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GM North America Chairman Robert Lutz: Lutz Free Wheelin’

Since starting his career at General Motors in 1963, Robert Lutz has logged time in top posts at every major U.S. manufacturer as well as BMW. In 2001, he returned to GM, where he is now chairman of GM North America. CE recently spoke to Lutz about U.S. auto industry competitiveness, GM’s revival and electric cars-and, of course, his own favorite ride.

Domestic automakers are once again in a tailspin involving various factors-legacy costs, manufacturing, globalization. What will it take to pull out of this secular spiral?

We are actually larger outside the U.S. than we are in the U.S. and operating at impressive growth rates in other parts of the world, such as Latin America, Russia and China. But you hit on some of the factors affecting the U.S. market. You cannot compete with automakers like Toyota and Honda with a disadvantage of almost $2,000 per car of legacy costs. Either you try to operate at equal profitability and be overpriced or you are pricecompetitive, which means your margins are compressed. It’s a penalty you can’t live with. But I believe that there is now a realization on the part of our union work force that we cannot really reestablish our competitive position as long as we’re fighting this very substantial cost disadvantage.

A second factor exposed in a recent book by John B. Taylor, a former Deputy Secretary of Treasury, involves Japanese currency manipulation.

When we complained about the manipulation of the currency in Washington, the administration would say, “We wish we could do something about that.” It now turns out that it was aided by the administration to turn the Japanese economy into a reliable bulwark, stemming the tide of forces hostile to us in the Far East. Taylor goes so far as to say, “We basically threw U.S. industry under the bus, but it was worth it. You can’t please everyone.”

What about internal factors?

GM once had more than 50 percent market share. As markets become fully open and competitive, market share inevitably erodes. If our experience is like the experience of other formerly dominant manufacturers in their home markets, it will probably stabilize at about one-quarter of the market. Volkswagen used to have 60 percent of Germany, now they’re down to about 20 percent. For some 20 years, GM has been in an almost constant process of reorganization.

Why couldn’t we [have gone faster]? Organizations are like organisms, which is why the word is similar. You can’t whack it all at once or the place comes to a grinding halt. It has to be an evolutionary process. That process probably preoccupied senior management so much that we may have taken our eye off the ball when it came to doing fully competitive vehicles. That part of the equation had nothing to do with legacy costs or cost advantage. It was us.

When will we see GM in fighting trim?

We are in fighting trim. But we are now extremely lean and focused on best-in-class product. For example, the Pontiac Solstice and the Saturn Sky are today the world’s best-selling two-seat sport roadsters and completely sold out. Pontiac sold this concept car at the ’02 Detroit show. It was met with great enthusiasm. We targeted bringing it to market at a base price of under $20,000. Everybody said, “Impossible.” Three years later, we had finished cars at a base price of $19,995. It is now a best-selling vehicle of its type by a wide margin, and it hasn’t even been introduced in all markets yet. That’s an example of a segment where GM had no presence and now arguably dominates.

How do you induce, manage and then leverage creativity?

Of what use is physical diversity without intellectual diversity? With diversity, we’ve focused on making sure we have a bunch of people who all look different. Not enough attention is paid to making sure that we have people whose brains are wired differently. We now actively recruit people who are well-educated and enthusiastic and conversant with cars, but do not necessarily have a finance or even an engineering background.

The other thing we did was unshackle design. Over the last 20 years, design was compressed into a very narrow box. Other priorities took precedence. How far away is the side glass from the occupants’ head? How much headroom is there? How good is the visibility outside the car? When everybody else had defined the car with these limitations, design was told, okay, now wrap this for us.

You can’t get there from here. You must let designers have a new, off-the-wall idea and then ask, “What is the minimum amount of compromise we have to accept to make this design feasible?” That’s how we run it now, and it makes a huge difference. Just look at the Malibu, the Saturn Aura, our new big crossovers, the GMC Acadia, the Saturn Outlook, the soon-to-be-introduced Buick Enclave. GM is hitting its stride again both in terms of execution but also in terms of creativity.

When will we see the plug-in hybrid, the Chevrolet Volt?

Before the Automobile Show, we were more prepared for a long-term research program. We have now drastically bent that curve because of the nerve it touched with the American public. The cards and letters are just pouring in. We are overwhelmed by the reaction to the electric vehicle. We see it as a potential game-changer.

Is it a production vehicle yet?

No. We are studying production ASAP, but in the auto business that means three or four years. And we have to work with the battery producers. We can execute and gauge exactly what the vehicle portion will cost, but until I drive some prototypes with experimental batteries in them that do the job, I will not rest easy. As it is, I’m nervous that we might get a battery that gives us the range but not the recharge time. These are the things that preoccupy us.

What do you personally most enjoy driving?

My Alpha Jet [French-German fighter jet], by far the most thrilling, exciting toy any person could own. A close second would be the BMW K1200S Motorcycle; roughly 186 horsepower. It’s an amazing piece of equipment that will provide more on-road pleasure than any automobile known to man.

With cars, I greatly enjoy the top-of-the- line Buick Lucerne with the sports suspension. It’s slick, it’s silent, it’s fast. It’s a car that does everything well. But if I had to pick one car to drive for the rest of my life, it would have to be the Cadillac STS V-Series, the 470 horsepower. It’s a comfortable five-passenger sedan, yet it has performance closer to a Corvette and it’s a spectacular value.

If you could correct one misperception people have about GM, what would it be?

The famous phrase, “They just don’t seem to be capable of producing cars and trucks the American public wants to buy.” If I read that one more time, I’m going to shoot some editor somewhere.


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