Lutz and Not Sweating Small Stuff

[HarleyEarl]

http://www.freep.com/apps/pbcs.dll/article...5/1002/BUSINESS

MARK PHELAN

Lutz says GM won't sweat the small stuff

Carmaker to focus on high-volume, big-profit products

BY MARK PHELAN • FREE PRESS COLUMNIST • July 16, 2008

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The troops need something to fight for, not a feeling of endless retreat.

General Motors Vice Chairman and retired Marine pilot Bob Lutz gave his beleaguered company that goal Tuesday, saying the company will concentrate its engineering and design efforts on vehicles it expects to sell profitably and in high volumes.

He pointed to successes like the Chevrolet Malibu and Cadillac CTS as evidence that GM's plan to sell large numbers of attractive cars is more than the empty boasting that has accompanied so many turnaround plans in Detroit.

"This is not the time for niche vehicles," Lutz said. "We can't afford to hit singles and bunts. We need triples and home runs."

This ain't batting practice, though. From Toyota and Honda to BMW and Mercedes, the world's best automakers have been successfully selling fuel-efficient cars for years.

"We're targeting everything to be high volume," Lutz said, acknowledging the competition, but with a confidence born of GM's recent successes with the Malibu, CTS, Buick Enclave and GMC Acadia.

Chevrolet is key

GM's best-selling Chevrolet brand is key to the plan. Chevrolet has at least four small cars or crossovers that will debut before the end of 2011: the Cruze compact car, a new version of the Aveo subcompact, the Traverse midsize crossover that goes on sale soon and a new version of the Chevrolet Equinox compact crossover.

All will have class-leading fuel economy and the kinds of features and design that have increased Malibu sales 95% this year while taking in an extra $4,000 on each car it sold, Lutz said.

If those four vehicles hit the market with the same strength the Malibu did, they could easily account for 800,000 or more sales a year.

Profit matters far more than sales volume, however. Small cars like the Cruze and Aveo have been break-even business at best -- and frequently money losers -- for GM.

Lutz said the Cruze has been developed to match or exceed the Honda Civic for looks, fuel economy -- and more important, selling price.

That's far from Chevy's current compact, the Cobalt. Cobalt sales have soared this year, but Lutz estimates the car sells for $3,000 less than a Civic.

GM employees got their first look at the Cruze when Chief Executive Officer Rick Wagoner addressed them Tuesday. The car -- which will be sold around the world, though the U.S. version will come from Lordstown, Ohio -- makes its public debut at the Paris auto show in September.

The eagerly anticipated Chevrolet Volt, an extended-range electric vehicle due to go on sale late in 2010, also could contribute far higher volumes than previously announced, Lutz suggested. GM has said it plans to build about 10,000 Volts in 2011, the car's first full year of production.

Any projection for the Volt is iffy because the vehicle relies on new technologies and suppliers, he said.

"We're in uncharted territory. If global demand is there, my personal guess is that vehicles like the Volt could be 500,000 a year in a few years' time," Lutz said.

GM plans to use the Volt's technology in vehicles it will sell around the world, including some vehicles that will be built alongside the Volt at the Detroit/Hamtramck assembly plant and shipped to Europe.

The engines that drive GM

Chevrolet and Cadillac are the engines that drive GM, and Cadillac will introduce two new CTS models in 2009: an extravagantly stylish coupe and a reportedly breathtaking sport wagon. CTS sales are up 30% this year, and the car is selling for an average of $8,000 more than the previous model, Lutz said. He expects the same from the wagon and coupe.

GM confirmed several other new vehicles that should hit the road in the next two years Tuesday. Cadillac and Saab will build crossovers based on the well-received concept cars they unveiled at the North American International Auto Show in Detroit in January.

Despite the intense financial pressure on GM, new-vehicle development escaped Tuesday's belt-tightening largely unscathed.

"We will build world-class vehicles. That's absolutely not something we will sacrifice," Lutz said, providing a rallying cry GM's designers and engineers needed on a grim day.

Contact MARK PHELAN at [email protected] or 313-222-6731.

[HarleyEarl]

When I read this, I get a sense that GM is now really Chevrolet and Cadillac.

I'll bet that GM could do very nicely with just these two brands.

Maybe not number one but a much better company.

[daves87rs]

The other brands are pretty much niche brands...

[Oracle of Delphi]

Like I have been saying for months, when all is said and done, in North America it will be Chevrolet, Saturn, Buick and Cadillac. Niche cars and brands are done in North America.

[HarleyEarl]

Like I have been saying for months, when all is said and done, in North America it will be Chevrolet, Saturn, Buick and Cadillac. Niche cars and brands are done in North America.

I agree with you. I'm not totally convinced about Saturn but who knows, the new Saturn might be a the most genius thing GM has done.

Really that lineup makes so much sense.

[regfootball]

some don't want cheap chevys. some don't want or can afford caddies. you need the inbetween.

[Blake Noble]

some don't want cheap chevys. some don't want or can afford caddies. you need the inbetween.

Buick as the "luxury experience" in between, Pontiac as the "driving experience" in between. Isn't that the way it should be?

Oh, as for Saturn, just kill it and rechristen those cars as Opels here in the United States.

[gm4life]

Pontiac needs to be in the equation. YJ do you think Pontiac is going anywhere personally? And I value your view on this.

[Blake Noble]

Pontiac needs to be in the equation. YJ do you think Pontiac is going anywhere personally? And I value your view on this.

It's been said countless times, everything at GM is on the table and being looked at. It's really quite hard to give a firm yes or no. Just a friendly disclaimer.

However, my gut says Pontiac might still have hope, though. I don't think GM has thrown in the towel for it just yet. :AH-HA_wink:

[gm4life]

Thanks that is what I am thinking too. Pontiac prolly will stay.

[Blake Noble]

No problem. I am happy to offer the insight.

[FUTURE_OF_GM]

The other brands are pretty much niche brands...

As was the plan...

The plan from 2005 was that Chevrolet and Cadillac would 'carry' GM. The rest is icing on the cake.

Like I have been saying for months, when all is said and done, in North America it will be Chevrolet, Saturn, Buick and Cadillac. Niche cars and brands are done in North America.

So you're saying that GMC, the number 2 selling division at GM, is a niche brand?

You're saying that Pontiac, the number 2 selling CAR division at GM is a niche?

You're saying that Buick, a brand with only 1 hot selling model and 3 models total is NOT a niche brand?

You're saying that Saab doesn't have the SAVIOR that you said it had?

Once again, the "facts" change as the news leaks out.

[gm4life]

The post above make sense.

[FUTURE_OF_GM]

It's been said countless times, everything at GM is on the table and being looked at. It's really quite hard to give a firm yes or no. Just a friendly disclaimer.

However, my gut says Pontiac might still have hope, though. I don't think GM has thrown in the towel for it just yet. :AH-HA_wink:

Look at what has been said... (Despite what PCS wants you to believe)

Pontiac does MORE volume with less product (old, rebadged, etc) than Saturn.

Pontiac sales are UP!

Pontiac HAS the established dealer network that Saturn lacks and GM doesn't have the $$$ to build.

Pontiac has MORE share than Saturn.

It's just as cheap or cheaper to rebadge a Chevrolet than an Opel.

GM doesn't have the $$$ to phase out divisions.

And even Bob Lutz hinted that Saturn is just as in trouble, if not more than Pontiac.

Saturn has been given the BEST and most co-hesive product offensive in GM history, yet it still HAS NOT produced results. The brand has little equity and few buyers. If this is all news to GM, then something is wrong.

[Camino LS6]

Saturn is, was, and always will be, a mistake.

Maybe even The mistake.

[HarleyEarl]

From the sounds of it, GM isn't in trouble afterall.

Great news.

[haypops]

For the month of June (an admittedly tough month for all) Saturn sales were down 12.8%. No other GM division had that small a sales decline. For comparison Pontiac and GMC suffered 15.7 and 24.1% declines respectively. The heart of Saturn's lineup was taken away (ION) and they still outperform the other divisions on a % basis. I don't know which divisions should go, but all this bitching and moaning about Saturn seems to be without basis.

[Robert Hall]

Look at what has been said... (Despite what PCS wants you to believe)

Pontiac does MORE volume with less product (old, rebadged, etc) than Saturn.

\

I wonder what Pontiac's consumer sales volume is relative to Saturn, though...once you factor out the fleet sales.

[regfootball]

i really wish we were talking about crap asian brands going away. hyundai kia toyota honda acura lexus

[Camino LS6]

I wonder what Pontiac's consumer sales volume is relative to Saturn, though...once you factor out the fleet sales.

It still dwarfs it, Saturn doesn't have the distribution to touch Pontiac's numbers.

[haypops]

Sales volume is of course another way to compare brands. Of course it's not as simple as it looks (more sales; more cost). Even with its much larger sales outlet, Pontiac only managed to outsell Saturn by 9000 cars for June of 2008. That is just one month of typical sales for the ION before its termination was announced. Even more telling is that Saturn out right outsold 4 brands for the first 6 months of 2008; Buick, Cadillac, Hummer, and Saab.

[vonVeezelsnider]

Even more telling is that Saturn out right outsold 4 brands for the first 6 months of 2008; Buick, Cadillac, Hummer, and Saab.

KILL CADILLAC!!!

[smk4565]

"Lutz said the Cruze has been developed to match or exceed the Honda Civic for looks, fuel economy -- and more important, selling price."

What about driving dynamics, build quality and fit and finish? They already beat the Civic on price by a few thousand dollars and the Civic blows away the Cobalt in sales.

Lutz also said they were going to get away from niche products. If so, shut down Hummer and Saab. The Sky/Solstice don't sell in volume, even the Enclave sells about 40,000 units a year, that isn't a volume seller. Saturn Astra and Pontiac G8 are low volume. Personally I like cars that aren't overly common like an Accord or Camry, but if they do what Lutz says about 1/3 of their cars would have to go away.

When they make 4 lambdas, soon to be 5 theta/epsilon SUVs, they had six GMT360 SUVs, soon to be 5 or 6 epsilon sedans (depending on Saab), etc you have lower volume niche vehicles because they are trying to hit all these different corners of a market segment.

[balthazar]

>>"...if they do what Lutz says about 1/3 of their cars would have to go away."<<

Depends on one's definition of 'niche'. I wouldn't call 40K (Enclave) 'niche' even in the arena of 1960s GM volume.

[thedriver]

If I remember correctly, isn't Buick right now selling less units than Oldsmobile was when the decision was made to kill it?

[balthazar]

People- sales numbers are not everything or mostly everything anymore. ROI should... must rank far higher.

[gm4life]

I know but GM likes to sell products in addition to having competitive ones and profitablity. Honestly I think Pontiac is safe, they have proven themselfs time and time again. With segment busters like the FWD 1987 Bonneville, 1997 Grand Prix, 2000 Bonneville, 2001 Aztek (I know it was ugly but functional), and most recently the Vibe. The G8 is also a pretty good segment buster. Honestly Pontiac deserves a new G6 and FWD or AWD whatever if they give it a design as good as the Malibu's but different it will fly off lots, just give it a manual please. PONTIAC is suppose to be sporty. I would have taken a 5spd. in my Torrent if they had offered one! Pontiac even being product starved aka no new G6 is still doing well. The G5 posts solid number and so has the Solstice and Torrent this year along with the great selling Vibe.

[smk4565]

If I remember correctly, isn't Buick right now selling less units than Oldsmobile was when the decision was made to kill it?

My favorite statistic. Oldsmobile sold 261,000 cars in 2000, at the end of that year they decided to kill it. In 2007, Buick, Saturn, Cadillac, Saab, Hummer each sold under 250,000 units. Hummer and Saab are each selling fewer than 2000 units a month, that is about 1/10th what Oldsmobile could do.

[gm4life]

SMK that is so true Olds never should have gone. At that time I said kill BUICK! And I meant it. When the Lucerne and Enclave came out I began rethinking my previous judgement. But look Pontiac still moved cars above the 250K line a "niche" brand bullsh*t. While the whole industry even Toyota is declining in sales.

Edited July 23, 2008 by gm4life

[balthazar]

smk- So in other words; you think GM should have kept Olds merely because it's volume was high(er). Interesting. Edited July 23, 2008 by balthazar

[smk4565]

People- sales numbers are not everything or mostly everything anymore. ROI should... must rank far higher.

Good point, Saturn and Saab have yet to show a positive return, we don't need them.

[gm4life]

So in other words; you think GM should have kept Olds merely because it's volume was high(er). Interesting.

No lets take a look at the line-up in 2000... New Aurora just came out, Alero (selling like hot-cakes), Intrigue (only 2 year design with a spunky engine), a new Bravada was on the way, and the Shilloute was recently refreshed and selling pretty solid. While Buick has a new Park Ave, and LeSabre, with a homely Centry that was 3 years old and a decent looking Regal. Gee what line-up was more appealing and had DOHC engines and good interior things most likely important to import buyers. And where did the Olds buyers go not nearly as many went to Buick and Pontiac as hoped. I know many went to Lexus or Toyota. Some to Honda or Acura even a few went to brands like BMW and Volvo. The Aurora and Alero were wonderfully styled cars with class leading interiors. Fact was in 2001 I didn't want an Intrigue because my 90 year aunt had just got one a year eariler. As for the Aurora I like it but wanted a Bonneville more but couldn't afford neither. Then Olds was gone when I went to get my next car the Bonneville.

[smk4565]

I think they should have kept Olds because they had better cars. You got a luxury and a performance upgrade over Chevy, where as Buick used the same engine as an Impala with a little more luxury, and Pontiac had the supercharged V6 but interior no better than a lot of Chevys.

They had way too much overlap at the time, so something had to be done. I was always in favor of Buick going and Olds staying, but GM made more profit on Buick since they could use cheaper parts in them, and GM probably thought as baby boomers age they will want a soft riding car, but most of the boomers were already lost to the imports and not coming back.

Also, Olds was always mostly cars, and GM in 2000 believed SUVs were the only premium product people wanted, and that premium cars (small to midsize have no place). Look at all the Lambdas and upcoming theta SUVs, and GMT360s and GMT900s. They make 20 SUVs in the $30k range and like 5 cars. But now car sales are up and people are looking for premium smaller cars, Mini has a 1 day supply despite running 3 shifts a day, 7 days a week.

[smk4565]

No lets take a look at the line-up in 2000... New Aurora just came out, Alero (selling like hot-cakes), Intrigue (only 2 year design with a spunky engine), a new Bravada was on the way, and the Shilloute was recently refreshed and selling pretty solid. While Buick has a new Park Ave, and LeSabre, with a homely Centry that was 3 years old and a decent looking Regal. Gee what line-up was more appealing and had DOHC engines and good interior things most likely important to import buyers. And where did the Olds buyers go not nearly as many went to Buick and Pontiac as hoped. I know many went to Lexus or Toyota. Some to Honda or Acura even a few went to brands like BMW and Volvo. The Aurora and Alero were wonderfully styled cars with class leading interiors. Fact was in 2001 I didn't want an Intrigue because my 90 year aunt had just got one a year eariler. As for the Aurora I like it but wanted a Bonneville more but couldn't afford neither. Then Olds was gone when I went to get my next car the Bonneville.

I have an 01 Aurora 4.0, I surely won't be going to a Pontiac or Buick, they are inferior products. I agree that Olds had the better line-up, better engines, better styling, better interiors. I also believe that many Olds buyers went to Acura TSX or TL, Lexus ES or IS, maybe Volvo or a Lincoln MKZ type car. These cars offer a step up in luxury and performance from a Camry/Accord/Malibu. The Buick LaCrosse/Lucerne actually offer less performance than a Malibu or Accord V6, and a Pontiac offers less luxury than a Malibu LTZ or Camry XLE. Pontiac, Buick, Chevy and Saturn overlap in price too much so each may be good at one thing, but lags in another.

[CaddyXLR-V]

Sales volume is of course another way to compare brands. Of course it's not as simple as it looks (more sales; more cost). Even with its much larger sales outlet, Pontiac only managed to outsell Saturn by 9000 cars for June of 2008. That is just one month of typical sales for the ION before its termination was announced. Even more telling is that Saturn out right outsold 4 brands for the first 6 months of 2008; Buick, Cadillac, Hummer, and Saab.

Well in that case, shouldn't the Grand Prix be factored in, which sold 10k+ cars per month, at higher prices than the ION? They probably had the same fleet/retail % as well. If you want to see how weak Saturn is as a brand, look no further than the Outlook. Cheapest of the 3 Lambdas, but is still the slowest selling. Saturn has the newest lineup of GM, while Pontiac has close to the oldest.

[gm4life]

Guess what Pontiac's are still selling. Gee I wonder what brand I'd cut. If they cut Hummer I could careless. Saturn and Saab should stay a while longer but after those two it would be hard for me to see Buick, Chevrolet, GMC, Pontiac or Cadillac go those are the brands I grew up with along with Olds.

[FUTURE_OF_GM]

Sales volume is of course another way to compare brands. Of course it's not as simple as it looks (more sales; more cost). Even with its much larger sales outlet, Pontiac only managed to outsell Saturn by 9000 cars for June of 2008. That is just one month of typical sales for the ION before its termination was announced. Even more telling is that Saturn out right outsold 4 brands for the first 6 months of 2008; Buick, Cadillac, Hummer, and Saab.

All luxury divisions.

Apples and oranges.

[cire]

I owned a 1999 Olds Alero GL sedan (actually I leased it for three years). While I did appreciate the exterior styling and some other elements of the car, I would hardly have called the interior class leading or even well executed by any stretch of the imagination. The seats and headrests were thinly padded and quickly became uncomfortable on moderate to long journeys. The rear seats were placed low to the floor which reduced leg support and comfort for rear passengers. There was a gap where the top part of the interior of the B-pillar was to meet the lower part. One interior door panel had to be replaced because the panel material started to separate from the panel. A fan switch had to be replaced because it ceased to work. The rear window defogger stopped working at one point. There were numerous quakes, rattles, and othe interior noises. Although the car featured a lot of soft touch materials on the upper part of the dash and door panels (which was a nice touch), the other interior issues would disqualify the car from obtaining well executed interior honors.

As far as the exterior, there were problems with it also. One of the headlight housings had to be replaced because of moisture buildup inside the lens. A foglight had to be replaced because it collected water. The mirror fell out of one of the sideview mirror housings and the entire housing had to be replaced.

In addition to the issues listed above, I also had to have the battery replaced within a year of commencing the lease. During the last year of ownership, the alternator had to be replaced.

The only saving grace to these issues was that GM honored their warranty and fix all of these issues without charge (although it took the dealership three attempts to fix the rear window defogger). Although I still appreciated my time with my Olds Alero, there was little about it that would make me nominate it for any "Car Of The Year" awards.

I blame the corporation's obsession with the SUV/truck segment during the height of SUV/truck mania with the haphazzard execution of GM's car products during this time. This is how the import brands took over the car segments and is the major reason why the domestic auto companies started to tailspin once SUV/truck mania had subsided.

There seems to be a lot of emotional attachment to Olds on this forum and I can certainly understand why. They had some fairly attractive cars (Alero, Intrigue, and Aurora) near the end of the brand's existence. I still don't think loyalty to the brand should blind people to the fact that while Oldsmobile's final products were certainly more attractive than GM's other offerings at the time, they certainly were not any better built than the rest of the corporation's products (at least the car products).

[Croc]

I still don't think loyalty to the brand should blind people to the fact that while Oldsmobile's final products were certainly more attractive than GM's other offerings at the time, they certainly were not any better built than the rest of the corporation's products (at least the car products).

The overall level of quality was much higher than other divisions. My early 01 Aurora is still very well-put-together after nearly 90,000 miles. The interior has a couple squeaks over rough pavement, but everything works well and I get nothing but compliments from my (generally) import-snob friends. Most are surprised the car was built over 8 years ago.

[wildcat]

If I remember correctly, isn't Buick right now selling less units than Oldsmobile was when the decision was made to kill it?

Buick is no longer a full line, it's part of the Buick - Pontiac - GMC sales channel... so the B-P-G total is the only figure that can be used now.

Globally, Buick sales are up and Buick remains (and will remain) a part of GM.

[haypops]

Well in that case, shouldn't the Grand Prix be factored in, which sold 10k+ cars per month, at higher prices than the ION? They probably had the same fleet/retail % as well. If you want to see how weak Saturn is as a brand, look no further than the Outlook. Cheapest of the 3 Lambdas, but is still the slowest selling. Saturn has the newest lineup of GM, while Pontiac has close to the oldest.

I couldn't find data for the Grand Prix but the G6 is fleeted more than double the rate of the ION as a matter of fact ION fleet rates are better than mid pack. The outlook is the least desirable of the 3 Lambdas and the transaction prices I see in the paper are the same $24K.

I think GM removed the ION at just the wrong time. The dealers feel the same way. Imagine a Chevy or Ford dealer without the Cobalt or Focus sales!

Let me add that I am not advocating Pontiac's demise just pointing out that there are some strongly held opinions of Saturn that are not backed up by the data.

[haypops]

All luxury divisions.

Apples and oranges.

Mid priced cars (Saturn) so its really comparing peaches to peaches.

LaCross sales as a percentag eof all buicks is increasing. They start at 17K in the papers. That is definetly Saturn territory (lower end actually).

Edited July 27, 2008 by haypops

[HarleyEarl]

I think it was a mistake dropping Oldsmobile but GM will never admit that. I think they just wanted one less division for whatever reason and Oldsmobile got picked. I don't think I'll ever get over it. It was and is one of my favorite brands. I hope one day some of the management will tell exactly what went on behind the scenes. Does anyone know or remember when the first hint that it was to be eventually axed?

[haypops]

Does anyone know or remember when the first hint that it was to be eventually axed?

GM repetedly said that the Oldsmobile dealer netork sucked.

[Newbiewar]

GM repetedly said that the Oldsmobile dealer netork sucked.

maybe sucked 1 billion dollars up, to shut them down...

the price of downsizing is tremendous,

the price of education (r&d) is expensive,

ignorance is worse...

[Oracle of Delphi]

GM repetedly said that the Oldsmobile dealer netork sucked.

I think Ron Zarrella had it in for Oldsmobile too.

[Blake Noble]

GM repetedly said that the Oldsmobile dealer netork sucked.

Oh, and the Saturn dealer network didn't/doesn't?