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.
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.
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.
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.