My Take on Bob Lutz

[mgescuro]

My Take on Bob Lutz
…Another Commentary by mgescuro…

Bob Lutz: Author, Marine, Businessman?
Bob Lutz: GM’s Savior?
Bob Lutz: Car Czar?
Bob Lutz: Man of the Year?
Bob Lutz: Complete Phony?

Depending on who you ask, it could be any one of those, and then some.
So what is so important about the Head of Global Product Development at General Motors?
In my eyes, Bob Lutz is responsible for ONE thing and ONE thing only at GM – Reworking GM’s processes for product development, design, and engineering.

When Mr. Lutz first arrived at GM, the entire product development process was in shambles. GM had forgotten how to design and build proper cars. Cars were a complete sea of grey and cheap plastics, incapable of competing with far better foreign competition. GM’s product design was a conglomeration of fiefdoms – in Europe, in Asia, and in the Americas. Neither fiefdom knew what was going on in the other fiefdom, and thusly, you had repeated design and engineering efforts. One of the best examples of that was the Epsilon platform.

First order of business for Mr. Lutz... Eliminate the fiefdoms. This resulted in a complete restructuring. Axing a number of department heads, flattening structures, eliminating and consolidating businesses, etc. In essence, Lutz instigated a cultural upheaval and revolution at GM. Where GM had a traditional and sequential development processs (Design => Engineering => Procurement => Manufacturing => Sales) he began transforming GM into a more efficient Platform organization process. Where as GM had compartmentalized sections for product development, with one section being unable to start until the other section had finished or revised, a platform organization is more efficient with all divisions working at once. Now GM’s product development division is organized by mid-sized platforms (Europe), sub-compact/Compact cars (Daewoo), full-sized (Holden/US), trucks/SUV (US). It utilizes the strengths of each region, while allowing for greater efficiencies. Lutz also allowed competition for “Best Designs,” as it creates friendly competition and pride in ones work. All of which was lacking at GM.

In my view, that is Lutz’s single most important contribution to GM. The complete overhaul of product development should serve GM well for decades to come

But has Lutz been able to adhere to his own “Immutable Laws of Business?” Let’s take a look.

Law 1: The Customer Isn’t Always Right
I believe GM has managed to follow this.
Customer: We need more fuel efficient cars.
Media: We need more fuel efficient cars.
GM: Here – Have the GMT-900’s!!
Media: *Rant* *Rant* *Bitch*
Customer: Oooo… 2 mpg more, nicer interior…. Here’s my deposit.
Be a little courageous…. Be a little daring…. Build a competent product, and the customers will come.

Law 2: The Primary Purpose of Business is Not to Make Money
Best said by Lutz in his book, “Guts.”
“Great profits are products only one way – by great products. And great products derive from enthusiasm turned loose…”
I think GM is still in the primary stages of this. But we’ll see.

Law 3: When Everybody Else is Doing It, Don’t!
Well, GM avoided doing hybrids, based on their experience with the EV1.
Fad avoidance? Perhaps.
Lutz says to “keep focus” and “Let your brand or product stand for something specific.”
Again, GM is still in the primary stages of this.
Also, he sates, “Don’t fall prey to ‘the dilution solution’...” Unfortunately, we still have bad and sorta-bad rebadges: Acadia/Outlook, Equinox/Torrent, Cobalt/G5. So there’s still work to do.

Law 4: Too Much Quality Can Ruin You
Trying to get to 0 errors will kill you. But in today’s market, customers expect and demand both exhilarating performance and quality.
GM’s focus on the interior has grown by leaps and bounds. GM’s overall quality reputation is matching or exceeding those of most Japanese benchmarks. So through the customer’s eyes, GM is finally gaining some ground on the “quality” front.
But again, there are still a considerable number of GM cars that have fallen behind the curve, and require a major refresh, earlier than schedule.

Law 5: Financial Controls Are Bad!
Being a little smarter with development, can spread the costs throughout entire divisions and platforms. Instead of cutting and slicing costs by 10-20-30%, cutting or consolidating redundant proactices can realize the same or greater financial savings, keeping development running at 100%.
Well, seeing as GM is going to cut approximately $8-9B MORE in 2007, it is no doubt this is exactly what GM is doing. To my knowledge, product development is not slowing down. In fact, they are gaining more funding. What they do remains to be seen.

Law 6: Disruptive People Are an Asset
Being able to stand up in a corporate setting and have a dissenting voice takes a lot of courage. But doing so can show an entirely different path to success. Allowing the designers to stand up and say something is “wrong.” Or allowing the factory worker to stop the line and point out something is what GM needs to improve. I believe a lot of this was set in motion, but this is a major cultural change that will take years to disseminate through the corporation.

Law 7: Teamwork Isn’t Always Good
Badly managed teams do not work effectively and don’t get work done. To make it work you need strong leadership and strong vision.
With Lutz as head of Product development, he is providing the vision and the leadership to the platform department heads. End of story. One vision... One voice... And you get all cylinders moving in harmony and everyone moves in the right direction.

Concluding Thoughts
Taking a look at what Mr. Lutz has put into place, it looks like he ascribes to his own “Laws of Business.” And for the most part, I tend to agree with the changes he has put into place.
Whether or not this continues to be the case once he retires from GM remains to be seen. Whether it is enough for GM to sustain its ability to remain a going concern? I cannot answer that definitively. But maintaining its present course is necessary. However, I do believe it needs to go much faster than it is currently progressing.

Bob Lutz has been able to turn GM's product development process into a leaner machine, able to keep up with most of the foregin competition. That has been his primary responsibility. The new cars that are appearing now are made under the new regime. The changes have come about 3 years too late. But they are coming.

If Bob Lutz is remembered for one thing, it should be for his rebuilding of GM's design and product development. The cars he has come up with is a matter of taste. But I for one am glad of the processes and changes Lutz has put into place at GM. These are long term solutions to GM's continued ineptitude. And it's only a matter of time before solid product becomes commonplace at GM -- with or without Lutz.

[Geotpf]

Originally Posted by mgescuro

First order of business for Mr. Lutz... Eliminate the fiefdoms. This resulted in a complete restructuring. Axing a number of department heads, flattening structures, eliminating and consolidating businesses, etc. In essence, Lutz instigated a cultural upheaval and revolution at GM. Where GM had a traditional and sequential development processs (Design => Engineering => Procurement => Manufacturing => Sales) he began transforming GM into a more efficient Platform organization process. Where as GM had compartmentalized sections for product development, with one section being unable to start until the other section had finished or revised, a platform organization is more efficient with all divisions working at once. Now GM’s product development division is organized by mid-sized platforms (Europe), sub-compact/Compact cars (Daewoo), full-sized (Holden/US), trucks/SUV (US). It utilizes the strengths of each region, while allowing for greater efficiencies. Lutz also allowed competition for “Best Designs,” as it creates friendly competition and pride in ones work. All of which was lacking at GM.

In my view, that is Lutz’s single most important contribution to GM. The complete overhaul of product development should serve GM well for decades to come

Agreed. GM, like many international corporations, ended up with different segments in different countries not talking to each other. Making them talk to each other more is a good thing. However, let's look at those "laws"...

But has Lutz been able to adhere to his own “Immutable Laws of Business?” Let’s take a look.

Law 1: The Customer Isn’t Always Right
I believe GM has managed to follow this.
Customer: We need more fuel efficient cars.
Media: We need more fuel efficient cars.
GM: Here – Have the GMT-900’s!!
Media: *Rant* *Rant* *Bitch*
Customer: Oooo… 2 mpg more, nicer interior…. Here’s my deposit.
Be a little courageous…. Be a little daring…. Build a competent product, and the customers will come.

The GMT-900 is not a success. It's not a failure, either-it did the best it could, considering the marketplace is moving away from large SUVs. That is, the release of the updated SUVs early was the proper move-GM spent a lot of money on the development, and the market for such large SUVs is shrinking every day, so getting them to the market as fast as possible was the correct move to make, but was not really a success. That is, GM grabbed a larger segment of a shrinking market, killing Ford and to a less extent DCX in the process, but is akin to being the best buggy whip manufacturer-not a long term solution.

YTD Sales of GMT-900 vehicles, not counting the just released pickups (note, these are calander year sales, and therefore include some GMT-800s):

Name, 11-month 2006 sales, 11-month 2005 sales, percent change

Escalade 34,228 27,281 +25.5%
Escalade ESV 14,007 12,323 +13.7%
Escalade EST 5,928 7,209 -17.8%
Yukon 64,401 66,445 -3.1%
Yukon XL 40,361 47,627 -15.3%
Suburban 69,087 79,045 -12.6%
Tahoe 146,230 137,399 +6.4%
Avalanche 50,330 58,327 -13.7%
Total for the eight vehicles: 424,542 435,656 -2.6%

That ain't no success. At best, it's not a failure.

And, yes, GM still needs to make more fuel efficient cars. They've handed that market to Toyota and Honda on a silver platter-and it's a big market, one which is actually growing.

Law 2: The Primary Purpose of Business is Not to Make Money

Best said by Lutz in his book, “Guts.”
“Great profits are products only one way – by great products. And great products derive from enthusiasm turned loose…”
I think GM is still in the primary stages of this. But we’ll see.

Can't argue with this.

Law 3: When Everybody Else is Doing It, Don’t!

Well, GM avoided doing hybrids, based on their experience with the EV1.
Fad avoidance? Perhaps.
Lutz says to “keep focus” and “Let your brand or product stand for something specific.”
Again, GM is still in the primary stages of this.
Also, he sates, “Don’t fall prey to ‘the dilution solution’...” Unfortunately, we still have bad and sorta-bad rebadges: Acadia/Outlook, Equinox/Torrent, Cobalt/G5. So there’s still work to do.

Right now, GM's brand stands for "the huge, bloated company that builds gigantic trucks and shiatty cars that get lousy mileage". Good if you want a huge truck or SUV; bad if you want anything else. And making pathetic hybrids like the Saturn Aura Greenline hybrid (which only gets 28/35 MPG) just emphasizes this, and does the exact opposite of what you are saying-GM is jumping on the hybrid bandwagon, but in a way that indicates to the world they suck at it. For comparrison, the standard Accord with a 4 cylinder and a stick gets 26/34. With an auto, 24/34. Thier weird "muscle hybrid", the fastest Accord made (with a V6 plus an electric engine), gets 28/35-exactly the same as the slow Aura-and it's a sales failure. The Camry with a 4 and a stick gets 24/34; with an auto, 24/33, and the hybrid, 40/38-and the hybrid is faster than the 4 (but slower than the V6). And of course the Prius gets 60/51. (All are midsized cars; the Civic and Insight hybrids are smaller, of course.)

Law 4: Too Much Quality Can Ruin You

Trying to get to 0 errors will kill you. But in today’s market, customers expect and demand both exhilarating performance and quality.
GM’s focus on the interior has grown by leaps and bounds. GM’s overall quality reputation is matching or exceeding those of most Japanese benchmarks. So through the customer’s eyes, GM is finally gaining some ground on the “quality” front.
But again, there are still a considerable number of GM cars that have fallen behind the curve, and require a major refresh, earlier than schedule.

No it's not. GM's quality reputation is still behind Toyota and Honda, because thier quality (read reliability) is, in actual fact, still behind Toyota and Honda, with the possible exceptions of Buick and Cadillac-both which clearly trail Lexus in terms of the reliability of luxury cars. It's also completely inconsistant-if you buy a Toyota or Honda product, you know you'll get a reliabile vehicle. If you buy a GM product, you may get something reliabile-or may get a CSV.

Law 5: Financial Controls Are Bad!

Being a little smarter with development, can spread the costs throughout entire divisions and platforms. Instead of cutting and slicing costs by 10-20-30%, cutting or consolidating redundant proactices can realize the same or greater financial savings, keeping development running at 100%.
Well, seeing as GM is going to cut approximately $8-9B MORE in 2007, it is no doubt this is exactly what GM is doing. To my knowledge, product development is not slowing down. In fact, they are gaining more funding. What they do remains to be seen.

Cutting costs for the sake of cutting costs cheapens the product. One has to be smart about it-cutting costs without changing the end quality of the vehicle. This is what Toyota manages to do. Whether or not these cuts are trimming the fat or muscle is unclear.

Law 6: Disruptive People Are an Asset

Being able to stand up in a corporate setting and have a dissenting voice takes a lot of courage. But doing so can show an entirely different path to success. Allowing the designers to stand up and say something is “wrong.” Or allowing the factory worker to stop the line and point out something is what GM needs to improve. I believe a lot of this was set in motion, but this is a major cultural change that will take years to disseminate through the corporation.

They can be, but they can also be a hindrance. The most disruptive person for GM within the last year was Kirk Kirkorian. Are you a fan of his?

Law 7: Teamwork Isn’t Always Good

Badly managed teams do not work effectively and don’t get work done. To make it work you need strong leadership and strong vision.
With Lutz as head of Product development, he is providing the vision and the leadership to the platform department heads. End of story. One vision... One voice... And you get all cylinders moving in harmony and everyone moves in the right direction.

Well, duh.

Concluding Thoughts

Taking a look at what Mr. Lutz has put into place, it looks like he ascribes to his own “Laws of Business.” And for the most part, I tend to agree with the changes he has put into place.
Whether or not this continues to be the case once he retires from GM remains to be seen. Whether it is enough for GM to sustain its ability to remain a going concern? I cannot answer that definitively. But maintaining its present course is necessary. However, I do believe it needs to go much faster than it is currently progressing.

Bob Lutz has been able to turn GM's product development process into a leaner machine, able to keep up with most of the foregin competition. That has been his primary responsibility. The new cars that are appearing now are made under the new regime. The changes have come about 3 years too late. But they are coming.

If Bob Lutz is remembered for one thing, it should be for his rebuilding of GM's design and product development. The cars he has come up with is a matter of taste. But I for one am glad of the processes and changes Lutz has put into place at GM. These are long term solutions to GM's continued ineptitude. And it's only a matter of time before solid product becomes commonplace at GM -- with or without Lutz.

He may have improved some things, but clearly GM has a long way to go. Maybe he did the best possible, and without somebody like him, GM would be further down the spiral. But he hasn't stopped the bleeding, that is for sure.

[Mikkoo]

A really interesting read. The revolutionary changes at GM are just now starting to take effect. With each new product release brings renewed optimism that GM can deliver 1st class vehicles.

[A Bum In A Bus]

Very good read, GM is headed down the right path and Lutz is the person to chart that journey, GM however has not always taken advantge of the human resources available within it's walls. GM should create an enviornment where ideas from the lowest levels of employment can more easily find their way through the system, sometimes the best idea will come from the person whose tightening the bolt.

Employees being allowed to use their creative brains will play a major part in GM's revival. In the past, Constraints dictated from the top down have prevented many a good, and sometimes great idea from getting past the department door. Infighting within departments,.... small department heads not wanting to be outshown by their underlings and other petty on-goings have contributed to untold problems. Contrary to past popular GM belief, the boss is not always correct and sometimes the smallest most insignificant employee may have the biggest idea.....use your resources.

Some advice to GM, hire the best designers, the best engineers, the best workers, and let them use their god given talents to make the company better. When employees have the freedom to travel new paths unabated, you get innovation, but when employees are corralled and herded like cattle to a predetermined destination you get mediocrity. Always strive to be first, second place never makes the front page.....but if you can't be first, be the best damn second on the planet.





A

[01cavalier]

Great write-up. I agree that the full results have yet to be seen.

GM does have a long history of holding back their engineers, I also have known someone who left because of it. It's too bad, because there are many innovative ideas that have been worked up that GM threw away. That definitely should never happen and is part of why GM has so much work to do to catch up.

[VCDJ]

The GMT-900 is not a success. It's not a failure, either-it did the best it could, considering the marketplace is moving away from large SUVs. That is, the release of the updated SUVs early was the proper move-GM spent a lot of money on the development, and the market for such large SUVs is shrinking every day, so getting them to the market as fast as possible was the correct move to make, but was not really a success. That is, GM grabbed a larger segment of a shrinking market, killing Ford and to a less extent DCX in the process, but is akin to being the best buggy whip manufacturer-not a long term solution.

YTD Sales of GMT-900 vehicles, not counting the just released pickups (note, these are calander year sales, and therefore include some GMT-800s):

Not a failure, just wait until price of fuel hit $3. GM is already cuting down production of 900, and they are brand new. It is a complete failure. Lambadas will be very sucesful.

[Angry Dad]

Originally Posted by VCDJ

Not a failure, just wait until price of fuel hit $3. GM is already cuting down production of 900, and they are brand new. It is a complete failure. Lambadas will be very sucesful.[/font]
[F New Roman][/font]

900 a failure?

Hardly, it owns the market. It is the benchmark. And though nothing is certain in today's world, fuel prices are predicted to continue a downward trend.

Failure, Armada, Sequoia and Navigator, those are the failures in that segment.

[69Firebird400]

I really think that GM would be in the tank if it weren't for Bob Lutz's intervention. At least we can say that the products coming out now are something to be proud of, for the most part.

Regarding the GMT-900s, I agree that it was a wise move to push the launch forward. I think you can call them a success, though - because although absolute sales numbers are somewhat down, they don't need as much rebate money as the GMT-800s did, so they are probably realizing more revenue from fewer trucks now. The question is, though, do the 900s cost more to build than the 800s did, then? If so, some of that transaction price advantage may be mitigated.

[MOOSTOPHA]

i agree that we have some of the best products we've ever had. at least in my twelve years in the car business. we just don't have that traffic driving, gotta have type of vehicle that drives people to my lot. my store is having the worst year we've had in 10 years. the new trucks are awesome!! but......... you know what people are saying? "wow!! great looking truck!! what are the rebates??" i say none. " well, i'll wait until they put some incentives on them. you know they will................." the customer leaves. what we are going through is a weening process that is going to take years to complete. people are waiting on 0% for 72 on the new 900 tahoes. i'm telling you this from the front lines. i see this stuff on a daily basis. the only thing i know to do is tough it out and be glad that i put some money back when things were good after 9/11.

[eaton53]

435,656

This is failure? Then I guess the Expy, Nav, Sequoia, Armada, etc. are all unmitigated disasters that should be cancelled immediately.

Plus much of the FS SUV is FS pickup. If it held up that release to the point that the Tundra beat the Silvy to market, or delayed the Outlook/Acadia then I would say bad, but that didn't happen.

Now GM is well positioned in some very important segments, but it is imperative that they have a Saturn-like renaissance with Chevy cars.

[yamahr1]

Originally Posted by Geotpf

[/size][/font]
Name, 11-month 2006 sales, 11-month 2005 sales, percent change

Escalade 34,228 27,281 +25.5%
Escalade ESV 14,007 12,323 +13.7%
Escalade EST 5,928 7,209 -17.8%
Yukon 64,401 66,445 -3.1%
Yukon XL 40,361 47,627 -15.3%
Suburban 69,087 79,045 -12.6%
Tahoe 146,230 137,399 +6.4%
Avalanche 50,330 58,327 -13.7%
Total for the eight vehicles: 424,542 435,656 -2.6%

That ain't no success. At best, it's not a failure.

However, I think the average transaction price is way up. You can't compare selling 1 new Tahoe at close to retail to one of last year's with 5 grand or more on the hood. You also have to take into account the effect of high gas prices during that same period. If GMT-900 hadn't come out, we'd be seeing a much larger drop than 2.6% in that very profitable segment for GM. So I disagree, IMO they are a real success.

The GMT-900's were also, in my view, the first of the new wave of GM vehicles that got general recognition to the effect that GM can do many things as well or better than its competitors, even Toyota. In other words, they marked the beginning of a much larger turnaround in GM public and media perception, which is being continued by the new crossovers, and to some extent the Aura. In the months before GMT-900, most of the press was ranting daily about GM losing $10B and heading toward bankruptcy, and about the folly of concentrating on introducing new full-size SUV's and trucks a time of high fuel prices. Then the actual product came out and the entire tone about GM changed to being more like, "Hey, you know what? These things are really well done!" That's huge!!

Many of us are expecting the new Malibu to propel that trend significantly, if it really can provide a credible alternative to the Camry with no excuses--the very heart of the marketplace where GM has been considered a bit weak even by its biggest fans. Time will tell, but one can reasonably expect it will be at least as good as the Aura, which many intelligent people could already prefer to the Camry.

Bob Lutz and Rick Wagoner have awakened the sleeping giant, and I would bet money that inside Toyota's boardrooms there are now three serious concerns: the Koreans, the Chinese, and General Motors!

[eaton53]

what we are going through is a weening process that is going to take years to complete. people are waiting on 0% for 72 on the new 900 tahoes.

I hope they're not dumb enough to do that, because what you're seeing now is the result.

Eventually people will figure out the rebate's not coming.

[Geotpf]

Originally Posted by eaton53

This is failure? Then I guess the Expy, Nav, Sequoia, Armada, etc. are all unmitigated disasters that should be cancelled immediately.

Plus much of the FS SUV is FS pickup. If it held up that release to the point that the Tundra beat the Silvy to market, or delayed the Outlook/Acadia then I would say bad, but that didn't happen.

Now GM is well positioned in some very important segments, but it is imperative that they have a Saturn-like renaissance with Chevy cars.

It is considering that the previous version sold better. Like I said, it's a shrinking market. GM is grabbing a larger share of said shrinking market, but sales are still down. Basically, a full fledged success is impossible in such a market.

[Geotpf]

Originally Posted by eaton53

I hope they're not dumb enough to do that, because what you're seeing now is the result.

Eventually people will figure out the rebate's not coming.

There's already two grand or 3.9% financing on 2007 Tahoes and Suburbans. I'll bet by this time next year, they will be in the five grand/0% range.

http://www.gm.com/automotive/vehicle...eg_incent.html

(The deal seems to be the same in all regions.)

[Pontiacwheels]

By this time next year the hybrid will be out which should help sales immensely. I'm sure there are people sitting on the sidelines waiting for the new model that gets much better mileage.