A decade ago General Motors’ products languished at or near the bottom of most of their respective segments, in terms of overall excellence. In particular, they lacked the design harmony, attention to detail, and premium attributes that were increasingly defining many competitors.
That was the situation Bob Lutz encountered in 2001 when he arrived at GM as Vice Chairman for Product Development. The company’s prior executive leadership came from a consumer-goods background and imagined that automotive products could be developed in the same way as $3 tubes of toothpaste.
“Product development was highly proceduralized,” recalled Lutz. “It was all folded in organizationally with 'brand management,' by John Smale, formerly of Procter & Gamble. The belief was that you could use the principles of the consumer products business in the automobile business, which has been tried before and it has been proven that it simply does not work.”
Before retiring from GM on May 1, Lutz spoke with AEI about what he believes are his contributions to the product-development (PD) process, and the hurdles he faced in achieving them.
The myths of speed and low cost
A significant problem for PD at that time was a mistaken focus on slashing the development time of new models, Lutz asserted.
“You will recall that there was a great race to develop a car as quickly as possible,” he said. Toyota and other Japanese OEMs were reportedly pioneering ever-faster ways of churning out new models, an approach that was thought to leave other automakers at a competitive disadvantage.
“We now know it didn’t work for Toyota either,” Lutz observed wryly.
It was this emphasis on speed, according to Lutz, that led to the design, finish, and craftsmanship challenges suffered by GM products of the era. That was because the Vehicle Line Executive had absolute authority over every aspect of a model’s development to ensure it could be kept on schedule.
The situation meant that VLEs rushed out products whose designs were not supported by GM’s own design executives.
“Wayne Cherry [Vice President of Design] did not have final say over what could go and what could not go,” Lutz discovered. “Products went out that had been rejected by the design director,” as long as they met other targets.
“If they had a design that was OK, but not great, but it [the program] was on time, VLEs were very reluctant to wait four months for a great design,” he said.
Lutz’s first move at GM was to return design authority to the designers. He told the engineers: “When we have a winning design for the car, that’s when the program will be turned over to you.”
But if haste was hindering GM's ability to execute compelling exterior design, an obsession with low cost was decimating the quality and appeal of the company’s interiors—perhaps the primary area in which customer satisfaction is won or lost.
“Our interiors were uniformly horrible,” Lutz groused. “They had all that disgusting gray plastic.”
This was the result of a cost-control system operating with the wrong priorities. According to Lutz, the problem was that GM demanded rock-bottom costs and held VLEs to meeting them. But when GM Powertrain would raise its price for the engine and transmission, or outside suppliers raised prices, the VLEs reacted by targeting the interior for corresponding cost cuts.
“We had cost targets and some material cost targets that in some cases were not realistic,” said Lutz. Nevertheless, “making the cost target was the most important factor in reviewing their [VLEs] performance,” he said.
In place of that system, Lutz decreed that GM would benchmark the best examples of interiors in each product segment, including full cost analysis. In some cases, he made product planners pay attention to vehicles far outside the traditional competitive set—comparing the high-quality cabin appointments of a VW Jetta, for example, to those of Cadillac.
Lutz's new metrics were then put into practice as the basis for budgeting for interiors in future products.
GM's dysfunctional PD apparatus was churning out undesirable products, most infamously the Pontiac Aztek. In concept the Aztek predicted the rise of the midsized crossover SUV. It also garnered positive reaction in GM's consumer clinics. But it failed in the showroom and became the media's poster child for everything that was wrong with GM.
According to Lutz, Aztek and other vehicles made it to production because of GM’s secretive consumer-clinic process, which let VLEs hold the results of the clinics confidential.
Lutz was aghast when he saw the forecasts for planned products. “Every single vehicle we had in the pipeline at that time was destined to fail,” he said.
Canceling most of them, Lutz froze others to make 11th-hour improvements. After axing a planned seven-passenger Saturn Vue—“It looked like a Vue with a backpack,” he said— he ordered revisions to the Cadillac STS and the Buick LaCrosse.
The planned STS “would have been absolutely sales-proof,” Lutz quipped. And the resulting production LaCrosse “wasn’t a big hit, but at least it wasn’t a car you had to be ashamed of,” which would have been the case with the original iteration, he said.
Amidst all the slashing and burning, Lutz overlooked the GMC Envoy XUV, the midsized SUV with a retractable roof above the cargo area. Killing that variant would have undercut the planned production volume at the Trailblazer/Envoy assembly plant, Lutz was told.
Furthermore, market research showed the company could expect to sell 110,000 XUVs annually, staffers told him. Ninety thousand, minimum.
Lutz relented. GM sold just 11,000 XUVs before pulling the plug.
The next challenge for PD
“When you first come into GM you are intimidated by all the smart people here,” Lutz conceded. But since his return to the company, GM’s products have raked in awards and become legitimate competitive benchmarks in their own right.
With Lutz’s philosophy of investing in superior product quality, GM's cost of building cars has gone up by $1,000, but the average retail transaction price has risen $4,000, he said.
Today the impressive 2010 LaCrosse embodies his demand that GM build the best cars that it can, said Lutz. He argues that its style, comfort, and safety attributes demonstrate the company’s ability to build world-class products.
The next challenge for his successors is to whittle away the vehicle curb weight that has increased along the way.
“As we went for product excellence, reducing mass was our lowest priority,” he said. “On the next generation we are going to maintain the excellence but get a lot of mass out.” The company aims to drop its average vehicle curb weights as much as two inertia weight classes.
As ever, Lutz is aware of the changing benchmarks. “Look at the Hyundai Sonata for example. That thing is a very nice car and is massively lighter than a Malibu.”