Great Bob Lutz Article in WSJ

[Mallard]

http://online.wsj.com/article/SB10001424052702304259304576375790237203556.html

 

One of my favorite anecdotes about the long postwar decline of General Motors came from a senior executive in the advertising agency that served Cadillac back in the 1950s and '60s. At the time, Jim Roche was head of the division. It was time to design the annual Cadillac Christmas card, and Mr. Roche instructed the agency to find something "heartland"—down-home American, an original work from a good artist. One painting found Mr. Roche's favor: a snowy scene with a small boy pulling a sled upon which was tied a Christmas tree. The lad's destination was a modest cabin on a hill, with a winding road leading up to it.

 

Mr. Roche loved it—but wait! Where was the relevance to Cadillac? He ordered away the small boy with the sled, to be replaced by a Cadillac sedan, with the trussed tree tied to the roof. The artist was able to render the Cadillac accurately and duly pasted it over the boy with the sled. The modified card was again presented to Jim Roche, but he discovered a new flaw: The humble cabin on top of the hill was no longer a suitable destination. Why would an achiever live in a dump like that?

 

The agency was told to make the dwelling more appropriate for a Cadillac family, so the artist went to work again and rendered a substantial residence, which required a major expansion of the hill it sat on. A second garage was also added, since Mr. Roche felt that a single-car garage looked out of place next to a home of that size.

 

At the final Cadillac Annual Christmas Card Review, all were silent until Mr. Roche, staring at the now-crusty watercolor, asked in his usual soft monotone, "Are those tires approved by engineering?"

 

"How's that, Mr. Roche?" came the response.

 

"The tire tracks in the snow. They're very pronounced. Is that an approved snow tire?"

 

Mr. Roche was righteously indignant over this blatant lack of due diligence and ordered one each of the "approved" snow tires shipped to the artist, who would have the freedom to decide which snow-tire pattern would be immortalized in the Official Cadillac Christmas Card. After that modification, it was finally approved, sent to the printer and mailed out.

 

Can anyone begin to fathom what that card cost—the material and intellectual resources that were squandered in its tortured path to perfection? Did any recipient of the card bother to look at the tire tread imprints in the snow? Was the card with the large house, the multicar garage, the expanded hill and the Cadillac sedan more appropriate and artistically meritorious than the original boy-with-sled?

 

In a normal corporate culture, a senior executive would have looked the card over, checked the text (easy in those days, since "Merry Christmas" was still a politically correct wish), and said, "Sure, looks good, get 'em printed." But not in GM's supposed "culture of excellence," where management had to improve on every detail, no matter how trivial.

 

The unfortunate thing is that Jim Roche so embodied the charisma-challenged, nitpicking, detail-focused perfectionist that in 1967 he became the chairman and CEO of GM.

 

***

Having experienced four different CEOs at GM over a period of 16 months between 2009 and 2010, I am frequently asked what kind of leadership style is the "correct" one for an automobile company. The direction of a large car company is distinctly different from that of, say, General Electric. The latter is a conglomerate comprised of wildly different companies, most of them completely unrelated to one another, with their own priorities, problems, products and customers.

 

"Running" this conglomerate in detail is clearly beyond the capability of any one man: The fields of action are too scattered and too diverse. What leadership does in a conglomerate like this is set the goals, the measurement criteria and the overall governing policies; select the right leaders for the individual businesses; measure progress; and sell underperforming units while adding new, promising entities to the portfolio.

 

A car company, on the other hand, is one enormous, hugely complicated organism that has many moving parts, all closely interrelated and interdependent. Many of the company's activities are day-to-day: running the plants to produce components and assemble cars, procuring supplier parts, moving the finished vehicles to the dealers, billing same and booking the revenue. The operations portion of the automobile business has been thoroughly optimized over many decades, doesn't vary much from one automobile company to another, and can be managed with a focus on repetitive process. It is the "hard" part of the car business and requires little in the way of creativity, vision or imagination. Almost all car companies do this very well, and there is little or no competitive advantage to be gained by "trying even harder" in procurement, manufacturing or wholesale.

 

Where the real work of making a car company successful suddenly turns complex, and where the winners are separated from the losers, is in the long-cycle product development process, where short-term day-to-day metrics and the tabulation of results are meaningless. Despite the advent of many new computer tools to speed engineering, testing and certification, the time between "initial idea" and "first unit off the line" is still about 3½ years, depending on the complexity of the product.

 

Astonishingly, in this critical area of product creation, where the future of the car company hangs in the balance, the much-scorned autocratic style of management works well, and numerous success stories confirm it. The big proviso, of course, is that the autocrat must be so steeped in the car business, and have so much taste, skill, intuition, and sense for the customer, as to be nearly infallible. (I shall eschew discussion of the less-than-knowledgeable autocrat, who delves into things he or she knows little about and demands that it be done this or that way. It is a near-infallible recipe for disaster. According to many, the former chairman of Daewoo, many years ago, fit this mold, and he destroyed the company while making sure all his employees treated him with due reverence.)

 

A prime example of a "highly skilled autocrat" is Ferdinand Piëch, grandson of the original Dr. Porsche, former CEO of Volkswagen, and, I take it, chairman of their supervisory board for as long as he elects to stay. With a self-confidence bordering on and perhaps crossing into arrogance, Mr. Piëch ruled VW with an iron fist, listening to few and firing many who dared question his supreme wisdom. Cowed and fearful, giant VW was run by one man.

 

Mr. Piëch made portfolio decisions; he insisted on cars with advanced technology; he made design decisions, often ordering a redo shortly before production if he spotted an interior detail he didn't like, such as an air vent in a poor position. And, though his stubborn sense of infallibility led to one or two colossal blunders (such as the beautiful but failed VW Phaeton, a $100,000 luxury car that was doomed by its VW badge), his strong direction and insistence on excellence made the VW Group, including Audi, Seat, Skoda, Lamborghini, and now Porsche and Bentley, into a global automotive powerhouse and currently the largest car company in the world.

 

But does the autocrat, no matter how gifted, create sustainable success? Or does his style drive away other capable leaders who would form a leadership team after the great man's departure? Time will tell. But, like him or not (and I would personally prefer not to work for Mr. Piëch), reputation, market share, profitability and shareholder value all increased dramatically under the my-way-or-the-highway style of the good doctor. The future is another matter, but if the purpose of leadership is to drive results, chalk up one major victory for the supremely skilled autocrat.

 

Contrast this to the approach that so long characterized GM, with its emphasis on benevolent, thoughtful sharing and showing respect for other people's "emotional equity." Everything was laboriously studied and restudied; personal opinions, as in "I think we should do this and not that," were discouraged. Open verbal disagreements were rare. It was hoped that "the data," generated by swarms of analysts and planners (and often slanted, of course, to coincide with the leadership's prejudices), would send a clear message, assuring everyone that this, indeed, was the only right course. No need for an acrimonious discussion. Just everybody nod and then go complain bitterly in the sanctity of your own office

 

Above all, GM leadership sought stability, balance and equilibrium. No traumatic shake-ups, no nasty exchanges at high-level meetings. Small wonder I often irritated the assembled group when I said, "I see the numbers, and I know who put them together and why, and I don't believe any of it!" More than once I was told, more or less politely, that "we" preferred to run the business based on "hard data" rather than "Bob's hunches." And, again more than once, "Bob's hunches" ultimately turned out to be correct and the dispassionate analysis dead wrong.

 

The main victim of vague direction, though, was product development, which ran as a reliable, predictable machine, turning out products of perfect mediocrity. It was here that I took an approach more like that of Ferdinand Piëch, in that I articulated a clear vision of what I wanted in design, visual quality and driving characteristics. Unblinded by 30 or 40 years of loyal GM service, I saw what was wrong with the system and its output, and I knew I had to change it if we were to be successful.

 

But in an American corporate environment attuned to "mutual consideration and respect," I could not be quite like Mr. Piëch. Where he could order others around under threat of dire consequences, I had to demonstrate, argue, persuade, field counterarguments and compromise, only to find that what I thought had been understood was not what people "decided" I had meant, and so the loop began all over again. It was time consuming. Mr. Piëch would have done it faster, but he was CEO, and I was only a vice chairman. Still, I often ask myself if the company could have achieved the turnaround in product excellence faster if I had been less patient and more brutal in my approach.

 

One of the things I found I had to do was teach the basics of what constitutes a beautiful interior, beautiful paint and superb fits of outside sheet metal. Friday after Friday, I was in one engineering shop or another, surrounded by midlevel engineers, designers and manufacturing execs, going over a future model in tiny detail, showing everyone how the same part looked on an Audi or Lexus (we always had one of each for comparison), then asking why we couldn't execute it like that, and listening to more or less valid answers.

 

I had to ask myself, and still do today, if it is the proper role of a vice chairman of a company with annual revenue of $200 billion to get down in the trenches for hours on end, teaching the love of perfection in the smallest details when perhaps a more impatient autocrat would simply have ordered—nay, demanded—that it happen, laying down a deadline and then firing masses of people if the deadline came and the results weren't there.

 

The fact is, though, that my effort to instill into the organization a drive for perfection and customer delight in all things was successful. And still I wonder—was I right? Did I change the core of the product development culture by teaching, or did I rely too much on my own will and my considerable influence to get what I wanted?

 

If the latter, excellence will soon be lost again, and talk of "how much we can cut before the customers start complaining" will rear its ugly head again. It will be death by a thousand small cuts, because anytime the company loses the focus of providing the very best it can, delighting the eye, ear, butt and wallet of the customer more than the competitors do, the inevitable decline sets in.

 

That's what happened at Chrysler after I left in 1998. I'd thought the culture had absorbed, permanently, the lessons I had so passionately taught during my stint as president of the company. But the Germans were obsessed with the belief that a mass-produced U.S. Chrysler or Dodge had to be much cheaper to produce than an equivalent Mercedes, and so every bit of customer-perceptible "worth" and "goodness" was stripped out, with disastrous consequences.

 

But this was a mistake. The fact is that all U.S. midsize cars contain the same parts count, the same engine and transmission technology, the same safety equipment, the same ABS brakes and traction control, the same or similar seats and interiors—and many of these parts even come from the same suppliers. A Chevrolet Malibu's material cost is within a couple percent of that of a BMW 3-Series.

 

I obviously failed to create a sustainable culture of customer focus and product excellence at Chrysler. But I believe the lesson will stick at GM.

[Adam]

He got canned in part of the bailout didn't he?

[Mallard]

He got canned in part of the bailout didn't he?

No, he retired. He actually stayed a few years after his original contract called for and now he's consulting for Lotus. Lutz is one of the few auto exec's that "gets it," and he's done a lot for GM, just like he did a lot for Chrysler. He's 79 years old, so it was probably about time to retire.

[Adam]

From the articles I have read about it and the quotes I have heard him say I wish he would have stayed around longer. I wouldn't want to give him the credit on gm's turn around but it is hard not to.