Monday, June 13, 2011

How GM sank, by Bob Lutz

Bob Lutz is a long time GM executive responsible for product development. He calls himself a "car guy", although the real GM car guy was Zora Arkos-Duntov the father of the Corvette. Lutz claims the bean counters are responsible. He describes what happened to Cadillac. Once upon a time Caddy was top of the line, best car out there. A new Caddy sold for maybe three times what a new Chevy sold for. Cost to manufacture a new Caddy was about the same as a new Chevy.
According to Lutz, GM decided to ramp up sales of Caddy, to sell more Caddies than Ford sold Lincolns. Production was increased, vast numbers of Caddies were sold to rent-a-car companies, who turned around and sold nice clean low mileage Caddies for less. Resale value of Caddy dropped, a lot, and used Caddies were so cheap anyone could and did buy them. People with money stopped buying new Caddies 'cause they were a dime a dozen, everybody had one. The lucrative new luxury car sales went to Mercedes and BMW.
Lesson not learned, a top of the line product has to be scarce, if you make to many of them, it stops being top of the line.
Then Lutz talks about Saturn. "despite some heroically mediocre cars there were at one time vast legions of happy Saturn owners." But Saturn was more than just a product, it was a whole car company with it's own engineering, personnel, dealership network, legal staff and so on. This massive overhead had to be paid for by the sales of just one compact car.
Lesson not learned, save money by consolidating the overhead operations.
This all comes from the Wall St Journal's excerpts of Bob Lutz's new book.

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