Lutz
Whether you know of him or not, Bob Lutz has definitely made a name for himself in the automotive industry. He's worked at all three domestic companies and even BMW in his career. Within the industry he's been called the "car czar" because he's an automotive executive that actually loves cars. He's the one that has brought about projects such as the Solstice and the Viper, to name a few. When he speaks, I generally listen. The following is an excerpt from an interview that I thought I would post. Enjoy.
- Bob Lutz Interview
We talk with the General's Car Czar
By Karl Brauer
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?
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."
posted by Aventius @ 10:23 PM
16 comments
16 Comments:
All Lutz said is that Chevy is slightly better than it used to be but Toyota is still the winner.
You're an idiot. Verbatim from the article: "Toyota is actually now in ninth place. And Buick, Chevrolet and Cadillac are ahead of Toyota"
"Even now the companies struggle to produce cars that American consumers find as attractive as imports from Japan and Europe. At bottom, the companies' real problem 'is product.' said Kim Hill, assistant director of the Center for Automotive Research, a non-profit organization in Ann Arbor, Mich. 'They are not putting out a product that people want to buy.'
How refreshingly simple. If the cars that GM, Ford or Chrysler built were superior to imports, people would buy them and the companies would make money. Okay, I think I've got that now.
Lutz is payed to represent a failed corporation.
http://www.edmunds.com/reviews/list/top10/103628/article.html
I don't see any Toyota or Honda or Mazda on that list.
This post is about falsely perceived reliability and quality of American vehicles. Please try to stay on topic.
By they way, Mazda is Ford.
By the way, Lexus is Toyota. What's your point?
Off topic responding to your claim, residual values are mainly determined by perceived quality, reliability, and consumer demand (which is chiefly determined by perceived quality and reliability). So this problem is what affected poor residual values.
I don't want to argue with you. There are a couple GM cars I like. I like the Corvette and GTO as cars I would possibly consider buying. In fact, I have even looked at the GTO. Maybe the Soltice as well. I even like the new SSR. It will take a few more years for Chevy to build up consumer confidence (and mine). Chevy needs to keep improving on the Cobalt, which is a look looking car. As far as Cadillac, I doubt I would buy one when I can get a new BMW 3-series for a few grand more. IF I wanted an SUV, a Suburban would no doubt be a reliable truck. But fuel costs aren't going down any.
I know numerous people in the past that have had GM cars and have had numerous problems. Yeah, the cars may be reliable now, but there is still going to take time to convince new buyers. No amount of surveys, QC tests, etc. will reverse years of negative personal experiences. GM needs to dump Buick and Pontiac and focus on the brand names Cadillac and Chevrolet.
Finally, we agree. I would love GM to dump Buick, Pontiac, and GMC. I think they need to focus on Cadillac, Chevrolet and Saturn (as their own version of Scion aka a young yuppie brand). I sincerely believe that a large majority of why Toyota is successful is because of the singularity of their brand. People know that they want a Toyota whereas people who want to buy domestic have to choose between about 15 separate brands which all sell the same vehicle. Its very confusing.
As for it's going to take time to regain the American people's trust, I also agree. This is the point that I am trying to drive home with this post. It will take time but it is time now for Americans to once again trust GM.
I also agree with the GTO. Its an absolutely fantastic vehicle, except for its gigantic key fob. It has one of the best interiors that I have ever seen in a GM vehicle and the powertrain is fantastic.
The Cobalt is leaps and bounds above what the Cavalier was but there is always room for improvement. Of course, I could make the same argument that I'd make for any manufacturer.
As for Cadillac, I somewhat agree. They make fantastic cars and are actually much more reliable than BMWs and Mercedes but my problem with them is two fold. One, everyone has one in Michigan (mainly the CTS) and secondly, its such an old man car. This is the same perceived notion that killed Oldsmobile (who had fantastic products at the time of its demise).
I have no problem with Toyota and Honda, aside from the fact I would prefer to buy American (including a Ford which would force my father to disown me). I sincerely believe that it is in American interests to continue supporting the American industries when products are equal. Despite Japanese automakers building plants here, they do not support the American economy. No engineering, testing, business, or supporting supplier companies are in the United States. The vast majority of parts in Japanese automobiles are imported and all of the engineering is done off shore. I still believe the old saying that "what is good for GM is good for America".
I appreciate your interest in this debate. Honest and informed debate is always welcomed here. Thank you.
I think the recent hardships of the American auto industry are something that should be discussed more often.
I would say 98% of innovation in the automotive industry is from America, and we shouldn't be giving it to foreign competitors. 10 years ago I would have laughed if someone said a South Korean auto would be competing with Ford and Chevy.
You want more discussion? Move to Michigan where the favorit pastime of journalists is to knock the American auto industry. Why you ask... because it sells papers.
They also fail to understand and discuss the two biggest threats that the auto industry has. The first is the gigantic healthcare costs of its workforce and its even larger healthcare costs of all of its retired workers. GM foots the bill for the healthcare of 1.1 million families, yet they only have 400,000 employees. They spend 5.2 billion dollars every year for this cost. Everytime their marketshare decreases, it becomes harder and harder to sustain the promises they have made to their retired workers.
The second largest problem is the currency rates of foreign automakers. The currency rates from Asia are strongly in the favor of Asian automakers. The advantage is in the range of of several thousand dollars per car (even those that are assembled in America because the business, engineering, and supplier parts are shipped in). The US government refuses to tariff their products even though Asian government tariff American cars even though the currency exchange rate for American cars in Asia in already against them.
It is these two problems that are the biggest threats to not only GM but also Ford and DCX.
The healthcare issue I discussed above and the problem of rising healthcare costs continues to beg the question: should companies be required to pay for the healthcare of its retired workers until they die? My father has worked for GM for I think roughly thirty years and many of his co-workers around his age have been forced into early retirement. So lets do some math and assume he retires today like many of the people he works with. Now if he is to live as long as his father did (which is a low-ball figure because every generation lives longer), this means that GM will have to support him with a pension and healthcare benefits for almost thirty years. So he'd be receiving retirement benefits for the same amount of time that he was employed there. The question that arises is that can companies sustain this? Its becoming obviously clear that the answer is a resounding 'no'.
As to the South Korean automakers, I think their growing success is ironic. They have some of the worst quality and reliability in the industry but this has not been realized by the public because they assume that since they are from Asia, their products will have the same reliability and quality as a Toyota or Honda product, which is grossly untrue.
I think GM screwed up when they started to give factory workers more benifits than engineers. I read it in the WSJ a few years back.
Also, I think America needs to tax not only the car, but all the hours worked to make the product. For example, Microsoft produces some software in India. The US government needs to document every hour of every employee that works for Microsoft in India. Then, the US Government will add the appropriate tax to defer healthcare/retirement/living expense costs to those in America than cannot work because of cheaper labor in India.
Great point. UAW members pay 7% of their healthcare costs compared to salaried workers who pay 27% of them. Meanwhile, the industry average is 32%.
The problem isn't so much GM, whereas a problem with the Unions because Ford and DCX have similar deals with autoworkers. The strength of the UAW at the negotiating table. They have a stranglehold on the industry. Its primarily why the foreign automarket has cranked out deals to get around the UAW. With the exception of Mitsubishi and the Toyota Corolla (because the plant is half owned by GM... Chevrolet Prizm is the same car), Isuzu Ascender (which is the Chevrolet Trailblazer), and the Mazda truck (Ford Ranger), all of the foreign vehicles built in non-UAW controlled plants.
They barter between states in order to get the best deal and the pick the state that allows them to ignore the UAW. And you know what, I can't blame them, but I question its legality and its ethics. If you are going to let foreign automakers and allow them ignore the UAW, is this fair to the domestic automotive industry that built its business being forced to work with the UAW?
I'm not defending the UAW though. I can't stand it. The UAW has drained the auto industry of its money, will, and its ability to make the choices it needs for its own interests.
I've had first hand experience in two plants (Pontiac Truck Product Center East, the Beta stage assembly building for testing and the Moraine, Ohio plant for Trailblazers), I was disgusted by the problems I had with the UAW. Only in a UAW plant will you have a grumpy, ridulously rude, man getting paid $80,000 to push a lever whenever Engineers drop by to check the underneath of a Trailblazer for assembly quality. The man works about an hour a day and sleeps on the job the rest of the time. Its ridiculous. I have plenty of problems with the UAW but that one stands out in my head.
What I'm basically trying to say is that the American automakers have numerous disadvantages that are out of their control and solely in the control of the US Goverment... UAW, Tariffs, & Healthcare.
Before I forget, I like your idea about taxing companies that outsource. Its unfair to our workforce to except them to compete with workers in third world countries. For example, DCX pays their assembly employees $49.50 an hour in Germany, $36.50 an hour in the US but is looking to open a plant in China (where they'd export them back to America) and pay their employees $1.95 an hour. How can the American workforce compete? Without any government protection, all of our manufacturing jobs will be shipped overseas and we'll all be working for McDonalds, Starbucks, and Walmart (oh, another horrible company that is the sole result of cheap labor in China).
I agree with you. The UAW, Tafiffs, and healthcare need to be regulated by the government.
And you know what is really depressing about all this? 10-20 years ago automotive engineers could engineer automobiles. Now, American engineers are fighting just to keep their jobs. Engineers in America cannot just engineer anymore. Young engineers in America have it much harder than the young engineers of past. On top of that, engineering salaries are not what they should be for new (and old) engineers. Does the government care? It doesn't seem that way.
Maybe I can just work my way up the ladder and become a manager at Wal-Mart and buy an Acura, a Nikon camera, Nike shoes and shirts made in China, and a Sony Playstation. Can my mind be set free stocking Tide Detergent and Hanes Socks? Maybe I'll find out one of these days. If I don't like it, I can always buy a pound of Curry, a water purifier, and move to India.
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