General Motors’ turnaround hit a major pothole when it recently posted a $3.25 billion loss in the first quarter of [...]
June 2 2008 by Jennifer Pellet
General Motors’ turnaround hit a major pothole when it recently posted a $3.25 billion loss in the first quarter of 2008, reversing a modest $62 million profit during the same period last year. By contrast, Ford showed a surprise first-quarter profit of $100 million. The troubles continue in its highly visible North American market. GM’s results from international operations-particularly
Holding forth during a Volt Nation town hall meeting at the show (which can be seen on YouTube) Lutz told anyone who would listen that GM’s current management has learned that “boldness in creativity wins; cautiousness loses.” Championing the extended-range electric vehicle Volt, which is expected to be out in two years, Lutz predicts GM will be pumping out a new hybrid/electric every four months once the Volt gets rolling.
Among his personal vehicles are a restored 1952 Aston Martin DB2 Vantage; a 1941 Chrysler convertible; a 1971 Monteverdi High Speed, which was a Swiss-built, Ferrariesque, high-performance coupe; a 1962 Buick Skylark convertible; a 1952 CitroÃ«n, six-cylinder front-wheel-drive car, which was the biggest front-wheel-drive car in the world at that time; 1934 Riley MPH semiautomatic, aluminum bodied sports car that the Riley company built to compete in Le Mans; and a Steyr-Pinzgauer, a former Swiss military vehicle that he regards as the world’s most competent all wheel-drive vehicle. And don’t forget the Alpha jet fighter and two decommissioned MIG fighter jets. The man never has to go without transport.
Given all the bad news that surrounds the industry and GM in particular, you say the company is on the “cusp of a huge change.” Explain.
Everybody’s aware of the external environment, which could well be better. But people don’t see what’s happening inside General Motors-the way we have reconfigured the product development machine on a global basis. Today it is geared up to crank out hit car after hit car. We’ve got the system to where it’s almost incapable of producing a mediocre vehicle anymore.
Look at all of the stuff we’ve done recently, beginning with the [GMT-900] pickups and the [GMT-900] full size sport utilities, which everybody agrees are best in class. And this is followed by the Saturn Aura, the Saturn Sky, the Pontiac Solstice GXT, the Buick Enclave and
When do we see this change having a material effect on GM’s North American business?
While the cars are doing well, we have extreme softness in big trucks, big sport utilities and big pickups. I wish I could say that profitability from car sales offsets a reduction in truck sales. It doesn’t.
The problem that we had to solve in
What about the change in thinking within the company itself? You’ve worked at a number of different car companies. How is the environment inside any different from what we’ve been led to believe?
The old General Motors that you press guys all remember-slow, lethargic, conservative, over-organized within a massively dispersed divisional structure-that disappeared under Jack Smith and has been further downsized by Rick Waggoner, Fritz Henderson and myself. We now have, in GM, exactly the same structure that we had at Chrysler or that I remember from BMW, which is one engineering department operating globally, one styling department globally, one procurement department globally, one manufacturing department globally. All cars are engineered the same way, tested the same way, engineered to the same standards, and are exportable or producible anywhere in the world. For example, this car [points to a Pontiac G8], started out as an Australian car.
Another thing that has changed radically in the company is the focus on priorities. At one time various things were weighted equally: corporate culture, diversity, good governance, manufacturing efficiency. Among all these little boxes that you checked off, somewhere was a box labeled product excellence. The problem was that GM’s focus was on too many things with not enough focus on what makes the business run in the first place, which is the product. Back in the ’60s, all anybody talked about at General Motors was the product.
The finance guys ran along behind complaining about the waste, but meanwhile raking in the money. During the time I was away, GM became so process focused and incremental in [its] approach that everybody forgot that if you don’t have a killer car none of the other stuff matters. Having low-cost suppliers, low-cost manufacturing, a wonderfully diverse workforce, and a kind and gentle internal culture where everybody gets along with each other doesn’t matter if the cars aren’t selling. I said, “What if we spend $1,000 per car to make them best in class? Maybe we don’t have to give away $2,000 to get people to buy them.”