Bob Lutz on Product and GM’s Latest Restructuring

Product news from the source…

By Brendan Moore

07.15.2008

General Motors Corp announced a plan earlier this morning to cut costs by $10-15 billion, stop paying its common stock dividend and divest itself of approximately $4 billion in assets in an effort to hoard some cash so it can weather the financial storm that has savaged the auto industry this year. This is GM’s second restructuring in the past six weeks and is illustrative of just how bad things are in the car business.

I was on a subsequent conference call with Bob Lutz, Vice Chairman of GM, after the announcement in which he answered questions from a small group of journalists regarding how product plans at GM would be affected by this latest round of cost-cutting.

We covered quite a few subjects on the call; here are my notes regarding the content. The statements are from Lutz (in response to questions) unless otherwise noted.

Even though GM is cutting back everywhere, product funding for cars is virtually unaffected since the cutbacks in SUV and pickup truck product planning will now pay for funding the car planning efforts at the same level as before.

The Chevrolet Beat will be the Chevrolet Spark, but we won’t see it here in the United States until the next-generation car comes out. It is too expensive to reengineer the car now for U.S. safety standards, as it was never intended to be sold in the U.S. this early.

The Buick Invicta concept is a definite go, but it will not be called the Invicta, but it will look like almost identical to the concept. Lutz said it probably be the best car GM has ever offered in that segment.

The Chevrolet Cruz announced recently will easily achieve over 40 mpg.

GMC has a future in the new world order of $4-a-gallon gas, and that future has a lot of 4-cylinder engines in it, as well as some of the smaller GM Europe crossover product, and Lutz promised that the GMCs will be distinct in their appearance and personalities from the Chevrolets.

Hummer is a great brand, but it simply doesn’t fit in GM’s needs right now. There is a considerable amount of interest worldwide in Hummer from potential buyers.

I asked if GM has a “Plan B” if the crossover segment melts down just like the SUV and pickup segment. The answer was, “no, we don’t think that will happen, but if it does, the Plan B would be to bring over the much smaller crossovers currently sold by GM in Europe”. Lutz said that would actually be simpler and cheaper than what GM is doing now, which is building separate (read: much larger) crossovers for the U.S.

Diesel engines are not a priority for GM at this point because they cost more to produce and the diesel fuel costs more than gasoline in the States, so those two things together wipe out any savings from a diesel powerplant.

Lutz commented that the GM lineup will “very closely” resemble GM’s lineup in Europe if fuel costs stay the same or go up in the future.

Lutz stated that gasoline was “priced irrationally” in the U.S. for a long time, and that led to “an irrational market”. He said the U.S. market is now adjusting to what the rest of the world does in terms of automotive buying decisions.

GM deserves a lot of the credit for the current trend towards electric vehicles. Other automakers will have only token efforts on EVs for years, GM will have the Volt out shortly. There will be 30,000 units of production of the Volt in the first year; 60,000 the second year and “enormous amounts” of production five years into production.

The Tesla “Whitestar” sedan project, now called Model S, is imitating the Volt concept.

Pontiac has a lot of new product in the pipe, and will be a performance car that is exciting and expressive no matter what the engine size.

There have been no talks whatsoever with Toyota about manufacturing a Prius twin with a GM badge on it at the NUMMI plant since Toyota’s announcement that Prius production would soon commence in the U.S.

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Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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5 Comments

  1. If the Cruze gets, for instance, 43 mpg, GM won’t be able to keep them on the lots.

  2. If the Cruze is going to get 40+ MPG, then what will the Beat/Spark get?

    50?

  3. Gasoline was priced irrationally. True, but it was fun while it lasted.

  4. Lutz is kidding himself if he is claiming credit for the electric car. Say, wasn’t there a movie about an electric car and GM?

  5. It’s hard for me to take anything this guys says seriously now. The Volt is vaporware. Even if it eventually exists, all Toyota needs to do is add a bigger battery to the Prius, replace the gasoline engine with a diesel, and PRESTO! The Volt becomes irrelevant.

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