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GM's Latest Challenge: Losing Lutz


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.

But the improvement in quality of interior and design has shown up in other models, such as the Enclave and its siblings, the GMC Acadia and Saturn Outlook crossovers, not to mention the forthcoming Chevy Equinox midsize SUV.

Lutz also pushed through big spending for the Chevrolet Volt electric car. It took even his maverick style and cult of personality three tries to get GM to green-light the project. When it hits the market in 2010, it could be a talisman for the Chevy brand and proof that the automaker can play in the advanced technology game.

Still, for all that Lutz did, GM will need to prove that even without his forceful personality it can continue to bring better styling, craftsmanship, and new ideas to market. Hall says GM has institutionalized better execution in engineering and design. But Stephens will still have to get finance and purchasing to loosen the purse strings to make better cars. "Lutz worked because he punched holes in the company's autoimmune system," Hall says. "The problem comes in when doing the right thing is a lot more expensive."

Lutz says that GM should be well prepared after he is gone. During his tenure, he changed GM's new-car development process to start with design first. The company's design department would create a product vision aimed at catching eyes and then start making the compromises for, say, better headroom, more cargo space, better fuel economy, and the like. "It's now institutionalized that we start with an aesthetic vision first," Lutz says, "as opposed to the old system of starting with an analytically designed vehicle and letting the designers gift wrap it." So long as GM keeps that process, Lutz says, styling will continue to improve even after he retires.

When Lutz does take the exit ramp at the end of the year, the industry will also lose one of its most colorful executives. He had a knack for making headlines throughout his career. Lutz infuriated his old Chrysler boss Lee Iacocca when he referred to Fiat (FIA)—which Iacocca was courting for a merger—as a "dead bride."

Controversial Moments

Wagoner has also had to distance himself from Lutz's very public dismissal of global warming, which he once called "a crock." Lutz also said that forcing automakers to build fuel-efficient cars through regulation—instead of consumer-based incentives or taxes—was tantamount to curing obesity by forcing clothing makers to produce only small sizes.

But he also had a knack for making exciting cars. Lutz started his career in GM's European business in 1963, where he gets credit for a leading role in developing some of Opel's better designs. He then went to BMW (BMWG) and later Ford (F), where his knack for spotting smart styling and pushing it through bureaucracy got him a reputation as a car guy, a macho designation for executives who know how to make cool cars.

He made a big mark at Chrysler, from 1986 to 1998, when he spearheaded some hot models for Jeep as well as the PT Cruiser. After he departed when Daimler (DAI) took over Chrysler, Lutz piloted failed attempts to restart Indian Motorcycles and an ultraluxe car company using the Cunningham name. He also had a few tumultuous years running Exide Technologies (XIDE), a battery maker.

That's when Wagoner picked his brain in the summer of 2001 at the behest of former GM and Ford CFO John M. Devine. Wagoner met with Lutz and asked him who would be the next Lutz to take over product development at GM. Lutz, then 69, said, "Don't assume it isn't me."

Now GM, and in some ways the industry, will be trying to see if they can come up with the next Lutz.

Welch is BusinessWeek's Detroit bureau chief.


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