Wednesday, August 3, 2011
"Car Guys vs Bean Counters"
The Battle for the Soul of American Business
By Bob Lutz
The Battle for the Soul of American Business
By Bob Lutz
The automotive world has been waiting for this book for months. Lutz gave a preview to a group at a fleet conference I attended in Las Vegas last summer, where he received a Lifetime Achievement Award from the Automotive Fleet and Leasing Association (AFLA). His previous effort, “Guts: 8 Laws of Business from One of the Most Innovative Business Leaders of Our Time” made “best seller” lists.
Now 79, Lutz knows his auto industry history better than most. He has lived it in the most inner circles, having held executive positions for GM Europe, then, BMW where he coined the phrase, “BMW, The Ultimate Driving Machine.” Then worked with Lee Iacocca at Ford, followed him to Chrysler, where he lost out to Robert Eaton for the top job, perhaps the biggest mistake Iacocca ever made. After a stint as CEO of Exide Battery Corp., he rejoined General Motors. Who better to tell us the story of the struggle for authority and dominance in the various domestic auto companies, as well as the recent history of GM’s fall and rise?
According to Lutz, the GM he found when he returned in 2001 epitomized , “The tyranny of process over results.” He does so in true Lutz style as evidenced by his personal motto, “Often wrong but never in doubt.” Anecdote after anecdote kept me chuckling while I marveled at the man’s insight and ability to articulate. While Lutz comes across as confident, he also impresses with his candor and humility, free to admit a personal mistake or miscalculation. Then there is his notorious acerbic wit and occasional tendency to be blunt with comments like, “Global Warming is a total crock of sh*t,” made during a private lunch with reporters in 2008 but repeated over and over again by the press.
Lutz gets some things off his chest as he rails against government over reach, Toyota, CAFE, MBAs, and the “liberal media” one minute, then skewers Limbaugh, Beck, and the radical right wing the next. He spends a chapter on second guessing the tenures and decisions of others but does it in a humble way, pointing out that those people made sincere decisions based on their personal beliefs and information available at the time.
Lutz chronicles the history of GM from the days when iconic stylists like Harley Earl and Bill Mitchell ruled the roost. GM achieved market dominance by executing stylish cars that people lusted for because of their innovation and beauty. Post war Cadillacs, finned V8 Chevrolets, the Corvette, sixties era Toronados and Rivieras, and many other exhilarating vehicles resulted from when “Design” was dominant. This was replaced by the premise that, “You can’t manage what you can’t measure,” which led to bureaucratic process where no one tried to achieve anything other than to be perceived as not having made a mistake. Lutz calls it “analytics run amok,” preferring “art over science,” but seeing the need for both. “It’s the balance that has been out of whack.” He cites “penny wise and pound foolish” anecdotes one after another to make his points.
He singles out for particular scorn the “brand era” at GM, headed by Ron Zarella, brought over from Bosch and Lomb to be president of GM North America. Instead of designing desirable products first and then creating the underpinnings to make that design work, the first step in the new “bean counter” dominated GM was to create cost constrained underpinnings. The Design Department was then given the mission to “wrap the underpinnings in something that looks as good as it can under the circumstances.” This is the opposite of how things were done when “Design was Dominant” at GM. Lutz cites the ill fated Aztec, the “Quasimoto of Crossovers,” as an example. Over the years, GM had established “a stifling thicket of criteria: where the wheels had to placed relative to fenders, how the windshield should slope to permit easy viewing of traffic lights, how ash trays were to open and close, etc. etc.”
GM had purchased a Chrysler 300 to try to determine how Chrysler could develop such a vehicle, but GM couldn’t. The Design Department covered the car with 90 “Post It” notes, identifying areas where Chrysler had violated GM design criteria.
There was a time when GM paint was intended to be purposefully dull so as to not reveal flaws, in search for an optimum JD power score. There was no desire to excel or develop a “smash hit. The focus was on meeting “data points.” By following “process,” executives could avoid the accountability of failure as long as it was perceived they had followed the GM process.
Brand managers were recruited from companies like Procter and Gamble, and cars were developed and marketed by people who were deodorant, baby wipe, and toothpaste experts.
“The ebullient, dynamic, seductive volcano of creation had been transformed into a quiet mountain with a gently smoking hole at the top, spewing forth mediocrity upon mediocrity,” says Lutz.
The internal confusion at GM is exemplified by a conversation Lutz relates with an automotive supplier over lunch. At the time, Lutz was President of Chrysler. He asked the supplier who his favorite customer was. The answer came back, “GM!”
Why,” asked Lutz.
It seems the supplier was able to sell the same bearing under seven separate parts numbers, but in seven different boxes at wildly different prices. The purchasing departments rarely talked to each other. According to the supplier, doing business with GM was sure hard to keep straight, but it was mighty lucrative.
Lutz is careful to exclude GM trucks from excoriation, pointing out that the truck division produced success story after success story. Of course, everything changed when fuel prices suddenly increased, as they did in 2008. Not only did profitable truck sales suddenly cease, but the GMAC mortgage business, which had been subsidizing overall North American operations, started hemorrhaging cash at an astonishing rate.
Lutz tells his own version of the auto CEOs going to Washington D.C. on their private planes. He talks realistically about the firing of Rick Wagoner, and the role President Obama, Steve Rattner, and others played in the bailout. He discusses the fierce debate over whether or not the government should have taken a stock position in the new GM and about whether or not the UAW was favored in the deal. But you’ll have to read the book to find out what he said!
Lutz says, “In a sense, the decline, failure, and rebirth of General Motors is simply a metaphor for what is happening to business in the whole United States.”
According to noted automotive journalist, David E. Davis, Jr., “This book should be required reading for any young person who seeks a business degree." He also applies his advice equally to the current management of GM.