Gripenfelter
10-24-2003, 08:49 AM
Edmonds: You did the Viper during your stint at Chrysler, and now Neil Hannemann, who led the Viper team, is doing the GT at Ford. Does GM need a Viper/GT class vehicle, or is the Corvette strong enough to handle that role?
Lutz: Let me tell you that the Corvette C6 will have versions where we confidently predict it will suck the doors off of both the cars that you just named. The current Z06, with 400 horsepower, on the Gingerman Raceway, laps faster with its 400 horsepower than the new Viper does with 500. So other than just brutal straightline acceleration, the Z06 is faster today. Clearly the C6 Corvette, without giving anything away, is going to be a major step forward in vehicle mass, dimensions, handling, braking and, most important of all, power-to-weight ratio. So I think whatever gap exists now is going to be eliminated — in total performance. I think we'll match the competition in acceleration, and we will beat them in on-road handling. And if the Z06 version of the C6 is not enough to do it, we've got a few tricks up our sleeve, which we're already investigating. But it will always be Corvette-based.
Edmonds: Why do you think the Japanese continue to gain market share in the U.S.? Is it simply product-related or does it go beyond that?
Lutz: Part of it is, of course, exchange rates. Adjusted for costs in the respective countries, the yen is just too weak. And considering the cost of doing business in the United States in U.S. dollars, the Japanese still have a cost advantage of three to four thousand dollars per vehicle, which they can either use to pricing advantage or margin advantage or putting more equipment into a car at a given price. And it doesn't matter whether they produce the cars in the U.S. or not, because a lot of the content is still imported. People say, "Well, Toyotas are built in the United States now." Yes, many are assembled in the United States, many are not assembled in the United States, and even the ones that are assembled in the U.S. contain a high percentage of Japanese or other offshore parts. The exchange rate issue is real. The other thing is, I don't think there is a real, measurable quality difference anymore. If you look at J.D. Power ranking by make — by nameplate — as opposed to by corporation, Toyota is actually now in ninth place. And Buick, Chevrolet and Cadillac are ahead of Toyota. It's only when you lump Lexus and Toyota together that Toyota barely squeaks out a first-place position — a little known fact, by the way. So the reality is we've closed the quality gap but the lag in customer perception is still huge. The average person still believes that the Japanese cars' quality and reliability is head-and-shoulders above General Motors, and it simply is no longer the case.
It's going to take a while for that to get through. I would say the onus is on us to produce vehicles, which we're now doing and the Chevrolet Malibu is the first concrete example, vehicles with a much higher level of visual quality. Better panel fits, closer gaps, better door-closing sounds, better-tailored seat covers and more precise knobs and switches. Soft, low-gloss plastic parts instead of hard, shiny ones. All of those things are part of what the customer registers as a quality perception, which is why we call it "perceived quality." And your real quality can be outstanding, but if your perceived quality is off, the customer says, "Gee, I don't know, this is a pretty lousy-looking interior. I can't believe this is a good car." And you turn them off. That part we still have to fix across our whole product line and do interiors and exterior fits and finishes that tell the customer, "Wow, this thing was put together with great attention to detail and love of craftsmanship." That's really the Volkswagen and Audi secret. If you look at J.D. Power, their cars are not even average, but the way they are finished is so good that the customer thinks, "This is done with such care and love. I must have this car."
Edmonds: What is the number-one challenge facing GM right now? It sounds like it's changing the company's perception.
Lutz: Yes, that's exactly right, you've got it. We've got to. And it's through advertising. It's through unpaid communication, through speeches, through owner experiences, through word of mouth. We have got to get the truth out about where we are on quality and reliability versus the Japanese. And as I say, part of the communication is how the car is put together. Because, again, you can have a totally reliable car with crooked body gaps, a door that closes with a bad sound, cheap interior plastic parts, carpets that don't quite fit. None of those things are a reliability problem or something that you go to a dealer about, but they're not nice. And it's up to us, as we've done in the Malibu, and as we will do in all of the cars we launch, that all of the sights and sounds, materials, controls and everything will contribute to sending the message of quality, as opposed to detracting from it. But you're right, it's our biggest problem — the lingering reputation that American companies, General Motors in particular, cannot produce consistent quality the way the Japanese can.
Edmonds: What is GM's greatest strength/advantage in the marketplace?
Lutz: We still have close to 30 percent of the market, and I'm convinced that it's going to grow. For the last four months Chevrolet has been selling in the United States at a three-million-unit-a-year rate. And I think that Chevrolet, with the new Malibu, the new Colorado pickup, the new van, which is sort of a blend between sport-utility and minivan, basically a sport-utility with sliding doors on the side, and with the Chevrolet Equinox small sport-utility. And with all the other new stuff coming from Chevrolet like the Cobalt, which replaces the Cavalier, which, arguably, is almost old enough to vote. You see a Chevrolet that is just a powerhouse. My forecast is that Chevrolet will be the number-one selling division in the United States in a relatively short amount of time. And then you've got the resurgence of Cadillac. We've got Pontiac on the comeback trail with the GTO as its flagship that's going to help change the whole perception of Pontiac. We've got a lot of exciting stuff coming from Pontiac, as well as Buick. And we've got this new Hummer brand that can be expanded downward into smaller sizes and price classes. So, I just see us ideally positioned in the market. One of my perceptions coming back to GM after working for all the other companies is, this company has more smart people in it.
I used to say at Chrysler, jokingly, back in the bad old days at GM, I'd get the Chrysler guys together when I was arguing for speed rather than studying stuff all the time. I would say, "Look guys, the bad news is the average guy at GM has 20 points of IQ on us. And the good news is that the average guy at GM has 20 points of IQ on us, because they're intellectual to a point where they will constantly study ramifications of things rather than acting. Whereas we're dumb enough to seize the obvious and we just go ahead and do it. Too much intellectual power can be a drawback, but it is no longer a drawback at GM because the company realizes that a less than perfect decision made quickly is better than a perfect decision made too late. It's a highly streamlined company — very, very fast decision-making, very little paperwork, and yet you have all this intellectual potential on the engineering side and the manufacturing side.
So I would say it's our market position, dealer network and the potential of the people. This is still one of the, maybe, two automobile companies left in the world that can do anything it wants to — anything.
Lutz: Let me tell you that the Corvette C6 will have versions where we confidently predict it will suck the doors off of both the cars that you just named. The current Z06, with 400 horsepower, on the Gingerman Raceway, laps faster with its 400 horsepower than the new Viper does with 500. So other than just brutal straightline acceleration, the Z06 is faster today. Clearly the C6 Corvette, without giving anything away, is going to be a major step forward in vehicle mass, dimensions, handling, braking and, most important of all, power-to-weight ratio. So I think whatever gap exists now is going to be eliminated — in total performance. I think we'll match the competition in acceleration, and we will beat them in on-road handling. And if the Z06 version of the C6 is not enough to do it, we've got a few tricks up our sleeve, which we're already investigating. But it will always be Corvette-based.
Edmonds: Why do you think the Japanese continue to gain market share in the U.S.? Is it simply product-related or does it go beyond that?
Lutz: Part of it is, of course, exchange rates. Adjusted for costs in the respective countries, the yen is just too weak. And considering the cost of doing business in the United States in U.S. dollars, the Japanese still have a cost advantage of three to four thousand dollars per vehicle, which they can either use to pricing advantage or margin advantage or putting more equipment into a car at a given price. And it doesn't matter whether they produce the cars in the U.S. or not, because a lot of the content is still imported. People say, "Well, Toyotas are built in the United States now." Yes, many are assembled in the United States, many are not assembled in the United States, and even the ones that are assembled in the U.S. contain a high percentage of Japanese or other offshore parts. The exchange rate issue is real. The other thing is, I don't think there is a real, measurable quality difference anymore. If you look at J.D. Power ranking by make — by nameplate — as opposed to by corporation, Toyota is actually now in ninth place. And Buick, Chevrolet and Cadillac are ahead of Toyota. It's only when you lump Lexus and Toyota together that Toyota barely squeaks out a first-place position — a little known fact, by the way. So the reality is we've closed the quality gap but the lag in customer perception is still huge. The average person still believes that the Japanese cars' quality and reliability is head-and-shoulders above General Motors, and it simply is no longer the case.
It's going to take a while for that to get through. I would say the onus is on us to produce vehicles, which we're now doing and the Chevrolet Malibu is the first concrete example, vehicles with a much higher level of visual quality. Better panel fits, closer gaps, better door-closing sounds, better-tailored seat covers and more precise knobs and switches. Soft, low-gloss plastic parts instead of hard, shiny ones. All of those things are part of what the customer registers as a quality perception, which is why we call it "perceived quality." And your real quality can be outstanding, but if your perceived quality is off, the customer says, "Gee, I don't know, this is a pretty lousy-looking interior. I can't believe this is a good car." And you turn them off. That part we still have to fix across our whole product line and do interiors and exterior fits and finishes that tell the customer, "Wow, this thing was put together with great attention to detail and love of craftsmanship." That's really the Volkswagen and Audi secret. If you look at J.D. Power, their cars are not even average, but the way they are finished is so good that the customer thinks, "This is done with such care and love. I must have this car."
Edmonds: What is the number-one challenge facing GM right now? It sounds like it's changing the company's perception.
Lutz: Yes, that's exactly right, you've got it. We've got to. And it's through advertising. It's through unpaid communication, through speeches, through owner experiences, through word of mouth. We have got to get the truth out about where we are on quality and reliability versus the Japanese. And as I say, part of the communication is how the car is put together. Because, again, you can have a totally reliable car with crooked body gaps, a door that closes with a bad sound, cheap interior plastic parts, carpets that don't quite fit. None of those things are a reliability problem or something that you go to a dealer about, but they're not nice. And it's up to us, as we've done in the Malibu, and as we will do in all of the cars we launch, that all of the sights and sounds, materials, controls and everything will contribute to sending the message of quality, as opposed to detracting from it. But you're right, it's our biggest problem — the lingering reputation that American companies, General Motors in particular, cannot produce consistent quality the way the Japanese can.
Edmonds: What is GM's greatest strength/advantage in the marketplace?
Lutz: We still have close to 30 percent of the market, and I'm convinced that it's going to grow. For the last four months Chevrolet has been selling in the United States at a three-million-unit-a-year rate. And I think that Chevrolet, with the new Malibu, the new Colorado pickup, the new van, which is sort of a blend between sport-utility and minivan, basically a sport-utility with sliding doors on the side, and with the Chevrolet Equinox small sport-utility. And with all the other new stuff coming from Chevrolet like the Cobalt, which replaces the Cavalier, which, arguably, is almost old enough to vote. You see a Chevrolet that is just a powerhouse. My forecast is that Chevrolet will be the number-one selling division in the United States in a relatively short amount of time. And then you've got the resurgence of Cadillac. We've got Pontiac on the comeback trail with the GTO as its flagship that's going to help change the whole perception of Pontiac. We've got a lot of exciting stuff coming from Pontiac, as well as Buick. And we've got this new Hummer brand that can be expanded downward into smaller sizes and price classes. So, I just see us ideally positioned in the market. One of my perceptions coming back to GM after working for all the other companies is, this company has more smart people in it.
I used to say at Chrysler, jokingly, back in the bad old days at GM, I'd get the Chrysler guys together when I was arguing for speed rather than studying stuff all the time. I would say, "Look guys, the bad news is the average guy at GM has 20 points of IQ on us. And the good news is that the average guy at GM has 20 points of IQ on us, because they're intellectual to a point where they will constantly study ramifications of things rather than acting. Whereas we're dumb enough to seize the obvious and we just go ahead and do it. Too much intellectual power can be a drawback, but it is no longer a drawback at GM because the company realizes that a less than perfect decision made quickly is better than a perfect decision made too late. It's a highly streamlined company — very, very fast decision-making, very little paperwork, and yet you have all this intellectual potential on the engineering side and the manufacturing side.
So I would say it's our market position, dealer network and the potential of the people. This is still one of the, maybe, two automobile companies left in the world that can do anything it wants to — anything.