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From Bloomberg’s irony-free (Saturn Aura, geddit?) article entitled “Car Buyers Spurn GM, Ford as Japan Brands Retain Aura”:
“It is very hard to open minds and get people to consider a domestic vehicle again, no matter how good,” GM Vice Chairman Bob Lutz said. “The product and fuel economy deficit, reliability deficit, styling deficit — all those deficits have been erased. What has yet to be erased and is going to be the biggest challenge of all is erasing the reputational deficit.”
34 Comments on “Quote of the Day: They Shoot Horses Don’t They Edition?...”
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The man couldn’t be more right about the reputational deficit. TTAC may not like Lutz, but even a broken clock is right twice a day.
Yes Bob, believe it or not, it will take at least as long to re-build GM’s rep as it took to loose it – decades.
“reliability deficit erased”? Really? Apparently he hasn’t read this:
http://autos.yahoo.com/consumerreports/article/best_and_worst_used_cars.html
As usual, it’s mostly GM, Ford and Chrysler to avoid.
John
Lutz also proclaimed, in 2003, that GM quality was the equal of anyone else’s quality.
He was wrong then. Why would I believe him now?
Lutz has also implied, in the past, that erasing the reputational deficit was partly the consumer’s responsibility; that the consumer owed it to GM or the nation or whatever, to reconsider GM. That’s an ROTFLOL, for sure.
The reputational deficit gets erased, without any excess noise from Lutz, when I notice that my few remaining GM-loyal neighbors are driving 8 year old Imapalas, trouble-free. That date looks to be at least 8 years away, just like it was in 2003, as the 2007 across the street has already been dragged away on at least one occasion. Funny how that works.
When the MBAs and other assorted bean counters were busy doing the business case analysis for reliability improvements and correcting defects, I wonder if they bothered adding a row to the spreadsheet with an estimated cost for the loss of reputation. Fixing the problems is relatively cheap and easy. Fixing the reputation problem – not so much.
KixStart – I agree with your approach to determining if GM has really caught up – from the day they actually do catch up, it will take 10 years for GM’s reputation to recover. Do they have 10 years?
I thought the whole reason that GM couldn’t sell their vehicles was due to:
– poor fuel economy
– poor reliability
– GM brand styling
Now maximum Bob is saying that’s not true? Its all about reputation? I think Bob needs to have his head examined. GM makes crap cars and has for decades – the reputation issue is a byproduct due to years of GM abusing their customers.
Like the saying goes about GM: made by rednecks for rednecks … so other than rednecks I doubt anyone will ever buy GM.
Whether I look at the data from TD, CR or JDP VDS I see the same thing.
Some GM products score well.
Most GM products score below average.
Many are among the worst in the industry.
The vast majority of Toyota and Honda products are above the industry average.
Ford and Hyundia show far more improvement than GM overall.
Maybe the public isn’t as stupid as Bob thinks?
Maybe it isn’t as dumb as Bob himself?
Some thoughts.
Bunter
Hyundai had a (far more problematic) perception gap, one that they fixed by standing behind their products.
GM tried to fix the perception gap by whining about the perception gap.
I think there’s a lesson to be learned, here.
No, seriously. Hyundai extended warranties, improved product and did everything possible to ensure consumer confidence. GM did nothing but bitch and whine at worst, and go on ad nauseum about a “Whole New GM” at best. Except the whole new GM still offered the same old warranty performance and value pricing nonsense, largely because they weren’t willing to admit there was a problem in the first place.
Credit to Lutz, some of the product is pretty good (as was Hyundai’s), but the confidence was not there.
The one GM product I ever had (a GMC 3/4 ton truck of late ’70s vintage) wasn’t a bad vehicle, other than atrocious gas milage (350 V8, auto) but I have no intentions of considering any Gov. Motors vehicle ever again. It will be Ford or Toyota for a truck, Ford and other “import” for anything else. Sorry GM, you lost me.
I believe that GM can successfully rebirth itself if:
– It changes its corporate mindset. Its easy to blame the crooked union, but hard to punish the 300 VPs paid far too much money.
– It foregoes the short term profit for the long term gain. Focus is on VALUE, not money.
– It actually forms a realistic and obtainable mission statement for its brands.
– It downsizes itself enough to maximize efficiency, yet forgoing the easy out by sending work overseas.
– It identifies and corrects the sins of the past while addresses customer complaints.
– Has the sack enough to stand up to Congress (Frank/Alexander) to get off its back so it can get back to making cars without worrying about 50 constituents in Hoboken who might lose their jobs.
Its like high school all over again and you’ve just had your ass kicked by the Korean kid in front of all your friends. You can win back your reputation but you’ll never get that fight back. You gotta move on.
Unfortunately for GM, they are no longer masters of their own destiny.
It does take decades to rebuild brand trust, but it also requires that competitors do something to violate the trust they have with their customers.
My mother and sister both drive Toyotas (Avalon and Camry respectively). They love them and will buy another Toyota when these need to be replaced.
Sure, they are boring to drive, but they are reliable, comfortable, decent looking enough, and the dealer has treated them well.
No matter how good GM is – happy customers won’t go elsewhere until they are unhappy.
-ted
Maximum Bob still doesn’t get it. Depreciation raises the cost of new domestic cars relative to their competition. On the flip side, used rental cars and lease returns can be a bargain. The other problem the domestic brand cars have is in your face cost cutting in areas like the quality of interior plastic parts. This is a refinement issue, not a reliability issue. Domestics look cheap, but reliability is getting better. GM also does a good job on drivetrain efficiency and fuel economy when compared to other vehicles of similar size.
If he had said this two months ago, would Obama still have been so eager to “buy” GM? What happened to full disclosure before a sale?
Hyundai extended warranties, improved product and did everything possible to ensure consumer confidence. GM did nothing but bitch and whine
GM’s problem: Reputational deficit
GM’s solution:
a> Exhaustive, expensive multi-year effort to upgrade quality and durability of products
b> Expensive rah-rah corporate image marketing campaign next quarter
Which do you think the short-termist mindset GM exec will choose?
The thing about reputations is the long lag time. GM skated for years selling junk to consumers who still believed in their reputation for decent product. Now they’re on the flipside, having to produce decent product for years before people will stop thinking of them as the K-Mart of automobiles.
Amazing… Lutz is put out to pasture and yet he continues to be a quote machine.
I guess he’s the auto-industry equivalent of Charles Barkley: writers continued to go to him even after retirement because they knew they could always get a good quote.
When GM/Chrysler start playing by the (bankruptcy) rules, I’ll look at them again.
Ford is the only American company I’ll look at right now for my wifes next car. Maybe a fusion?
That CR ‘Worst of the Worst’ really says it all. Lutz wants to paint the reliability thing like it is all in the past, but those cars aren’t from 1970.
I have not been burned by my Hondas or Toyotas so why should I jump ship. Seriously why would any company expect a satisfied customer of another company to suddenly switch over and choose their company’s products over their competitions? This attitude simply demonstrates the HUBRIS of Bob Lutz.
If anyone left at GM thinks its a lack of open mindedness when every company and every product faces the problem of how do you capture your competitor’s customers when their already happy with your competition then they deserve their fate. Am I not open minded that I won’t hire a convicted felon or a pedophile? Like the article and others have said. Show me ten years of clean living and maybe the convicted felon or pedophile might get consideration for a job (maybe).
Same for GM show me long term reliability and durability and I might consider your car.
The massive depreciation on US branded cars is an ongoing problem. Compare the resale value of any five year old GM, Ford or Chrysler car or minivan against competing models from Toyota and Honda. The difference is shocking.
“The product and fuel economy deficit, reliability deficit, styling deficit — all those deficits have been erased. What has yet to be erased and is going to be the biggest challenge of all is erasing the reputational deficit.”
Let’s assume for a second that Lutz is right that the reliability and economy deficits have truly been erased, that’s like a student improving from an F to a C average. He’s passing now but he’s still a long way from excellence. You can’t build a great reputation by only matching what the competition are already doing. Just doing the minimum requirement and then calling it good is the definition of mediocrity.
The solution to the reputation problem is simple. GM must over-deliver on the promises consistently over the long run. That’s how Toyota built their reputation for reliability. That’s how Hyundai has rehabilitated their once laughable
reputation. It’s not an easy thing to do, but the concept is very very simple.
I might be a minority of one, but here goes:
I have driven Fords and Chevys my whole life, the vehicle I currently drive is a 1998 Astro conversion van with no problems after 140K miles. It replaced another Astro that had the tranny die at 243K miles.
My wife drives a 2001 Honda Civic. It has 70K on it, is uncomfortable to ride in, is very noisy, had a recent $1000 repair bill, and has a much get up and go on the interstate as a 3 legged elephant. She likes the car, but I will take a gas hog Astro over it any time of the day or night.
While YMMV on these kinds of comparisons, I have the impression from reading and using CR for a long time that they tend to be biased against Detroit iron, and more lenient toward foreign autos in their evaluations.
Even though I will never touch a new US Gov’t/UAW product again, I don’t buy the US cars bad/ foreign cars better argument across the board.
Just bought my first domestic car – ever. A low-miles ’08 Ford Taurus X, we got it for 40% off the original MSRP – depreciation is my friend! I have never been burned by any import – Eurpoean or Japanese – I’ve ever owned, but in the search for a family car at a reasonable price, I was “open minded” (see Bob?) and considered domestics for the first time.
Nothing from GM or Fiatsler was appealing, and my research seemed to indicate that Ford has its act together of late. The T-X is certainly impressive for what it is, and I am shocked by the overall quality, so we bought it over the Highlander and CX-9 (our other choices).
The irony is that we basically “stumbled upon” this car – we never knew it existed, never saw an ad, seems that Ford never really promoted what is a very competitive vehicle in the segment. Weird.
We bought an extended warranty. Just in case.
The bottom line is that when the D3 build better cars, (some) people will (probably) buy them.
What’s missing from Bob’s equation is a misunderstanding of how people shop for cars and why brand reputation is so important.
Most people only buy cars every few years (I think three to six is the average.) Unlike cheaper consumer products, there’s not much opportunity for people to compare competing products side-by-side in daily use.
Couple that with the fact that cars are the 2nd most expensive products most people will ever buy and you get a very risk averse style of buying that is completely rational. After all, the worst possible outcome of an auto buying transaction would be to be stuck with a lemon that needs major repairs and that you can’t sell because you owe more on it than it’s worth.
So the reputation of a product is very critical because just as a person’s reputation tells us how that person is likely to act when we are not watching him, a manufacturer’s reputation tells you how their product is likely to perform after it’s out of warranty.
The factor that Lutz can’t seem to understand is that the risk-averse model of buying also relies on inertia. People embark on one course and will stay on that course (i.e. will buy that brand of vehicle) until some outside factor forces them to choose a different course. And once they get on the different course, inertia tends to keep them on that course, even after the manufacturer has (allegedly) repaired the damage that caused the customer to veer off that course in the first place.
The sad fact for GM and Chrysler is that unless the import brands do something stupid, there’s probably little that the domestics can do to change US buyer’s habits. As long as the import brands keep making vehicles that are as good, as reliable, and as reputable as they are expected to be, those who are inclined towards the domestics are likely to remain that way.
An interesting topic as I find myself out vehicle shopping for the first time in nearly 3 years. I’m selling my 04 Toyota and shopping for a new vehicle, and because of my happy experience, Toyota is once again at the top of my list.
I suppose there are those people who say I owe some kind of duty to my fellow countrymen to at least give the domestics a shot, but my response would be (1) I gave 23 years of my life to the service of this country and I think I’ve earned the right to drive whatever I damn well please and (2) when it comes to dropping 20 large on a major purchase, I’m not inclined to take risks with my money. The domestic is the wild card, the Toyota is the ‘sure thing.’
Until the D3 find a way to break that cycle (either by introducing something so new and innovative that people will be drawn to it in spite of the perceived risk, or by taking advantage of poor product and poor customer service on the part of the import brands) they will continue to lose market share.
I heard his interview on Bloomberg Surveillance the other day. Bob Lutz is clearly a talker and not a listener. It was painful to hear Tom Keanen struggle to insert a word now and then as Bob dominated the show. I thought, wow, Bob is so totally 1960 in his style that its amazing he made it this far.
I agree with the above poster that in a vacuum, Toyota and Honda will continue to gain market share in North America at the expense of the domestics. But, life does not operate in a vacuum and what most people take for granted can change dramatically. Imagine going back in time to 1970 and telling a senior GM executive that in less than 40 years his company would not only be in bankruptcy but would also have lost most of its customers to Japanese and Korean competitors. You would get thrown out of the building, and possibly committed to an asylum!
Basically, the way the American car companies regain dominance in North America is by doing the following. They must create automobiles which excite people by their styling and functionality, while also exceeding the reliability of the imports. Where the Big 3 fell short is by first, creating unreliable cars that looked good, and then, when they were faced with declining sales to Japanese appliance-cars, chose to also create bland appliance-cars, without fixing the reliability problems! To me, this required an almost prolific talent for incompetence.
At the same time, where both Honda and Toyota succeeded is by building a basic car (e.g. Camry and Corolla, Accord and Civic) which may have been crap at one time, but then improving it, little by little, year after year, and selling it for less than the competition. GM’s biggest mistake was to discontinue(or change the name)of any vehicle which didn’t immediately produce the sales the company was looking for. This is stupid, because the company not only tacitly admits failure, but also disowns those who did buy the car.
Ford appears to be on the right track with the Fusion/Milan twins. It’s a basic passenger car which Ford has kept improving year after year. My wife owns a Milan. We bought ours for about 23K fully loaded, and it looks and drives better than a 30K Camry or Accord. That’s how you get customers. You create a reliable car that gives your customers more value for their money than the competition. Rinse and repeat for 20 years and suddenly you have a large and devoted customer base which would never consider anything else.
But of course, this requires long-term thinking, which the modern American corporation seems almost incapable of doing. After all, we’ve got to worry about the price of our stock shares TODAY and maybe Tomorrow (who cares about next week???!!).
dew542512 :
June 22nd, 2009 at 12:30 pm
Like the saying goes about GM: made by rednecks for rednecks … so other than rednecks I doubt anyone will ever buy GM.
Wow, that’s just…. wow. Magnificent.
Despite Lutz’s insistence that all the “gaps” are closed, he does have a valid point in that last bit.
GM’s reputation is largely shot with the general public. My 04 Impala is comparable to my fiancee’s 05 Accord. The Impala gets similar mileage (she drives her Accord hard), rides better (in both our opinions) is faster and handles better (she has to turn the AC off to merge in traffic in the Accord – I drive an SS). The Impala is quieter and more comfortable inside. The Accord’s interior parts look better but overall the Impala’s interior has fewer squeaks and rattles and none of the interior parts are broken (both her center console lid and dash console cover are broken). Christy loves my Impala and drives it whenever she can. And still, since the Accord hasn’t given her any real trouble (assuming that they don’t “screw up the exterior anymore than the have with the last one” – her words, not mine) she plans to buy another: all because of the problems her 1998 Saturn gave her after 2 years of ownership. She also passed up on a Pontiac G6 she fell in love with while renting after the Saturn was totaled. That’s 2 sales GM lost because of a prior reputation.
Talk Talk Talk.
GM… put your money where your mouth is. Back your cars with the best warranty on the planet. Back the resale value. And make it simple and clear without weasel clauses. If people have a problem with one of your cars, just replace it and take it back to figure out where you screwed up.
Your reputation is toast. The bottom line is that YOU, not the buyer, are going to have to assume all the risk of ownership now and for a long time.
If you can’t do this, then turn off the lights and go home, because you are finished.
That picture of Lutz reminds me of George Peppard from the A-Team days (minus the safari jacket and stainless Mini-14 of course).
Sadly, GM would have been better off with Hannibal from the A-Team.
Matthew Danda: “It was painful to hear Tom Keanen struggle to insert a word now and then as Bob dominated the show. I thought, wow, Bob is so totally 1960 in his style that its amazing he made it this far.”
Probably, GM is still in the ’60’s, so he gets along well there.
I think the Volt is probably a good example of Bob talking and not listening. Forty miles of range and $30K sounded good to him and he didn’t need engineering to tell him anything about it.
Since then, they’ve had to completely overhaul the exterior, remove a good part of the gas tank and a seat to get the batteries to fit. Buyers are likely to get a $40K economy car with 300 miles of range.
For what? GM has no lasting technical advantage in this car. The battery drives development, not the other way around. When batteries are avaialble, everybody else will buy them. Mitsubishi has an EV in production today and can take price cuts on the battery as they go.
The best GM can do is to get a reputation for selling overpriced advanced technology cars.
Congratulations, Bob, you’ve invented Tesla Motors.
The funny thing is that reputation is easier won by those who never had much in the first place than by those who had public trust and then lost it.
Witness Hyundai. When they actually started producing decent cars while standing by their product, people started thinking, “Hey, those guys are doing pretty good for themselves…”
GM could spend the next five years producing rock solid cars but they’ll still be faced with the hecklers. “Let’s see how bad they screw it up this time.”
Bob also forgot about the decisions that GM still makes that show how out of touch they still are with the market.
I don’t think its any one thing that keeps people from buying American but rather the sum of the bad parts. I am in the market for a new car and love the way the G8 looks as well as its power and handling. I can live with the sub-par interior, brutal depreciation, and fears (unfounded or not) about quality and availability of parts. But the lack of technology was the last straw: no optional navigation, only some of the 2009 models have Bluetooth, no SmartKey-type system. All on a car thats stickers for $35k fully-loaded. And all are options available on sub-$20k offerings from their foreign competition.
“The product and fuel economy deficit, reliability deficit, styling deficit — all those deficits have been erased. What has yet to be erased and is going to be the biggest challenge of all is erasing the reputational deficit.”
Of this list, I would say the styling deficit has definitely been erased. GM’s cars are generally better looking that Toyota’s or Honda’s offerings. However, this is a subjective viewpoint.
But in the fuel economy and reliability arenas, GM still trails Toyota and Honda. Particularly using real world numbers, not the government’s calculations. Yes GM has made good strides in the last few years, but they still trail.
In the end, GM is largely competitive with Honda and Toyota’s offerings. But competitive isn’t good enough. Competitive keeps your customers in house, but it doesn’t attract widespread defections from your competitors. The only way to achieve that is to be better than your competitors.
Styling is definitely subjective. I find GM’s offering MUCH more bland than Toyota or Honda’s.
OTOH, I’ve had several recent “That’s a Ford?” double take moments.
That said, I’m still not interested in buying a domestic. It looks like Hyundai, of all companies, will be getting my business for the Genesis sedan.
Like the saying goes about GM: made by rednecks for rednecks … so other than rednecks I doubt anyone will ever buy GM
That’s an interesting comment. I wonder how many sales are lost because people think of Chevy (aka Chivy), Ford, and Dodge as pickup truck brands driven by rednecks.
OTOH, most of the transplants are built in the South, where most “rednecks” are thought to live. (I’ll be the first to say not all folks in the South are rednecks and not all rednecks live in the South!)