Daniel O’Callaghan continues his digest of Bob Lutz’s 2011 book, ‘Car Guys vs Bean Counters’, which charts the decline of General Motors and Lutz’s decade-long struggle to rescue it.
In an effort to understand better what gave the Japanese manufacturers such an edge in terms of quality and reliability, GM established a joint-venture with Toyota in 1984, the quaintly named New United Motorcar Manufacturing Inc. (NUMMI) to build both GM and Toyota versions of the Corolla at a new plant in California.
The GM version was launched as the GEO Prism. It continued in production from 1989 to 2002, encompassing three generations of Corolla. Other Geo models, based on designs from Suzuki and Isuzu were launched but made little impact, the market consistently rating the Japanese badged equivalents higher in terms of quality and reliability, much to Lutz’s puzzlement and annoyance.
Geo was eventually folded into Chevrolet and its unclear what, if anything, GM gained from the venture. Toyota executives were polite and deferential but gave little information of value away. GM executives who spent time working at the joint facility were ignored or shunned when they returned and expounded different ways of doing things.
Around the same time, GM implemented a highly ambitious and expensive automation programme. The company thought it could leverage its financial muscle in a way that its weaker domestic competitors could not, to reduce unit costs and improve profitability. Unfortunately, the programme was rushed and the new technology proved to be unreliable. The cost savings on production line labour were more than offset by the costs of maintaining teams of highly trained engineers to service and repair the troublesome machines. This, and the cost of amortising the expensive new machinery, actually drove up GM’s unit costs and damaged margins.
Another initiative to reduce costs was the sharing of not just internal components and body structures, but also visible external parts such as doors, boot and bonnet lids between the different marques. This severely curtailed designers’ freedom to build distinctive and attractive vehicles that maintained each marque’s identity. The customers’ allegiance to each marque was sorely tested.
Recognising this issue, the company decided the solution was not to revert to more individualistic design, but to overlay the generic designs with marque-specific details, like plastic body cladding and hollow rectangular head restraints on Pontiacs, five-spoke wheels and a wide chrome grille bar on Chevrolets, the latter detail aping the marque’s successful trucks. Saturn, it decreed, being perceived as the choice of those with little interest in cars, would be bland in the extreme, with no hints of individualism in their designs!
‘Brand Management’ became the new mantra within GM, not only for each marque, but for individual models too, which would, GM decreed, be treated as though they were distinct ‘brands’. This concept was promoted to GM by non-executive board members from US consumer goods companies, where it was used to embed distinctions between different brands of, for example, toothpaste or breakfast cereal in the minds of the consumer.
More than ninety teams of product and marketing people, largely working independently of each other, tried to define ‘brand characteristics’ for each vehicle and devise unique, individual advertising campaigns to support this effort. GM’s marketing and advertising budget became highly fragmented and the spend on individual models was, in Lutz’s view, derisory and ineffective. The structure was an organisational nightmare and the marketing specialists employed by GM came mainly from consumer goods backgrounds with little or no experience in the automotive industry.
While all this was going on, GM’s North American truck division was carrying on with a simple, clear focus on building better trucks and SUVs than Ford or Dodge. The division’s ongoing success in a strong economy where demand was growing obscured to some degree the crisis that was enveloping the car divisions.
Another factor that disguised the decline in GM’s car divisions was the continuing profitability of the company’s finance arm, General Motors Acceptance Corporation (GMAC) which was now providing the vast bulk of group profits. This led some commentators to quip that GM was now a finance company that had a sideline in manufacturing cars and trucks.
The decline in GM was perfectly encapsulated in the Pontiac Aztek, launched in 2000 to almost universal incredulity and derision. It was, in today’s terms, a compact crossover, but any practical merits it had were overwhelmed by its weirdly geometric and incoherent design. The Aztek was meant to symbolise a break with GM’s overly cautious recent designs but was simply repellent to most observers. It has been frequently voted the ‘ugliest car of all time’. The Aztek however did enjoy a strange renaissance as the car driven by Walter White, the lead character in the cult TV drama ‘Breaking Bad’.
Rick Wagoner, a GM ‘lifer’ who had been appointed President and CEO in 2000, and Jack Smith, then GM’s Chairman, were well aware of the product and organisational problems that had beset GM. Other GM board members had previously made overtures to Lutz about re-joining the company, but it was Wagoner who finally agreed the deal. Lutz first turned down the offer of a consultancy, arguing that he would be powerless against the existing GM hierarchy, before accepting a full-time post as Vice-Chairman in charge of product development. The appointment was initially for three years, but Lutz would eventually spend the best part of a decade with the company.
In Part Three, we’ll discover what Lutz found when he arrived at GM on 1st September 2001 and how he set about trying to address its manifold problems.