Online Extra: GM's Lutz: In It for the Long Haul
Perhaps no single personality in the auto industry conjures as much attention, praise, or controversy as General Motors' venerable new-car czar, Robert "Bob" Lutz. When he joined GM (GM ) in September, 2001, after retiring from Chrysler in 1998, he lighted hope among longtime GM watchers and company lifers that he could bring style and spirit to a carmaker derided for building a parade of prosaic models.
During the past year, with GM losing almost $4 billion and market share sinking, Lutz has been under more pressure than ever to build the kind of hot cars that will restore luster to GM's brands and turn around its dismal financial performance. In some ways, he has succeeded, having pushed the stylish Pontiac Solstice through GM's turgid bureaucracy. And he has proven doubters wrong with the retro-styled Chevrolet HHR wagon, which has sold well despite criticism that it was a knock-off of Chrysler's PT Cruiser. But other cars, like the Pontiac G6 and Buick Lacrosse, are stylistically bland and haven't really hit in the marketplace.
Still, at 73, Vice-Chairman Lutz says he's energized and will fight to bring GM back as long as the company will have him. BusinessWeek Detroit Bureau Chief David Welch recently sat down with Lutz in his office at GM headquarters for a far-reaching interview about the car business, design, and whether GM can come back. Here are edited excerpts of their conversation:
We're hearing car companies brag about their horsepower and fuel economy. With gasoline prices rising and falling as they have, what does the market want?
It has gone bipolar on us. There's a race for horsepower and a race for fuel economy. The fuel-economy part is partly justified and partly economically sound. And it's also, in its own way, as irrational and emotional and economically unsound as the horsepower race. What earthly purpose does a 500-hp car have? You can also say at U.S. fuel prices of around $2 a gallon, is there really a rational reason for a 50 mpg car?
With so many choices and so much competition in today's market, how can GM stand out to consumers who have long ignored its offerings?
The differences in cars are more difficult to measure these days. That's where the power of brands comes in. For GM, the negative belief about all of our brands is that our car are powerful, heavy, and heavy fuel users. But we outperform Toyota (TM ) in many comparisons. The public's perception about what a company does is more important than the actual attributes of the vehicle. Whether hybrids make economic sense is irrelevant.
Speaking of brand image, how do you save Pontiac and Buick?
Pontiac and Buick need sharper focus. We have to stop trying to make them Chevys with a different badge. That means fewer models. On Pontiac, the Solstice is a good example, and it will be followed by others. The brand will be sharply focused in a sporting direction.
So you're no longer trying to get big sales volume from Buick and Pontiac?
We want to grow volume with Chevy, Cadillac, Hummer, and Saturn. Saturn is definitely a growth brand because you don't have to overcome preconceived public notions.
What about Buick?
The real challenge with Buick is that people automatically exclude it from consideration. That it's an old person's car is a notion that's constantly reinforced by the media. Breaking though that is very tough. It's easier to grow a brand like Saturn.
With both the Buick and Pontiac brands, you plan to drop the number of models and reduce the dealer network. That's needed, but does it also make it tougher to change the brand image when you literally have fewer dealers, fewer models, and a smaller presence in the marketplace?
Having fewer dealers isn't necessarily a bad thing. One reason Pontiac has a dilution of image is that GM years ago lost its focus. To make dealers as profitable as possible, Pontiac has had everything every other brand had. We destroyed the GM brand hierarchy. That's why we'll do better with fewer vehicles that are focused.
I still see that happening. Pontiac is supposed to be the sporty division, but Chevrolet has the Corvette and seven SS cars. Pontiac only has Solstice and GTO.
It's a different kind of performance. Chevy is more of a traditional American muscle car. You can get a Solstice with some engine upgrades that [will make it similar] to a Corvette.
I see the emerging strategy for these brands. But it seems like it could take more time that you've got.
You can only fix a brand over a long period of time. The other thing that can break though negativism about a brand is design. It's the most important frontier.
You've been closely involved with engineering and design for 40 years. Do you finally have the technology to make cars that look just like the concept cars at auto shows?
A concept car is like taking a digital photo and putting it though PhotoShop. Many concept cars don't have fuel tanks or they have insufficient leg room. You're not constrained by manufacturing requirements or safety standards. It's like the pin-up girls who were drawn with impossibly long legs.
But the industry is getting better at it.
Design is getting better. That's why it's tougher to get leadership.
Vice-Chairman and CFO John Devine decided he has had enough and he will leave GM in a year. Your contract comes up in September. Are you going to stick around long enough to see GM through the crisis?
I hope so. This is the best time to be a product-oriented guy, when a company needs dramatic vehicles. I'll be 74 in February. Who knows how long I'll stay as active and as healthy as I am.
Behind my back, maybe people say, "The poor old guy is slowing down." Or the board may decide I'm not the right guy. Before you got here, I just came out of a meeting with [Chairman and CEO] Rick Wagoner discussing my goals that must be met by December, 2006.
Are you guys going to get out of this mess?
I'm totally confident we'll do it. Remember how there were obituaries written about Chrysler in '88 and '89 and back in '79. The Economist published a picture of a grave with Chrysler on it, saying "Rest in Peace." We have a very solid turnaround plan which is right on schedule.
Edited by Patricia O'Connell