Culture Change
GM's Lutz says new attitudes, product renaissance helping to lead turnaround

By DAVE GUILFORD AND JAMIE LAREAU | AUTOMOTIVE NEWS

AutoWeek | Published 05/23/06, 1:04 pm et

To say General Motors had a bad year last year is putting it mildly: It lost $10.57 billion.

But Vice Chairman Robert Lutz, 74, says attitudes inside GM are changing. He says a new culture led by a product renaissance will help the company complete its turnaround.

Automotive News News Editor Dave Guilford and Staff Reporter Jamie LaReau sat down with Lutz on May 8 to talk about GM's financial health and product plans.

Your responsibilities were changed a year ago. What is your current role in North America?

I don't have any direct responsibility for the North American market or the marketing, but North American global product development obviously falls under my purview. I certainly offer my comments. The role of the vice chairman, especially one with considerable industry experience, is to convey thoughts and opinions as necessary.

When you arrived in 2001, there was a sense that GM culture was too bureaucratic. Has it changed much -- or changed enough?

You could argue that no matter how fast a culture changes for the better, you're always impatient. When I got here, if I might criticize the past, product development was delegated at too low a level, especially design. There was insufficient senior management involvement with the product direction.

We tended to gravitate to always trying to find the scientific methods for everything, including measuring of customer taste and determining what kind of product we should do for one segment and putting a great deal of faith in quantitative analysis. What that leads you to is a sort of portfolio of balanced mediocrity -- nothing stands out and is exciting or surprising.

I really tried to make the product development process less of a retrospective analysis. I find that is such a defeatist strategy. It disregards the quality of execution. If your product is a blockbuster hit, it creates a segment. I have been trying to shift the balance, with the complete support of (CEO) Rick Wagoner.

GM North America has been the profit laggard. What's the problem?

The reason North America isn't profitable is because the so-called structural costs are 35 percent of revenue. There are two ways to fix that: Either increase the revenue or decrease the amount of fixed costs. We're going to try to do both.

We've identified very clear-cut ways to get from our 35 percent structural costs down into the high 20 percent and hopefully the mid-20 percent range. Part of it is the globalization, as we get more products in a shorter time with less capital and less engineering expense.

Will GM North America be profitable by the end of this year?

I can't answer that question.

Pontiac is getting a rebadged Cobalt coupe. Why do a rebadged product?

Buick has nothing at the low end, GMC has nothing at the low end, and Pontiac has nothing at the extreme low end. So there is a justification that North America sales and marketing felt very strongly that the combined B-P-G franchise needed a vehicle at the low end.

To avoid giving them just an overtly rebadged Cobalt sedan, the compromise was coupe only and no base coupe. The Pontiac interior is fairly different.

So is it Cobalt-based? Yes. Can the expert tell that it's Cobalt-based? Yes. But we went as far as we humanly could to avoid direct interaction with the Cobalt. It will be positioned higher than the Cobalt in price. So while you'd like more separation, this is what we could do in the time available.

Last year you described Pontiac and Buick as "damaged brands." What's your perspective today?

Everyone always says that I was sort of implying we were going to cut Buick and Pontiac. I never said "irrevocably damaged" or "irreparably damaged" or "terminally damaged."

Any brand that is not as strong as you would like to have it be is damaged. We're starting to repair the damage, but neither of those brands is where we would like it to be. They've stabilized. Both are on the way up in terms of measures such as favorable opinion and (consumer) willingness to consider -- especially Pontiac.

Where is the B-P-G channel strategy headed in terms of products?

That whole channel strategy is a work in progress. Neither Buick nor Pontiac's role do we see as trucks. GMC will not get any passenger cars.

The Pontiac Torrent comes to mind as something that doesn't fit that.

It's doing well, but I wouldn't want to speculate whether Torrent would stay with Pontiac or migrate to, say, GMC down the road.

With fuel economy as a top issue, how do you feel about all the alternative powertrain ideas?

Long-term, there's no single solution. There are large petroleum reserves; and the internal-combustion engine, as we know it, I don't think is going to go away any time soon. But it will be supplemented by renewable fuels, which we believe in greatly.

There's some benefit to the environment for ethanol, but the number one reason it should be a national priority is that it's the fastest and easiest way to reduce the dependence on imported oil.

All of those biofuels are now technically within everyone's grasp. We have the hybrid program. In the longer term, we have the hybrid and fuel-cell programs.

The various forms of gasoline-electric hybrids will continue to prosper, and what we see as a really good possibility is E85 hybrids.

Any chance of a pure electric vehicle?

Yes and no. We are getting close to battery technology using nickel-metal hydride. We're getting close to a generation of batteries which may provide that elusive combination of range, recharge time, safety and cycle life; to where the pure electric vehicle, in about eight or 10 years, becomes a feasible alternative.

You have been at GM going on five years. You came in as a change agent. How do you think you've fared?

I would give myself a B+ or an A-. It took me maybe 18 months to fully understand what was going on. When I came in, I was somewhat in awe of the orderliness and the systematic approach to everything.

After about two years, it dawned on me that what I was admiring as a system was in fact broken. That's when we really started focusing more on the globalization of product development to avoid the duplication among the regions.

I started unashamedly advocating products that there was no earthly substantiated need for in the analysis, like the Pontiac Solstice, Saturn Sky, Chevrolet HHR and Chevrolet Camaro. There's other stuff we have coming that is just a little bit outside of what that system would have generated.

There are at least three products, one of which will be shown as a concept at the Detroit show, that is what I call design-driven product planning. You'll also see a departure from the rational approach in that many of our vehicles in the future are going to be very similar in proportion to the GMC Acadia and Saturn Outlook (crossovers), in that there will be a tremendous emphasis on the chassis. The look that we want is like a weightlifter in a tight T-shirt -- where the clothes look too small for the physique. You'll see a much stronger orientation toward the emotional side.

What were some of your highs and the lows in terms of what needs to be done?

Given the size of the organization and the established way of doing it, if I had tried to move faster, there might have been a transplant rejection. Looking back, you always wish you'd moved faster. But now everybody understands the need for emotion in the product.

The leader, beyond me, who is always arguing for radical designs, more change, more difference, more reach, don't be cautious, "Yes, it's nice, but I'm not sure it goes far enough," is Rick Wagoner. He has become an ardent fan of really radical design.

I feel good about that because it means at some point I can pack it in and as long as Rick's around, nothing will change.

What is GM's culture like now? Is there a sense of urgency?

Absolutely. There's a difference between a sense of urgency and panic. Panic is not good, and we don't have any of that. There's a knowledge that the old ways won't work, and that we're in a new world.

in that there will be a tremendous emphasis on the chassis. The look that we want is like a weightlifter in a tight T-shirt -- where the clothes look too small for the physique.