Car Guys vs. Bean Counters - Bob Lutz [10]
My friend and former colleague Jack Hazen retired several years ago as my finance chief in Product Development. Jack lived through this CAFE era and, as it marked the turning point in GM’s fortunes, it remained vividly burned in his memory. (Jack, it should be noted, was unusual among corporate finance types in that he possessed a keen sense for the product.) Here is his account:
Prior to Pete Estes retiring, there were numerous “Product Deep Dives” with the chief engineers, general managers, tech staff, and a finance rep (I attended these meetings for Cadillac) from each division. The main goal was to establish the Product Program that would cover the 1982 to 1985 time period and allow us to meet the CAFE standards—which, for GM, required the biggest improvement due to our mix of large, luxury cars. The major discussion point was whether to convert all the large, large-luxury, and personal-luxury cars to transverse front-wheel drive (TFWD) or do RWD luxury versions of the current midsize RWD cars. Despite the fact that the engineering community at the divisions expressed considerable concern about their ability to do the conversion to transverse front-wheel drive by 1985 for all these cars, Pete Estes said we needed to do it to meet the CAFE standards. Additionally, since GM was in much better shape financially than Ford or Chrysler, who could not afford to do this, this dramatic move would end up really putting GM in an even stronger leadership position in North America. At the time, as I recall, we had about 44 percent market share in the U.S. Before he passed away, Pete had stated in an interview that the decision to convert everything to transverse front-wheel drive was a mistake.
This, of course, ended up being one of the worst decisions from a product leadership standpoint due to a couple of major factors:
• The infamous four-speed transverse front-wheel drive automatic transmission (THM440) to be used in these cars was only on paper at the time (1979) and would eventually go into production without proper validation and fail at very high rates, often two or three times during the first customer life with the car. This was the biggest problem, but there were some other product issues, too, as these cars were all new, and GM had little experience with the transverse front-wheel-drive layout. Relative to the QRD (quality, reliability, durability) problems GM had with all the new automatic transmissions in the 1980s, starting with the X-car, I asked Alex Mair (Group VP, GM Technical Staffs) later in the 1980s as to how GM could have gone from a company that was the automotive leader in automatic transmissions to having all these problems starting with the new automatics in the late ’70s and early ’80s. He said the biggest factor was that we had allowed a lot of the old automatic transmission engineers (with tribal knowledge) to retire in the mid-1970s when the first oil embargo happened.
In this timeframe (1979), when this decision was made, the new transverse front-wheel-drive compact X-cars were just being introduced, and we were unaware of all the QRD issues that we would discover on this first iteration of transverse front-wheel drive (e.g., steering gear “morning sickness”—a quasilockup of the steering on cold mornings, air conditioning compressor issues, radiator failures, and on and on).
The other major issue was the design of these vehicles, as they were so much smaller than the previous large/luxury cars that there was some consumer push back and, in the case of Cadillac, we lost a lot of customers to Lincoln. However, they actually sold quite well until the quality issues started to surface, and then customers fled in droves to the Lincoln Town Car. From a styling standpoint, the significant mistake was reducing the overall