CAR interviews the retiring Bob Lutz (2010)

By Tim Pollard

Motor Industry

09 March 2010 15:34

General Motors' 78-year-old product chief Bob Lutz (insert 'car tsar', 'car guy', 'Maximum Bob' cliché here) announced his retirement shortly after the 2010 Geneva motor show. CAR Online caught up with Maximum Bob to hear of his thoughts on the new GM, future products and exactly what happened behind the scenes during GM's collapse into Chapter 11 bankruptcy.

CAR: GM's been on quite a journey over the past 18 months. How has the mindset changed?

Bob Lutz: 'We've had a lot of change and cycled through Rick Wagoner to Fritz Henderson to Ed Whitacre as CEO. It's been a very rapid transition. The main difference is that General Motors used to be a very procedural company. It believed very deeply in processes and decisions moved from one committee to another. Whitacre keeps asking: "Why do we have to discuss this three times? Why can't we decide this at one meeting?" And he doesn't like every decision going to the board.

'So once the capital budget is approved for the year, individual projects no longer have to come to the board. Previously, product decision were always taken by the board. Ed said to me: "I don't need to be at these meetings, you guys know what to do." So it's now myself and Tom Stephens and people like that who decide. It's a radical simplification of the way the company works. There's a much higher level of accountability... he wants the people assigned to the tasks to be responsible for the outcome. If the results aren't there, people will be thrown out. That was not the old GM culture.'

So you're ok with the US government's ownership of GM?

'Yes and no. Nobody likes being a government-owned company. The American right-wing talkshow hosts portray it as the nationalisation of General Motors. In fact the Obama administration wanted to give us money in the form of debt, and it was the lone Republican on the taskforce – a former Marine officer called Harry Wilson, a free-market Republican – who said: "If you give money to [bankrupt] GM in debt, they'll drown in interest payments. They'll never be able to pay the principal back. It'll be an enormous financial burden..."

'He suggested giving us the aid in equity. That way we get the money but it doesn't cost us anything. The administration said: "But we don't want to own General Motors", and Harry Wilson said: "You will, but only until GM does an IPO and swaps government equity for private equity." So now the poor Obama administration gets blamed for a left-wing socialist takeover of GM, when it was in fact proposed by a free-market Republican.'

The US media described the new GM as American Leyland. They must have had a negative view?

'That depends whether you're reading the right-wing press or the New York Times and Washington Post. The average American is politically conservative. They did not vote for president Obama because of his left-wing political orientation – they voted for him for the charisma of the man. It would now seem that the Obama administration is a little bit to the left of where the American public want to be. That centrist tendency of the American public and distrust of big government caused a backlash against the New GM. People said, "I won't buy a car from the American government." I say to those people: "We don't like being Government owned any more than you do. The quickest way to stop us being government owned is to get everyone to buy our cars." It's still a slight drag on our sales.

'If you ask Americans if they would consider buying a GM car, they say "no". And they say, "Historically the cars weren't very good, they're government owned, they're a big corporation – and I hate them." But then you ask if they'd consider buying a Chevrolet, Buick, Cadillac or GMC product. And they say: 'Great! I love them! Just don't talk to me about General Motors." So we've stopped using the GM logo in any advertising. It's all brand specific now."

Talk us through the abandoned sell-off of Opel in summer 2009

'When we got the US government money, we were told "Here's your viability plan, here are your minimum cashflow targets and your schedule for repaying the government debt. Repaying the government short-term loans and replacing US and Canadian government equity with private equity are your two highest goals. That's what you will focus on." Those were the rules we were playing under.

'So when we looked at the Opel-Mgana deal, that involved the miniumum financial effort on the part of GM. Fritz and I and the rest of the management team – with a great deal of reluctance – recommended the Magna solution as the one we were obliged to adopt in order to mininimse the risk of financial downside and maximise our chances of meeting obligations to the US government. None of us wanted to see Opel go away. It was a tactical decision versus a strategic one. It was our fiscal responsibility overriding what we emotionally wanted to do.

'We were surprised to hear our board pull us up and say: "Is this what you really want to do?" Everything was going better than we had planned. The losses were reducing. The US eocnomy was turning around. We asked ourselves, "Will we be in a situation three years from now that we'll divest Opel and say, 'Gee, if only we hadn't done that.' So we said, "Yes, that is a possibility." And they said: "On balance, we'd like to keep Opel." That was fine with us. It was nice for the board to have made the decision. To have management to propose the fiscally prudent solution and then the board to say "no, we prefer the bold strategic solution" is a wonderful place to be.'

>> Click 'Next' to read more of CAR Magazine's interview with departing GM product chief Bob Lutz

By Tim Pollard