The Fate of Empires and Search For Survival (Part Three)

Daniel O’Callaghan continues his digest of Bob Lutz’s 2011 book, ‘Car Guys vs Bean Counters’, charting the decline of GM and Lutz’s decade-long struggle to rescue it.

2000 Chevrolet Malibu. (c) Edmunds

Even before officially starting work at GM on 1st September 2001, Lutz had the opportunity to preview GM’s forthcoming models. He attended the company’s August board meeting and met Wayne Cherry, GM’s Vice-President of Design, at the Pebble Beach Concours d’Elegance event the same month. Cherry shared with him photos of models in different stages of development and Lutz was horrified by what he saw. 

Amazingly, Cherry admitted to feeling the same and explained that, despite his nominal position, he was subordinate to the Vehicle Line Executives (VLEs), who oversaw every aspect of each new model’s development. Their explicit priority was to minimise cost and bring the new model to market as quickly as possible, maximising carry-over parts from the existing vehicle. This was believed to be key to Toyota’s success. Design was pretty low on their list of concerns and Cherry had, effectively, no power to intervene and stop even a dismal design from being brought to market.

After he started, Lutz discovered that GM was hamstrung by processes such as performance management and endless debates about organisational structure and targets, the management theory that the MBAs inculcated into the corporate culture. Senior management was excessively, even exclusively focussed internally, and product excellence was hardly discussed. Agreeing, monitoring and achieving multiple targets was the sole focus, irrespective of whether or not these targets brought any tangible benefit to the product or customer.

Lutz discovered that GM had excellent market research capabilities, but such was the pressures on VLEs to meet cost targets and deadlines that they signed off on new models, irrespective of how badly the prototypes had performed in customer clinics. Sending a dud to market was perceived to be a lesser crime than binning it to start again! The risk-averse triangulation of ‘needs segments’ analysis was stifling creativity and producing mediocre cars that were little, if any improvement over the outgoing models and singularly failed to excite the market.

Against great resistance from the VLEs, Lutz insisted that the results of the customer clinics on all forthcoming models be made available to him. He was depressed to find that even the best of these was greeted with only mild enthusiasm but was able to use this evidence to force a rework or even cancel models, with the support of Rick Wagoner. Lutz was, however, clearly frustrated that he could make only limited improvements to models that were in the pipeline for launch up to 2003/4.

Pontiac Solstice. (c) Motor Trend

Lutz did score one notable early success when he commissioned a concept car for the 2002 Detroit Motor Show. This was a small two-seater RWD sports car that would become the Pontiac Solstice in production. Press and public reaction to this was very enthusiastic and Lutz hoped it would be seen as a tangible sign that things were changing at GM.

There were failures too. Against his better judgement, Lutz allowed the GMC Envoy XUV to go ahead. A mid-sized SUV with a unique roll-top roof that allowed tall loads to be carried, it sold a paltry 13,000 units in 2004 and 2005 before being cancelled. The VLE had assured Lutz that the meticulously gathered research forecasted annual sales of between 90,000 and 110,000.

There were manufacturing quality issues too: Lutz highlights inconsistent panel gaps, poor quality paintwork, cheap feeling and poorly grained plastic mouldings, lumpy and crooked upholstery and cheap, brittle switchgear as defects that were driving potential customers away. GM was also failing to maximise potential synergies. There was a needless duplication of engineering effort in different regions of the world in the development of essentially similar vehicles. As Lutz puts it, GM was operating as four regional companies rather than a single global automotive business.

Lutz tackled Design first. He dismantled the unwieldy multi-layered structure that separated conceptual, development and production design into separate fiefdoms and replaced it with a single tier of studios that would work on new vehicles from conception to production. He negotiated a one-year reprieve for Cherry, who was unfairly blamed for the failures of the old system and had reached retirement age. Cherry used the year productively, designing the stunning Cadillac 16 concept, another statement of intent by the revitalised GM Design.

2003 Cadillac Sixteen concept. Image: motorauthority

Next came Product Planning. The rigorous and inflexible data-driven approach that had focussed on customer ‘needs’ rather than ‘wants’ had, in Lutz’s view, crowded out creativity and inventiveness. Ingrained attitudes, including excessive deference to seniors, were hard to change. Lutz recalls the occasion when a VLE presented him with a solidly green ‘scorecard’ in the expectation of receiving a healthy bonus. When asked, the VLE had to admit the vehicle was selling very poorly, but he could not be held accountable for that as he had achieved his goals!

Another VLE was reluctant to add chrome trim to the DLO of the forthcoming new Chevrolet Impala, even though he knew it would considerably improve its appearance and, presumably, its sales performance. The reason for his reluctance was the prospect of a red mark on his scorecard caused by the cost of the extra brightwork. Lutz talked him around but despaired of this mindset.

There followed efforts to improve panel fit, paint quality and, in particular, interiors, an area where GM fared very badly against its competitors. The latter involved educating outside suppliers that GM now required much higher quality and precision in the manufacture of such parts. This took a degree of patience on the part of the company, allowing suppliers time to retool to meet the new, more exacting standards.

In Part Four, we’ll examine Lutz’s efforts to make GM a truly global business and the development of the company’s first hybrid car, the Chevrolet Volt.

Author: Daniel O'Callaghan

Shut-line obsessive...Hates rudeness, loves biscuits.

32 thoughts on “The Fate of Empires and Search For Survival (Part Three)”

  1. As an aside to the above, one of the more intriguing model replacement stories from the Lutz-era GM concerned the Chevrolet Venture minivan:

    MPV sales began to fade in favour of SUVs in the middle part of the decade, so the cut-price solution GM offered was to stick a more upright SUV-style front end onto the Venture and rename it Uplander:

    This model replacement strategy would have certainly ticked all the boxes on the VLE’s scorecard, being quick, cheap and utilising the maximum number of carry-over parts, but potential buyers certainly weren’t fooled. The Uplander remained on the market for just four years and it’s sales, at around 60,000 per year, never matched those of its predecessor.

  2. Daniel, thank you again for this fascinating series of articles.

    I am sure Lutz is painting his own career in the most favourable light, but so much rings true: GM was an overly bureaucratic company churning out crap product.

    Ultimately, his efforts were not enough to stave off bankruptcy when the financial crash hit in 2008 – but turning around such a behemoth in seven years would always be a tall order, even without internal resistance.

    That Cadillac Sixteen is pretty sweet though.

    1. Thanks for your kind words, Jacomo, which are much appreciated. This series was fascinating to write. While its based on Lutz’s book, I have tried to fact-check his assertions wherever possible.

      Regarding the Uplander, Lutz would have signed off on it, so he wasn’t above a “quick and dirty” fix himself. He’ll be my gunsight again in two future DTW pieces.

      Incidentally, GM would have gone bankrupt in 2009 even if it had the finest range of vehicles in the world, as we’ll see in the fifth and final instalment of this series in a fortnight. Stay tuned!

  3. Were any of Lutz´s cars any good though? I can´t think of one. And in merging GM into one lump it killed Buick and Saturn and made Opel beholden to objectives outside its market.

    1. Richard: “made Opel beholden to objectives outside its market”

      I see what you did there…:)

    2. Richard,

      Maximum/’Crock of Shit’ Bob’s influence is evident in the first-generation Insignia, as well as the rest of the previous generations of Opels. The lush paint and other factors contributing to considerably raised levels of perceived quality were attributed to him, back in the day.

    3. Hi Christopher. Lutz tells a story in the book about the paint finish on GM cars when he arrived at the company. He queried why the finish was noticeably less glossy than on competitors’ cars and was told it was deliberate, to disguise the less than perfect surface finish beneath! It was one of many quality issues he claims to have tackled.

      Regarding the first generation Insignia, was it good or bad? I’m confused by the ‘crock of sh*t’ reference, but I’m probably misunderstanding you.

    4. Daniel,

      ‘Maximum’ Bob Lutz famously described the issue of global warming as a ‘crock of shit’ some years ago. Against that backdrop, his involvement in the creation of the VLF Destino, a slightly redesigned Fisker Karma – with a V8 rather than hybrid propulsion – stands as a staunch embodiment of his worldview.

  4. It seems GM didn´t quite get the secret of Toyota´s success or the difference between Toyota´s and GM customers. And they also did not get why peope opted for German brands and Lexus either. Yes, VW and Toyota had extensive component sharing. They were good components in desirable cars whilst GM put mediocre parts in cars made mediocre. They probably had a quantitative measure of shared bits and ignored the consequences of the choices in qualitative terms. Interestingly, Ford didn´t really go down this path either of enforced commonality or mindless spreadsheet management.

    1. All true, Richard. There seemed to be a casual indifference to and underestimation of the customer, and a presumption that incrementalism was good enough. There were undoubtedly improvements in quality during the Lutz era, but no step-change like, for example, the interior of the Mk4 Golf, or handling and ride qualities of the Mk1 Focus.

  5. Congratulations on the article, yesterday I was looking at the American sales figures and if I am not mistaken caddillac travels around 1% of the market?! How long will the brand last? Besides not taking care of the brands outside the United States, they can’t even do it at home. During the 2008 crisis it had to be saved by the state, it seems that both the product culture and the financial culture are missing. The Americans control the tech sector, the same cannot be said of the automotive sector.

    1. Thank you, Marco. I’m glad you’re enjoying this series. You’re right: it was a fatal cocktail of indifferent product but mainly terrible financial and risk management that forced GM into bankruptcy in 2009. The full story will follow over the next two weeks.

    2. So – if anyone was in a betting mood, and assuming business as normal, how many years do the minds of DTW give GM? GM´s US market share fell 10 percentage point from 2004 to 2019. That´s an average annual loss of 0.6 percentage points a year. If their market share is now 16.9% then 16.9 divided by 0.6 is 28 years before they sell no cars at all, in theory. At some point before the year they sell not one car, the firm will be bought up or shut down or change form dramatically. I give it about a decade or so. GM has no more expertise in sedans; its truck market is confined to the US. I´d guess that GM will end up as GMC Trucks with all the other brands shuttered. On the way Cadillac will die as a badge on a GMC truck.
      There are companies in the US making and selling cars and trucks at a profit. It can be done. GM for some reason can´t figure out how.

    3. That’s a good question, Richard, although it reminds me somewhat of an old puzzle:

      “A man sets out on a long journey and covers half the total distance on the first day. On subsequent days, he covers half the remaining distance. How many days does it take him to reach his destination?”

      Solving this puzzle won’t help in working how long GM has left in its present form, by the way.

    4. Daniel: it´s a matter of time when another downturn and some more duff models and some badder management makes GM turn belly up. I don´t suppose the final moment is at 1% market share but somewhere between 11% and 7%. There will be a point where it´ll be glaringly obvious the only way is quickly down. Let´s say they have three bad years and then there´s a finance crisis; two more divisions go. What´s left? Chevrolet, Buick, Cadillac and GMC if I am not mistaken. Well, Buick is there for the Chinese so maybe GM sells the brand to a Chinese player. And Cadillac is stuffed as of now. That leaves Chevy and GMC and when there are no more sedans, the GMC brand will be pasted on some residual Chevy models (GMC is used on SUVs and trucks now) and that´s the last station.

    5. Well spotted, Richard, that’s precisely why the answer to the puzzle, which is that he’ll never reach his destination, is not relevant here. As you suggest, if GM’s market share continues to decline, it will reach a critical point where it will no longer be viable as a going concern. It’s a public company and the stock market is entirely unsentimal. Once the stock market value of the company falls below the value its net asset value, it’s game over, unless the US government steps in again, of course.

      It will be a true tragedy if this all does come to pass. Let’s hope that GM can rediscover its long lost mojo before it’s too late.

    6. “Unsentimental” rather than the nonsense I typed, of course.

    7. Daniel: any warm feeling I had for GM vanished when they sold Opel. I can´t think of any reason to want to keep a single one of GM´s nameplates going. Thus I can´t call it a tragedy (though its rubbish news for the people who work below GM´s cretinous management layers). I would have felt differently about ten or more years ago. Buick is now a badge-engineered sham when once it made some really lovely cars (and I include all the silly bordeaux velour ones). It had some good cars until the Park Avenue was killed off – nice and all as the Buickised Opels were they were not Buicks at all. So, goodbye GM. You were taken over by kleptocrats and incompetents and run as a cash cow for MBA vampires. Adieu.

  6. mutatis mutandis, it reminds a bit of the story of fiat from the 90s onward that went from a 50% share to a current share of 22%, to end up in the PSA galaxy. maybe GM will be bought by some Chinese group.
    excuse me very off topic, there is talk in italy of a possible revival of Lancia up to the C segment, I´d be curious to know what is the additional cost of a new model for which only the external sheet metal and internal materials change, to say, to produce a 208 cost x and a c3 even. if you produce only a model with twice the volume how much do you save?
    for example yaris technology and only on yaris, do not make a mini lexus

    1. I had a look at the link. That vehicle is not an Ypsilon. It´s clearly not feminine enough. It looks sporty and haunched when Ypsilons are supposed to be more female in character (which is why they are charming in a way other small cars are not). I hope that CAD model is just a place holder. Each Y has had something interesting to it and that rendering is not interesting at all. It´s a gold butch blob.

    2. The comparison is a good one and proves that even a dominant position in your domestic market (which us a distant memory for GM) can slip away and does not j silage you from the effects of globalisation.

      Maybe we are witnessing a changing of the guard and the automotive future belongs to Tesla and other new entrants rather than the old, ICE-era champions? The VW ID-3 will be interesting to watch in this regard.

    1. I have to wash the dishes and should not waste time, GM sells Cadillac, Buick and Chevrolet in order of prestige, the buick is the Opel Insignia, I wonder what bad quality so must have the Chevrolets that are one step below the Buick.

      Maybe the rendering is not interesting, but the idea is not bad in my opinion, you´re right, the lance is now feminine but in the past it was luxury and sport, if they use alcantara inside and beautiful plastics the product in my opinion is sellable, VW sells three identical models, POLO Ibiza and Fabia, the important and not to buy from the competitors. But in the end the one that makes the most money per model is the toyota.

      Translated with (free version)

    2. I agree that the images of the supposed new Ypsilon are nothing special, but I would love to see Lancia resurrected by PSA. It’s highly likely that any new Lancia would be based wholly on PSA underpinnings, but the lovely Delta was essentially a Fiat Ritmo in a party frock (admittedly, a haute couture frock from the house of Giugiaro).

      As an added bonus, the reinvention of Lancia might allow DS to be quietly euthanized.

    3. Marco: the meaning of Lancia is an open question. I have not subscribed to the idea that Lancia was defined by luxury or sport. There were high quality cars which is not the same as luxury and there were some sporting models such as the Fulvia. The Stratos, Monte Carlo and Integrale are not typical Lancias. Lancia got smothered “luxury” trim to compensate for their declining individuality. Much as I like Themas, Kappes, Lybras and Dedras they were not the right kind of cars for Lancia.
      I was thinking only of the Ypsilon when talking about perceived gender. Lancia as a whole would be neither strongly masculine nor feminine. It´s going to a more complex concept to nail than simple gender signs.

  7. Lancia is now female because the only model on sale is the Ypsilon. Having said that, I hope that being inside PSA will bring as many new models as possible. models for male, female and for D
    I was born in 1978 so for me Lancia and a mixture of opulence ( Thema launches) sport ( Delta launches coloured martini) and the Prisma.

  8. Speaking of PSA, I mentioned before that I thought the new 208 was not quite right in side profile, with a too-narrow rear door, shut lines that seem to be at odds with other and misaligned door handles. (The rear one looks too low in relation to the front.):

    Anyway, on the new Corsa, which shares the 208’s inner structure, if anything, these issues look more pronounced:

    Or is it just me who’s obsessing about this?

    1. That short rear door reminds me of a comment once written about the Series 1 5-door Discovery: “Not a car for transporting clowns”

    2. There´s not much about that Corsa that says “Corsa”, is there? Poor old Opel. The roofline is especially wrong. And the Corsa should have a cuteness to it this car lacks entirely. It´s too bloody big, isn´t it?

    3. I believe that those in the trade refer to that as having been ‘Talbotised’.

  9. as far as escape lines are concerned, a good example of clean work is golf VII for me. Speaking of the 208, the fuel nozzle is quite messy, a circle would have been better at the end maybe, the line under the handles is useless (I think).

    The Corsa on the other hand has that line that starts from the rear headlight which is curved, why? and then the line on the rear door at the bottom again has no use.

    If I had to buy a B segment car for aesthetics, probably my number one choice would be the Kia Rio, then the Polo then the Corsa.

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