Car Guys vs. Bean Counters - Bob Lutz [62]
But Ford and GM, having expended overseas way before World War II, did have capable product “sources” around the globe. In GM’s case, it stemmed from the acquisitions of Vauxhall in the UK in 1925, Opel in 1929, and Holden, in Australia, in 1931.
For decades, having these regional, semiautonomous car companies was an advantage: brands were still largely regional, they were close to their markets, the types of cars demanded by Europe versus the United States were light-years apart, and economies of scale were available at lower volumes.
But beginning in the 1980s, this began to change rapidly. Brands such as Audi, Nissan, and VW became recognized throughout the world. Federal fuel economy regulations were driving the size and mechanical layout of U.S. cars ever closer to the rest of the world. Tastes, thanks to the mass media as well as specialized car publications, were converging. (It’s interesting that, when GM conducts consumer clinics to test a potential new design, there is little divergence in results between China, Brazil, Chicago, or Frankfurt. Every culture, it seems, responds to the same aesthetic signals when it comes to cars.) Economies of scale ran away from the regional model. As competitive pressures and government regulations increased, so did the cost of designing and engineering an all-new vehicle. What used to require $200 million of engineering was now easily $700 million. Suddenly, GM’s regions found it increasingly difficult to create a full portfolio of competitive products while remaining within some reasonable range of overall engineering expense.
A good example was the perceived need, in each region, for a small SUV. With independent budgets for engineering and capital, each region saw the need and the relatively small volume (it was an emerging segment). The combination of a huge engineering and capital outlay for a new and unique little four-by-four could not be financially justified by GM Latin America. Europe’s volume was a bit higher, but it didn’t “pencil,” either. Nor did proposal after proposal in North America.
Toyota, with the hugely successful RAV4, faced no such problem: each sales region in the Toyota empire identified the need for the new small SUV niche: 20,000 here, 30,000 there, 50,000 for Europe, 80,000 for the United States, and so on. Add the numbers up in one program and suddenly the engineering bill makes sense. The potential component volumes get the favorable attention of world-class suppliers, unique regional “wants” are either incorporated or rejected, the program is approved and becomes a huge success, and is followed shortly by the Honda CR-V, a result of the same centrally guided process.
But GM was culturally locked in to the concept of regional autonomy. It was argued that skilled, relatively empowered executive teams in the four regions—Latin America, Europe, Asia-Pacific, and North America—responsible for their own resources and held accountable for financial and market success, would provide optimal results. It sounds true. It was true, twenty years ago, and aspects of it are true today, but all the advantages of regional autonomy simply got swamped by the increasing market demand for ever broader product lineups as well as the ballooning cost of developing an all-new vehicle. Product sharing among regions was a necessity, and if some of the benefits of regional, close-tothe-market decision making got lost, that had to be considered collateral damage.
The emotional distance between GM’s regions was even larger than the thousands of miles of physical separation. An illustrative story: Circa 2000, about one year before I rejoined GM, Car and Driver published an overwhelmingly favorable road test on