The New GM: Poised for Success
By Bob Lutz
GM Vice Chairman
As I mark my last day at General Motors today, I want to say a special thank you and farewell to the loyal readers of FastLane. This blog would not have been the success it has become without you, and I’m sure you’ll continue to read the many interesting posts about GM and its vehicles that will follow on these virtual pages.
I leave here today knowing full well that this company is on the right track, especially in terms of the products, which pave the path to success.
Several reasons exist for my unbridled optimism, but the vehicles stand out above all others. The old film mogul Louis Mayer once famously said, “There’s nothing wrong with Hollywood a few good movies wouldn’t fix.” The same philosophy applies to automotive companies; the best vehicles win.
No automotive company has ever turned itself around without great cars and trucks, so it was obvious to us that we needed to strengthen the product line in all segments, and, over the course of the past several years, I believe we have done exactly that. Simply put, the cars, trucks and crossovers in GM’s lineup now, top to bottom, constitute the strongest roster it has offered in decades, if not ever. And the ones in the pipeline in the near-term are even better.
Creative authority was returned to the hands of the designers at GM, and we’re now seeing results in vehicles like the Buick Lacrosse, Cadillac CTS and SRX, Chevrolet Malibu, Camaro and Equinox and the GMC Terrain. All are doing well in the market, and are helping to revive the image of the four brands they represent. Those four brands are more than holding their own in the marketplace, proving the naysayers wrong who said eliminating half our brands would cost us a lot of market share. March was the sixth month in a row that the four brands collectively delivered a year-over-year retail sales increase.
Furthermore, all the key metrics used to assess the health of a brand are moving in the right direction. Incentive spending is down. We continue to close the gap vs. our competitors and make sales based on the wheels, not the deals. Our average transaction prices are up. Our residuals are up. And our inventories are way down, compared to where they were last year — some 340,000 units down.
And our quality continues to improve. Chevrolet is now on par with Toyota and Honda in J.D. Power’s Initial Quality Survey, something I hope will improve even further when the next study comes out. We’ve had a 45 percent reduction in warranty claims since 2007 and a 75 percent reduction in recall costs in the same time frame.
In 2009, according to NHTSA data, GM’s percentage of vehicles recalled vs. the total number of vehicles on the road was just 3.1 percent. Four manufacturers have larger numbers, and the top three are into double-digits.
Beyond the improved vehicles and quality, the bottom line is looking better too. This company, through the cleansing fires of Ch. 11, put itself in a position to succeed. Financially, our balance sheet is in the best shape it’s been in for quite some time.
We have an essentially debt-free balance sheet, and a new and more competitive labor situation. The “new” GM, in my view, is a powerhouse. We have good variable margins, which we’ve always had, by the way, but which were overpowered by massive fixed costs. At anything remotely resembling normal industry volumes, GM will be quite profitable. I’m not saying when… but rest assured it will be soon.
And another big reason I predict success for GM is the confidence I have in the people, and the senior leadership.
GM has always had great talent. It just didn’t always use it to its maximum potential. The people here are truly the best and brightest — I’ve known that since the beginning. Now the culture has turned 180 degrees since I returned here in 2001. It’s more product-centric than ever, and the focus on designing, building and selling the best vehicles in the world is razor sharp. This company is not set up to do a mediocre product anymore. Period.
I have faith that Ed Whitacre and his team know exactly what needs to be done to keep this company moving in the right direction. Focus on the products, keep things simple, boil the fat of unnecessary process out of the system. Tom Stephens, Mark Reuss and Ed Welburn have, like the CEO, an unwavering commitment to putting out one great vehicle after another.
The American jazz legend Charles Mingus once said, “Making the simple complicated is commonplace; making the complicated simple, awesomely simple, that’s creativity.”
That describes the approach the leadership of the new GM is taking perfectly. This business isn’t all that complicated. Do the best product you can do, and if it looks better and drives better than the other guy’s, you win.
I only have about 47 years of experience on which to base this opinion, but I believe GM is poised to win. Thank you very much for your terrific support.