About The Authors

Saturday, September 11, 2010

Bob Lutz – “The Triumph of “Gut” over Number Crunching”

Bob Lutz, auto industry icon, recently received a Lifetime Achievement Award from the Automotive Fleet and Leasing Association (AFLA) at their annual conference in Las Vegas. As part of the ceremony Mr. Lutz was asked for his opinions on recent events in the automotive industry, as well his perspective on his career in the auto industry. Not only has Lutz had a brilliant career in the auto industry, his ability to articulate is what sets him apart.

Lutz has written another book, to be released next year. His previous book, “Guts: 8 Laws of Business from One of the Most Innovative Business Leaders of Our Time” is well known and widely read. While I like my own title for his book, he prefers “The Car Guy Versus the Bean Counters.” I’m sure it will be an instant best seller.
Lutz’s long adversarial relationship with the numbers people goes way back. In my own view, bean counters live by the mantra, “You can’t manage what you can’t measure.” They have no understanding for the fact that, “What you could have had, but didn’t get” is just as real, despite the fact it can’t be easily quantified. For years, Lutz has had to deal with those who thought designing and building vehicles should be based on study group data. The previous generation Malibu was an example. According to Lutz, GM’s numbers people maintained that that Malibu scored the highest in study groups of any vehicle they had ever developed. We know how that car worked out. Thanks to Lutz, GM now takes a different view in the development of their vehicles. By investing an additional $500. to $800. per vehicle in content, with a focus on interior quality, transaction prices are higher as fewer and lower incentives are required to maintain volume. The current Buick LaCrosse is an example.

Lutz points out that GM is not in the transportation business, but in the business of emotions. Consumers buy vehicles mostly based on how they view themselves driving it, and how they are perceived by others.

On the subject of Buick, Lutz addressed the issue of why GM chose to maintain the Buick brand instead of others they let go. Buick is a hot brand in China. Over time, Chinese became impressed with the Buick brand because it was the chauffeur driven vehicle of choice of the wealthy and high ranking officials going back decades. In fact, Chinese preferred Buick to Cadillac. This preference made the Buick brand the obvious choice when the decision had to be made.

Lutz is highly critical of the U.S. government’s CAFE approach to fuel economy, preferring the European model of fuel taxes. His comment, “CAFE is like trying to control American obesity by only producing standard sized clothing,” brought down the house. In his view, phased in fuel taxes would influence consumers in what they buy and drive, making it easier for manufacturers to predict consumer preferences. The fact that this is not politically viable is another story. Lutz believes that U.S. consumers will not pay a premium for high fuel economy vehicles without a dramatic rise in fuel prices, despite the fact he raves about the new GM VOLT. At some point Americans will tire of fighting the war against radical Islam and paying for both sides of the war.

When questioned about any possible political ambitions Lutz replied, “First of all, I’m too old. Secondly, I wasn’t born in the U.S., and we know how that plays in this country. But should those things be waived, I might agree to be Emperor for a couple of years.” Extreme laughter followed this “tongue in cheek” comment.
When the subject of the auto industry bailout came up, “Lutz first responded by saying, “I really don’t have anything in common with the average Democratic voter.” Again laughter. But he went on to say, “The administration’s team did an admirable job. There is no doubt they had to trample on some due process issues, but the end result was magnificent.” While I would have loved to have been able to ask questions about SIGTARP, the dealer terminations, the executive shuffling at GM, the impending IPO, etc., there wasn’t an opportunity.

Lutz kept his audience spellbound and there was a discernible wave of disappointment when it was time for his segment to conclude.
Going into his version of retirement he has left a lasting legacy on the auto business. Bob Lutz is at the top of my list of those I would most like to have a beer with.
David Ruggles
WARDS Dealer Business
Sept 2010