GM: Bigger Changes Ahead?

Burt: GM Does It Again by Jim Burt (2/4/2002)
GM Gets Bullish on Design by Joseph Szczesny (1/14/2002)

The dramatic restructuring of General Motors’ North American product development system is likely to be just the first in a series of shakeups coming from the automaker’s product czar, Bob Lutz.

While the GM Vice Chairman declined to specify what he will target next, company insiders expect to see Lutz take aim at what’s now left of the brand management system put in place by Ron Zarrella, former president of GM North America. Lutz did tell that he plans to expand his focus to overseas operations, as well as those in the North America.

“There are always going to be changes, because GM is in a constant state of evolution,” Lutz stressed during an interview with TCC. “We don’t ever want to tell ourselves what we did was as good as it gets.”

Indelible stamp

In barely six months, the former Marine fighter pilot already has left an indelible stamp on the long-troubled GM. Lutz has already cancelled a number of product programs, including the Buick Regal; ordered others delayed and fixed, such as the Cadillac STS, while some others have been moved forward, including a three-row version of the new Saturn VUE crossover vehicle.

The reorganization of the product development system is aimed at giving authority to those who know product best, particularly the GM design department. “Over time,” said Lutz, a reorganized product development system “will require one-third less people…and six to eight weeks less time” to go from concept to customer. But the most significant “purpose is to guarantee home runs.”

Insiders say the old system was too unwieldy, giving say-so to as many as 200 middle managers. And like Zarrella, who himself came from the packaged-goods industry, many of the brand managers and staff had little experience in automotive endeavors. As a result, Lutz has complained, there was far too much emphasis on market research, rather than good gut instinct. In the future, he plans to restrict the use of focus groups and consumer clinics until after the basic design of a new product is nearly locked in place.

Cherry picking

That means stylists will have the final word, and General Motors’ design director, Wayne Cherry, will have ultimate veto power. “We’ll now be able to execute very effectively, and very efficiently,” proclaimed Cherry, who has made no secret of his frustration with the old system.

During his tenure, Zarrella had pointedly excluded Cherry from GM’s Automotive Strategy Board, the consortium of top-level executives that guides the automaker and earmarks investments. Cherry will now take a seat on the ASB.

GM has been tightening its belt in the face of the U.S. recession, and intends to cut $1 billion out of its capital spending plans for the coming year. But spending on product development will not be affected.

To ensure that the right ideas rise to the top, Lutz’s new system will set up a network of competitive teams that will develop designs and potential business plans. For each new project, at least three teams will compete, and in some cases, he noted, GM may turn to outside studios, such as Ital Design, for added input.

As many as 70 percent of the vehicles already built into the GM product plan will now face a new review—and the possibility of a new “design bake-off,” according to Lutz. The remaining programs are too far along.

Group Vice President Mark Hogan will oversee the new teams. For the last two years, Hogan had been in charge of General Motors’ Internet and high-tech operations, collectively known as eGM.

Little car, big car

The changes at GM reflect many of the ideas Lutz attempted to implement while he was at Chrysler in the 1980s and ‘90s. But Lutz admits he failed to institutionalize the concepts to the degree that they remained in place after he left in mid-1998. Industry analysts caution that must not be allowed to happen at GM once Lutz retires in 2004.

In his interview with TheCarConnection, it was clear that Lutz was well aware of such mistakes, as well as those made by GM over the years. Notably, the carmaker has been undergoing a seemingly constant series of reorganizations and shakeups since 1984, when it split North American operations into what became known as the “big car” and “little car” groups.

That project virtually paralyzed the company for several years, a period during which it lost significant share of the key U.S. market. It also started chipping away at the authority of individual divisions, such as Chevrolet and Buick, which had previously operated with virtual autonomy. When Zarrella arrived at GM seven years ago, he went even further, turning those divisions into little more than marketing operations. And instead of focusing on, say, Pontiac as a whole, Zarrella’s brand managers emphasized individual vehicles, such as the Sunfire or Grand Prix. There was little payoff, with GM continuing to lose U.S. market share until it posted a minor gain for 2001.

Lutz made it clear he does not want to recreate the chaos of 1984, so he chose not to discuss specific future changes he has in mind. But the brand management system is likely to be further pared back, along with marketing and advertising. Meanwhile, GM has quietly told dealers it will restructure the field management system with which the factory interacts with its retailers.

Lutz, who turns 70 this month, also said he will expand his reach to GM’s overseas operations, though he stressed that product development is working far better abroad than it has been in the U.S. Still, he will try to seek potential synergies. One idea under study would bring the Australian-made Holden Commodore to the U.S. The sporty line might serve as a fast way for GM to add rear-wheel-drive vehicles. It all but abandoned rear-wheel drive in the early ‘80s as part of another massive shakeup, this one designed to switch over to smaller, more fuel-efficient front-drive products.

So far, Lutz has received overwhelming support from the ranks, but the more he tries to take on, the more political things could become, cautioned a senior company official who asked not to be identified by name. Nonetheless, with a three-year contract and a mandate to transform the long-struggling company, Lutz knows he’ll have to continue moving at a feverish pace if the GM he leaves behind will be better than the one he inherited.

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