Car Guys vs. Bean Counters - Bob Lutz [67]
The Epsilon 2 models Federico has brought to market thus far are all resounding market and financial successes.The first was the Opel/Vauxhall Insignia. It quickly became the new standard of German midsize cars, sold extremely well in a weak market, and was named European Car of the Year by a jury of fifty senior automotive journalists from all major countries.The vehicle went on to garner more than 120 major awards.
The Insignia was followed by the larger, longer Buick LaCrosse, manufactured in both the United States and China. It was highly acclaimed in both of the world’s largest markets and, in North America, is drawing a new, younger, more upscale set of buyers to the Buick brand. As of this writing, it was America’s best-selling large sedan.
A brief digression: Early in the decade, I was asked by the media why GM was keeping the Buick brand. Our intention, I explained, was to make Buick into an American Lexus: elegant, refined, quiet, high-quality, but with better road manners and a lower price. Rarely have I ever made an utterance to the press that was so roundly ridiculed. “Har-har, that’ll be the day,” about sums it up.
Six years later, thanks to the hugely successful Buick Enclave luxury crossover (not a global program, as vehicles this substantial have little market outside the United States), the LaCrosse, and the smaller Epsilon 2–based Buick Regal (Jim Federico’s latest offspring), few would argue that Buick did not surpass the target. Buick, today, is “the better Lexus.”
The outstanding critical and commercial success of Federico’s Epsilon 2s (and there are more to come) meant that the icebreaker had, with some delays and minor restarts, vanquished the regional “frozen middles” and had cut a clear channel for the other, equally major global programs to navigate.
The part of globalization that never came about (and still should) is tracking of program cost, investment, and profitability on a global basis. With regional profitability goals superimposed on a global powertrain, product development, purchasing, and manufacturing system, there is much energy still wasted on who pays for what and who has control over “the budget.”
For example, if GM North America, under extreme profitability pressure, decides to save fixed costs by reducing engineering and design staff, they run afoul of Global Product Development. Of course, that’s exactly what happened. These product development resources, although also (and this is the silly part) in GM North America’s cost structure, were really under my budgetary discipline and control.
The company struggled with the concept of global budgets cutting through regional lines. There is still an enormous sense of conflict in knowing there is a tough cost cutter as president of GM Europe, say, who will drive to reduce resources for greater profitability, even if they aren’t his (or hers) to reduce. Running a company by region is fine for many industries but no longer optimal for car companies.You have to go global, with the regions reduced to marketing and PR entities, as is the case with the Japanese, Koreans, and Germans in the United States.When is the last time anyone saw published data on Toyota or Honda profitability in the United States? Or BMW of North America? Nobody runs the business that way anymore. Suboptimizing profitability by geographic entity makes about as much sense as declaring every U.S. state a “profit center” for GM North America.
I wish we could have evolved to a global profit and loss method while I was still there. It will ultimately happen, of course, because it has to.
9
Chevrolet Volt
(“I’ll Let You Explain It to the Board”)
GM WAS LATE TO THE HYBRID PARTY . . . OR WERE WE? AS EARLY AS 1968, GM demonstrated a battery/gasoline engine hybrid, using lead-acid batteries. The company easily had the technological ability.What it lacked was the will.
At several points after my arrival in 2001, the subject of a hybrid vehicle was raised. When we tallied up the engineering expense and the capital required, figured in the cost per vehicle