an engine guy with a slew of classic cars in his garage. At the same time, he has been a key player in the development of GM's hybrid technology and the company's efforts to meet fuel economy rules.

The Malibu may be the most significant car Lutz spearheaded. The design was progressive, and in many ways the family sedan was best in class. Before the car market tanked, Malibu sales were way up over its boxy predecessor, and the new car sells for about $3,000 more than the old one did. "Without Lutz, they wouldn't have cars like the Malibu," says James N. Hall, principal of 2953 Analytics, an auto industry consulting firm. "The Malibu would have been the most milquetoast car. Lutz made GM stretch."

Some Bad Moves

He had some losers, too. Lutz hoped the Saturn Sky and Pontiac Solstice two-seat roadsters would resurrect both brands. Neither did, and they lost money. His love for sporty rear-wheel-drive cars led to the Pontiac G8, another weak-seller. And when he put an SUV nose on GM's old minivans earlier in the decade, the low-budget move bombed.