Get this: it wasn't last week. It was the week before. GM's Veep of Global Badge Engineering made this comment in an interview with Just-auto [sub] on the 23rd of July at the London Auto Show [sorry we missed it]. Given the $15.5b hole that opened-up in GM's second quarter financial results on the following Friday, I guess you could say Maximum Bob's remarks constitute pre-cataclysmic (post-modern?) irony. Anyway, the winner of TTAC's first annual Bob Lutz Award offered the usual grist for our collective mill. "The US press is full of pontifical analysts on television [Huntley Brinkley?] saying that the real problem with General Motors is that they are just not producing the vehicles that the American public wants. That's a complete fiction. We are producing the vehicles that the American public wants, we just can't produce enough of them because of the sudden swing in demand where all of a sudden everyone wants small passenger cars and a year ago everybody wanted big V8 trucks. We can't turn on a dime like that, but we'll get past that and our future product programmes are all in the pipeline and continue unabated." So, will The Big 2.8 make it? "We have a rough spot to get through in terms of liquidity…"
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Its a good thing that when times were good, GM had the foresight to prepare for the INEVITABLE shifts and downturns in the market. Uh, wait…
It seems that Maximum Bob is vying for a lifetime “Lutz” award. “…everybody wanted V8 trucks…” is simply priceless. So that’s why, for the last seven years, these same trucks were “sold” with a pile of cash on the hood. Did anyone at GM ever look at *how* these V8 trucks were being used? And *how* vulnerable they might be when fuel prices increased?
In 1974, when no one had seen the rapid change in the auto market, a reasonable person might have said “…all of a sudden everyone wants small passenger cars…” That was unprecedented, although lightweight, higher mileage cars had been gaining market share even in 1974.
“The US press is full of pontifical analysts on television saying that the real problem with General Motors is that they are just not producing the vehicles that the American public wants. That’s a complete fiction. We are producing the vehicles that the American public wants, we just can’t produce enough of them because of the sudden swing in demand where all of a sudden everyone wants small passenger cars and a year ago everybody wanted big V8 trucks.”
Does he mean that because GM can’t produce Malibus and Cobalts fast enough people are “settling” for Camrys and Civics?
“The US press is full of pontifical analysts on television saying that the real problem with General Motors is that they are just not producing the vehicles that the American public wants. That’s a complete fiction. We are producing the vehicles that the American public wants, we just can’t produce enough of them because of the sudden swing in demand where all of a sudden everyone wants small passenger cars and a year ago everybody wanted big V8 trucks. We can’t turn on a dime like that, but we’ll get past that and our future product programmes are all in the pipeline and continue unabated.”
It’s nice of Bob to help make the point that GM isn’t producing the cars people want.
The real deal: they always knew this market transformation might happen. But in the GM system, it’s not possible to get a budget approved to develop products for situations that MIGHT happen. It’s hard enough to get funding approved for virtually certain market scenarios.
My take on this system:
http://www.truedelta.com/execsum.php
How many people skimp on life and even health insurance (or own none at all) because their budgets are tight? You know you have to pay the mortgage. You only might get sick or die. It’s like that.
I try hard to take the General’s side in a lot of these discussions, but Lutz makes it so damned difficult. I’m sorry, but the Cobalt and Aveo simply are not what “the American public wants.” We want Fits, Civics and Priuses, but Honda and Toyota are having the same issues as GM with meeting supply.
The reason Cobalts and Aveos sell is that there are no more Civics and Priuses to be had. If Toyota and Honda can deal with changing demand and still be very profitable, it says that the underlying issue is not demand shift.
The underlying problem is that GM is fundamentally unable to compete given its current organization. If Bob and Rick were to face THAT reality, I might buy their stock.
I don’t think is actually true that Chevy can’t produce enough of the cars people want as they abandoned the small car market decades ago with also-ran entries. Year over year SUV sales have been dropping for the past 3 years (since 2004/2005 heydays) – the writing was on the cave wall but they didn’t do anything about it.
Lutz says such funny things – does he think them through?
“We are producing the vehicles that the American public wants, we just can’t produce enough of them because of the sudden swing in demand…”
Sudden swing in demand? What happened, did rich people begin caring about the price of gas?
There was no sudden swing in demand – there’s been two decades of GM management being wilfully oblivious to demand, that’s something else entirely!
I am still waiting for Wagoner to get canned.
But really, this symbolizes everything that is wrong with GM. The reason they are in so deep shit is because they were too stubborn and unwilling to give up the SUV. The drop for SUV demand is nothing that happened overnight, SUV demand has been dropping steadily since late 2005. However, instead of realizing this market shift, and prepping for this by ramping up their small car production and putting the trucks on the back burner, they just decided to cram the trucks and SUVs even harder down our throats.
I remember that around late 2005/early2006, GM was busy cramming the trucks and SUVs down our throats while we all ran out to buy Priuses. I remember the commercials where they paraded the fact that they offered the most trucks and SUVs of any automaker, and where they talked about how they can help “to get you out of your car and into a SUV”. My favorite though was the HUMMER ad which showed a mom dropping her third grader off for the first day of school, and all of the kids thought that he was so cool because his mom dropped him off in a Hummer H2. That really PISSED me off, as it showed just how relentless The General was going to be to keep SUVS “cool”, and I, of course, predicted that it was going to turn out bad if they kept up this attitude even as SUV sales fell. Boy, could I have been more right?
But really, they had this coming since 2000, when Red-Ink Rick announced that GM will ramp up production of trucks and SUVs while putting cars on the back burner. So, he essentially made GM into a truck company. And well, we all know what every one of TTAC’s best and brightest have said about GM putting all of their eggs in one basket……
Bob Lutz and the Bob Lutz Award…from his cold, dead hands.
The market didn’t turn on a dime!
If it did, Toyota would have never had reason to build the second-gen Prius. People saw the current market coming for years. There was never a question as to IF gas prices were going to go up, it was just a matter of WHEN.
And since when was there NOT a market for decent compact and midsize cars?
If I’m the guy running the company who gets a $14M bonus (not thinking of anyone in particular, Mr. Wagoner) I would feel a need to justify my compensation by occasionally engaging in some strategic analysis regarding the long-term direction of the market in which I sell my product. At no extra charge, I would also try to think up some ways that those long-term market changes might be anticipated so they don’t wreck the company.
Apparently, GM’s $14M didn’t cover that. At GM, $14M buys a CEO who only thinks to end of the next quarter. For a CEO who thinks five years ahead, well, that would cost extra.
Dear MR. Lutz, one of the dense ones. The reason Toyota and Honda are doing about 2000X better than your company is that they hedged their bets. Yes they built trucks and SUV’s. but they never slowed down or stopped the refreshning and updating of their cars including their smallest little profit jobs. Further, they took the ready to go technology of the hy/brids and built them at a time when Hummers were putting the finishing touches on their new quonset hut showrooms. Yes the Japapese played all sides of the car game with equal dexterity, GM put all and I mean all of their eggs in one very large 5-6000 pound basket. If they survive this, it will be the luckiest and biggest caper pulled off in modern industrial history. Many companies went bankrupt for being far less poorly run than GM. The Railroads, Bethlehem Steel, Airlines, etc. Why does it seem so weird and unthinkable that the worst managed company in America can hang on and survive this when others who were only poorly managed by varying degrees are now in History books?
@cicero: +1
That strategy stuff is hard
If it wasn’t so tragic (people getting ‘escorted out” of GM facilities), suppliers going belly-up, etc, it would be comical.
How much has the world changed, Bob, since you were being driven around in a golf cart at the Eyes on Design event in June?
Of course GM knew that SUV and truck sales were tapering off. However, it was too expensive to invest in completely new designs. Cheaper to freshen up the stuff they have, and -when necessary- give discounts and rebates. In the short term this was the more profitable route.
They stuck with the big vehicle route because it doesn’t cost much more to build an SUV or a truck than it does to build a Colbalt – labor costs and most parts are essentially the same; the difference is only the cost of more iron for the engine block and the body, basically. But the profit margins are much greater!
Nothing new here – back in 1987 I tried to buy a Chevy Nova. It was a Toyota clone that year, but I figured that most people would buy the ‘real’ Toyota, and that GM would be willing to deal.
The salesman refused to talk to me about one. He wanted to give me a great deal on some big Pontiac. He explained, “Son, there ain’t no room to move on the price on them little cars”
Nothing has changed in 21 years.
What happens to the employee’s pensions now that Lutz admits they’ve run out of money? Will GM’s creditors pull the plug after such a public admission? Will they make it at least to the centenary?
GM can’t turn on a dime because they don’t have any left!
I don’t know what he’s smoking
I don’t know anyone who wants a product made by GM.
Not a single human being.
When Wagoner, Lutz, Henderson, et al spout off, people with some sense of reality shout ‘bull shit’. But imagine these guys around a conference table. Other then Lutz, who sadly seems to be senile, I just can’t believe anyone else actually believes it. It must be very uncomfortable to live a lie every day. Other than Wagoner, who I’m convinced is a thief and con man, surely at least some of the others must feel some guilt participating in and enabling the ongoing destruction of so many lives.
Isn’t ‘not building the cars America wants’ and ‘not building enough of the cars America wants and too many of the cars America doesn’t want’ basically the same thing?
Maybe they can get that guy and that elephant from that old Peugeot ad to panel beat a couple thousand Hummers into Aveos…
mel23 :
Other then Lutz, who sadly seems to be senile,
Amazing the things people will say. You can criticize his actions as an executive all you want, but calling the guy “senile” is just silly.
Have you ever had a conversation with Lutz? I have. He’s lucid, stays on point and doesn’t appear to have any memory problems. As a matter of fact, at this year’s NAIAS he remembered (or so he said) a letter my son sent to him at Chrysler 14 years ago.
Senile? Hardly.
LOL, Lutz and his “boys” are laughing all the way to the bank!
The Federal Government will not allow GM fail!
So all this doom and gloom is nothing more than a ruse for getting a full Feds bailout. While Lutz and the “boys” still get $100 million+ for manipulating the Feds to save GM.
“We can’t turn on a dime like that,”
No kidding! I’ve seen more responsive supertankers.
“Amazing the things people will say. You can criticize his actions as an executive all you want, but calling the guy “senile” is just silly.
Have you ever had a conversation with Lutz? I have. He’s lucid, stays on point and doesn’t appear to have any memory problems. As a matter of fact, at this year’s NAIAS he remembered (or so he said) a letter my son sent to him at Chrysler 14 years ago.
Senile? Hardly.”
Well technically senile just means old, but point taken. However, you have just damned him with faint praise since it appears he is merely incompetent not afflicted.
With his ability to put so much spin on a downward spiralling market this guy would make a good running mate for McCain/Obama.
Hmmm…1972 gas crisis, 1979 gas crisis, 2008 gas crisis.
Anyone see a pattern here?
If GM, et al. couldn’t see this “reality” coming with a 30+ year lead time they deserve whatever they get.
Again, we can talk all day about GM’s lack of strategy, but the problem’s bigger than that. The company is choking on its own bile. It’s culture doesn’t foster building world class products. It’s a company that lives quarter to quarter, even if it means chewing its left leg off to maximize stock price.
They have no courageous leaders.
# Michael Karesh :
August 4th, 2008 at 10:24 am
The real deal: they always knew this market transformation might happen. But in the GM system, it’s not possible to get a budget approved to develop products for situations that MIGHT happen. It’s hard enough to get funding approved for virtually certain market scenarios.
How many people skimp on life and even health insurance (or own none at all) because their budgets are tight? You know you have to pay the mortgage. You only might get sick or die. It’s like that.
— Of course, they could have done a LOT of R&D for that $15 billion in losses…—