Bob Lutz

Nobody asked me but . . .

Bob Lutz showed up in LA recently for an impromptu breakfast with the Motor Press Guild, aka MPG.  Bob is always good for a few juicy quotes so I hustled up the 405 in typical OC-LA rush day traffic to grab an earful.

Bob didn’t disappoint.  He started with a comment about GM needing to make headway in the Smile States and then proceeded to elaborate on some recent successes in California:

  • GM’s retail share of market in California for Q4 2009 was 9.3%, up 0.8 percentage points (PP) from Q4 ’08.
  • Compact Crossover and large car sales were up 4.7 PP and 2.8 PP, respectively for the same period.
  • In a recent design clinic of an upcoming new Cadillac versus its European and Asian competition, the clinic attendees liked the Cadillac more after they found out it was a Cadillac than when they didn’t know it was a Cadillac.  Lutz says this is the first time this has happened.
  • In back-to-back tests conducted in the GM wind tunnel the following coefficients of drag (Cd) were measured:
    • Honda Insight: 0.32
    • Toyota Prius: 0.30
    • Chevy Volt: 0.29
  • For January 2010 versus December 2009 GM’s incentive spending was down $800 and its average transaction price was up $250 during a period when the industry average fell $400.
  • Residuals are up for GM.
  • Conquest rates are up.
  • According to the latest J. D. Power IQS (Initial Quality Study) scores, Chevy is essentially equal with Toyota and Honda with 103, 101 and 99 problems per 100 vehicles, respectively.
  • Since 2007 GM has had a 45% reduction in warranty claims and a 75% reduction in recall costs.
  • In January 2009 Chevrolet Equinox purchase intent was at 3%.  For January 2010 that number has jumped to 14%.
  • The new Chevy Cruze is a critical new model; it’s larger than Cobalt; the EPA measures it as a midsize sedan even though it is a compact.  The interior is beyond the norm for the class and one model will get 40 mpg on the highway.
  • The Chevy Spark is also coming.  This is a very small car that Lutz calls “funky” and “fun.”  Sales expectations are modest.
  • Chevy is producing a Caprice Police model.  Think of a rear drive Pontiac G8 but with a longer wheelbase.  Perpetrators need to be comfortable, too, according to Lutz.
  • Aveo RS is all new; it’s designed and engineered by GM using a German global platform.  It’s almost the size of the Cobalt making it a subcompact with compact room.  It will also be offered in a 4-door version.
  • January 2010 versus January 2009 purchase intent for the Buick LaCrosse has jumped from 2.7% to 19.6% in its segment.
  • The new Buick Regal will offer a turbo version.
  • 50% of GMC Terrain buyers are new to GM.
  • Don’t expect any diesel cars from GM.  According to Lutz the US emission regs are much more strict than Euro 5 and the costs to build a compliant diesel engine are very high.  The 30% fuel economy advantage that diesels have historically enjoyed versus gasoline spark ignition engines has dropped to the high teens because of emission requirements.  And the stratified charge engines GM is working on will offer about an 11% improvement in fuel economy compared to current gasoline engines.  These stratified charge engines work as both a spark ignition engine and a diesel depending upon various engine conditions.  Lutz also mentioned the price of diesel fuel in the US s having a major impact.  In the US you can pay more for diesel than for premium unleaded.  In Europe the price of diesel is much lower because of high taxes on gasoline.  Lutz estimates that a US diesel will be at a $5000-$6000 disadvantage compared to a gasoline engine.  He also noted that all current European diesels are currently operating in the US on waivers which will go away.
  • When will we see Chinese-made GM cars in the US?  Not soon, according to Lutz, because it’s a myth that you can produce cars more cheaply in China.  He cited the issue of low engineering costs in China because of reverse engineering, mentioning as an example a Great Wall SUV being a Toyota clone that you can’t sell anywhere but in China.  Costs will increase dramatically when the Chinese have to design their own platforms from the ground up.  Plus you have to pay high costs for shipping.  Lutz says US manufacturing costs are favorable because of the value of the dollar versus other currencies.
  • GM’s partnership with SAIC and Wuling is very successful but won’t result in Wuling vehicles coming to America anytime soon, unless you think South America and other areas of Asia where they are already being exported.
  • GM’s way of doing business has changed completely under CEO Ed Whitacre.  It used to be, “ Make the most money, not the best cars.”  Lutz says the new mantra, “Sell the best cars” has become deeply embedded into GM and he sees a new esprit de corps at GM.
  • On the price of gasoline in America and making newer technologies (plug-in hybrids, electrics, etc.) affordable compared to their gasoline piston engine counterparts Lutz has this to say: American’s only pay 25-30% of what the rest of the world pays for gasoline.  The federal gasoline tax in this country is only 18.4 cents per gallon.  This should be raised by 25 cents a year.
    • For January 2010 versus December 2009 GM’s incentive spending was down $800 and its average transaction price was up $250 during a period when the industry average fell $400.
    • Residuals are up for GM.
    • Conquest rates are up.
    • According to the latest J. D. Power IQS (Initial Quality Study) scores, Chevy is essentially equal with Toyota and Honda with 103, 101 and 99 problems per 100 vehicles, respectively.
    • Since 2007 GM has had a 45% reduction in warranty claims and a 75% reduction in recall costs.
    • In January 2009 Chevrolet Equinox purchase intent was at 3%.  For January 2010 that number has jumped to 14%.
    • The new Chevy Cruze is a critical new model; it’s larger than Cobalt; the EPA measures it as a midsize sedan even though it is a compact.  The interior is beyond the norm for the class and one model will get 40 mpg on the highway.
    • The Chevy Spark is also coming.  This is a very small car that Lutz calls “funky” and “fun.”  Sales expectations are modest.
    • Chevy is producing a Caprice Police model.  Think of a rear drive Pontiac G8 but with a longer wheelbase.  Perpetrators need to be comfortable, too, according to Lutz.
    • Aveo RS is all new; it’s designed and engineered by GM using a German global platform.  It’s almost the size of the Cobalt making it a subcompact with compact room.  It will also be offered in a 4-door version.
    • January 2010 versus January 2009 purchase intent for the Buick Lacrosse has jumped from 2.7% to 19.6% in its segment.
    • The new Buick Regal will offer a turbo version.
    • 50% of GMC Terrain buyers are new to GM.
    • Don’t expect any diesel cars from GM.  According to Lutz the US emission regs are much more strict than Euro 5 and the costs to build a compliant diesel engine are very high.  The 30% fuel economy advantage that diesels have historically enjoyed versus gasoline spark ignition engines has dropped to the high teens because of emission requirements.  And the stratified charge engines GM is working on will offer about an 11% improvement in fuel economy compared to current gasoline engines.  These stratified charge engines work as both a spark ignition engine and a diesel depending upon various engine conditions.  Lutz also mentioned the price of diesel fuel in the US s having a major impact.  In the US you can pay more for diesel than for premium unleaded.  In Europe the price of diesel is much lower because of high taxes on gasoline.  Lutz estimates that a US diesel will be at a $5000-$6000 disadvantage compared to a gasoline engine.  He also noted that all current European diesels are currently operating in the US on waivers which will go away.
    • When will we see Chinese-made GM cars in the US?  Not soon, according to Lutz, because it’s a myth that you can produce cars more cheaply in China.  He cited the issue of low engineering costs in China because of reverse engineering, mentioning as an example a Great Wall SUV being a Toyota clone that you can’t sell anywhere but in China.  Costs will increase dramatically when the Chinese have to design their own platforms from the ground up.  Plus you have to pay high costs for shipping.  Lutz says US manufacturing costs are favorable because of the value of the dollar versus other currencies.
    • GM’s partnership with SAIC and Wuling is very successful but won’t result in Wuling vehicles coming to America anytime soon, unless you think South America and other areas of Asia where they are already being exported.
    • GM’s way of doing business has changed completely under CEO Ed Whitacre.  It used to be, “ Make the most money, not the best cars.”  Lutz says the new mantra, “Sell the best cars” has become deeply embedded into GM and he sees a new esprit de corps at GM.
    • On the price of gasoline in America and making newer technologies (plug-in hybrids, electrics, etc.) affordable compared to their gasoline piston engine counterparts Lutz has this to say: “One way to encourage fuel efficiency would be an annual increase in the federal gasoline tax of, say, 25 cents per year, so that people, seeing higher fuel prices coming, could take that into consideration before their next purchase.”

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