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The U.S. car industry's downfall: Putting numbers before design

Kai Ryssdal: If you're a car guy or a car girl, chances are pretty good you've heard of Bob Lutz. He's arguably the car guy. Over the past 47 years, he's worked for Ford, BMW and Chrysler. He was the vice chairman of General Motors from 2001 'til last year. Bob Lutz's got more than a few things to say about how American carmakers came to find themselves in their present predicament -- and he says 'em in his new book Car Guys vs. Bean Counters. Bob Lutz, good to have you with us.

Bob Lutz: Good to be here. Thanks.

Ryssdal: So I'm going to read you back to yourself just to get us going here, playing off on that line about car guys vs. bean counters. And here's what you have to say about the bean counters: "It's time to stop," you say, "The dominance of the number crunchers living in their perfect, predictable, financially-projected world who fail time and again. And give the reins to the product guys of either gender, those with vision and passion for the customers and their product or service." So that would be you, right, the product guy with the passion?

Lutz: Well, first of all, let me say you almost should have done the audio version.

Ryssdal: Well, thank you.

Lutz: But I don't necessarily place myself on the hero list. But it is true that giving the customer the absolute finest automobile that General Motors could possibly produce has proven to be the correct approach to the automobile business because this finance-generated effort to skimp and see how much cost can we strip out before people actually protest, I think is something that's taught in the business schools and it has been extremely damaging to American business -- and it doesn't have to be that way.

Ryssdal: Well let's explain how you would like it to be and the way, really, that you think it ought to be -- certainly in cars, anyway. You stress in this book the importance of design and the downfall, you say, of the American automobile industry has been putting design as an afterthought to those numbers guys.

Lutz: Yeah, because that's all part of the rational approach, where the vehicle was more or less defined by numbers: interior dimensions, luggage compartment dimensions, its overall length, etc. It was then handed over to design and design was basically told to put a wrapper around it.

Ryssdal: Well, what happened then in Detroit where nobody, except maybe you, seemed to realize this?

Lutz: Well, what happened is I'm really kind of a holdover from the '60s. When the place was basically run by the product enthusiasts, people like Harley Earl, after him Bill Mitchell -- these were designers who were on the covers of magazines and finance was counting the money. And then the scientific management took over. And of course, for a while the company lived off momentum. But the gist was just not enough focus on the vehicle itself.

Ryssdal: So all of that said, for your obvious passion for the subject, for your experience, for your successes which we have to grant you, how come the identifying line above your name on the title of this book says, "former vice chairman of General Motors" instead of "former CEO of General Motors?"

Lutz: This is the downside of being a creative person who does not play the political game too well. If I had,for instance, been a little bit more circumspect in my dealings with Lee Iacocca and perhaps had held my mouth, I might well have been his successor at Chrysler Corporation.

Ryssdal: Seems kind of an easy answer: You shot your mouth too much.

Lutz: I tend to be a person, when I don't know something I say, "I don't know, I'll have to look it up." I think boards like a CEO who is totally buttoned up, has all the figures. People with my personality generally don't make CEO.

Ryssdal: Bob Lutz, former vice chairman of General Motors. He's got a new book out about that company and the car industry and American business writ large. It's called Car Guys vs. Bean Counters. Bob Lutz, thanks a lot for your time.

Lutz: Hey, thanks very much for having me. I appreciate it.


Ryssdal: I stopped by a GM dealership while I was in China last week, where the company makes way more money than it does here. There's a slideshow -- including the part where they try to sell me two cars -- see it here.

About the author

Kai Ryssdal is the host and senior editor of Marketplace, public radio’s program on business and the economy.
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That is definitely a good news for everyone. We all wanted to save on our vehicle gas, that's why this car is really an answer. I have read of an article related to this. GM Co. has opened a new sales partnership that's sure to move new Chevrolet and GMC light
truck inventory. Until January 3, 2012, Costco members are able to purchase a light General

Motors truck or SUV from the Chevrolet or GMC line at select areas of the warehouse retail chain. Members will enjoy a “GM Preferred Price,” which is the same as car maker worker pricing. Resource for this article: <a title="GM partners with Costco to sell lights trucks, SUVs" href="http://www.cardealexpert.com/news-information/auto-news/gm-costco-lights... partners with Costco to sell lights trucks, SUVs</a>. This is another milestone for this company.

This is not just the story of one industry in the United States--it is the story of many over decades of mismangement by both management and its employees. The American education is horrendous compared to its late 19th century and early 20th century counterparts and it shows through by the lack of critical thinking skills of the people involved. In fact, history is filled with too many people assuming THEY KNOW best about EVERYTHING--when in many cases they were COMPLETELY out of touch of reality! In fact most non-fiction books since the 1970's seem to have a very biased postition to them, and it could be argued are "dumbed" down from earlier eras--and some would argue it was done on purpose.

This is not just the story of one industry in the United States--it is the story of many over decades of mismangement by both management and its employees. The American education is horrendous compared to its late 19th century and early 20th century counterparts and it shows through by the lack of critical thinking skills of the people involved. In fact, history is filled with too many people assuming THEY KNOW best about EVERYTHING--when in many cases they were COMPLETELY out of touch of reality! In fact most non-fiction books since the 1970's seem to have a very biased postition to them, and it could be argued are "dumbed" down from earlier eras--and some would argue it was done on purpose.

This is not just the story of one industry in the United States--it is the story of many over decades of mismangement by both management and its employees. The American education is horrendous compared to its late 19th century and early 20th century counterparts and it shows through by the lack of critical thinking skills of the people involved. In fact, history is filled with too many people assuming THEY KNOW best about EVERYTHING--when in many cases they were COMPLETELY out of touch of reality! In fact most non-fiction books since the 1970's seem to have a very biased postition to them, and it could be argued are "dumbed" down from earlier eras--and some would argue it was done on purpose.

While I agree the accountants shouldn't rule the roost I think Lutz is either willfully ignorant or just plain out of touch if he think the bean-counters led to the demise (or near demise) of the US Auto Industry.

How about both sides, creative and accounting ignoring long-term *needs* (reliability, efficiency, workmanship) of car buyers over short term *wants* of a segment of their buyers (gas guzzling SUVs, form over function). They ended up with fleets of poorly made vehicles with out-dated technology while the Germans, Koreans, and Japanese ate their lunch time and time again both at the low and high price points.

Lutz and his chums were all so out of touch we're lucky to even still have a US Auto Industry. And I expected some more challenging questions from Kai than this fluff reporting to promote Lutz's irrelevant book that feels more like an episode of Mad Men than something applicable to today's auto-industry.

Thanks so very much for talking with Bob Lutz - he clearly understands the automotive market and how it differs from others like consumer goods. It is and always will be about the product first when it comes to automobiles. They are significant purchases and extensions of ourselves - reflecting the way we live and how we want to be perceived. Price and quality are certainly factors, but if the product design and function does not speak to you then you are less likely to act on the purchase. Contrast the emotion of an automobile purchase with anything you might buy at Walmart/Target and you can gain some insight into his point of view. Consider why the P&G product management principals did not have the same impact when brought to GM.

Bean Counters vs Car Guys is nothing new. Remember the Corvair? It originally was designed with the same suspension as the Corvette. Sounds safe and secure, right? Then the bean counters said to cut the cost of the car. We all know the resulting suspension was basically unsafe. When will we ever learn from our mistakes?

It's about time someone recognizes the value and proper place (ownership) of the artisan/craftsperson.

Yet we're all responsible for encouraging companies to squeeze the companies to make maximum profits. As stockholders (or owners of mutual funds/401ks), we want our portfolio to improve no matter what. We blindly tell the companies to cut corners if they have to. Keeping out eyes shut to poor management and thinking only about the bottom line makes us ALL accomplices in the downfall of American businesses.

I agree with Bob Lutz’s assessment and would like to make a broader comment in the same premise. American companies are driven by stock price performance much more so than companies in other countries. Executives focus on short term stock price gains and, thus, short term profit margins and growth. Even if a company is healthy, its stock performance may lag competitors, which is perceived to be an actual financial problem. The solution of course is to cut expenditures which have to major dire consequences. First, is that companies are not producing the best product or service that they can be. Second is the reduction of the work force. The pursuit of short term stock performance is detrimental not only to our economy and the middle class, but to our competitiveness in the global economy. I wish that American companies would take the approach of optimizing profits instead of maximizing them, and the stock price will follow in suit.

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