Ed Wallace

Bob Lutz, Real Car Guy

Since its birth the automotive industry has been a breeding ground for oversized personalities that both enthrall and infuriate the car-loving public with their pontifications. That engagement is lasting; the short list of names most will remember includes Henry Ford, his grandson, Walter Chrysler, Sergio Marchionne, Lee Iacocca, Carlos Ghosn, Bob Lutz, and the current heir apparent, Elon Musk.

However, the list is getting smaller as the years go by. The first four names are no longer with us; Iacocca speaks only rarely since he retired decades ago; Ghosn is in jail. But Bob Lutz is now the old lion of the auto industry and is still speaking about the brilliance and stupidity of those who have tried to alter the industry in some meaningful way. It’s almost impossible to believe that he once sold vacuum cleaners in California, trying to support his family while attending college and flying Marine Corps jets.

Like Louis Chevrolet, Bob was born in Switzerland at the start of the Great Depression. His father, an executive with Credit Suisse Bank, in time would become vice chairman; but, as Bob always took great pride in telling everyone, his father still went to work at the bank every day into his nineties. No doubt if Bob had his way he would still be leading some auto manufacturer’s renaissance from near death to recapture their former glory. He isn’t, but he’s more than ready to comment on those trying to do that.

The Beginnings of Excellence

His father helped set him on the road to success. On receiving his MBA from Berkeley, Lutz first got a job offer from one of the lesser automakers. But on hearing this news, Dad told his son that if he wanted to be in the automobile industry, he should go to work for the biggest car company. With that advice, Lutz Sr. called General Motors and found his son’s first real job.

Working for a large, established company such as GM would have not been much fun for a young man in those days. As reported numerous times in this column, General Motors’ decline that ended in bankruptcy in 2009 actually started with chairman Frederic Donner’s reign of errors starting in the late Fifties. True, GM was still a monster in the auto industry at the time Lutz appeared, but that was based on momentum, brilliant cost control, and designer Bill Mitchell’s exceptional design studio’s decade-long run as the industry leader.

Lutz moved over to BMW after eight years with GM, just as the Bavarian automaker’s luxury reputation and sales finally took off. But only three years later it was off to Ford of Europe, where Lutz actually oversaw the first of the aero-designed Ford products, such as the Sierra and Scorpio models. (Years later, rewriting its history, Ford would call the mid-Eighties Ford Taurus the first of the aero-cars, but that was in no way true.) During the Second Energy Crisis it was Ford of Europe, under Bob Lutz’s direction, that turned massive profits — enough to save the entire company during that economic downturn. That achievement was enough to bring him back to America to head up Ford’s truck division and take a seat on the board of directors. It was not enough to keep him from being run off shortly thereafter.

The Days of Whine and Roses

The Eighties was a very strange time to work in much of corporate America, mostly due to the advent of the book and PBS series, In Search of Excellence. There’s absolutely nothing wrong with a corporate commitment to being better than any competitor you might have; but in reality the majority of the public often fall for the promised lower price and inferior goods — as long as the misleading ad campaign screams that you’re getting better quality for less money.

As a result of corporations’ believing that corporate attitude could be changed from the bottom up, in spite of the fact that attitude at the top didn’t change, corporate shrinks were sent out across America to first evaluate and then train better “teams of employees.” Ultimately it was as if corporate leaders, because they were incapable of creating a culture of winning by doing the right things, subcontracted that out.

And with those corporate psychologists came new funny names for everything a business did. Even the dealership I was running in 1986 hired a corporate shrink; and every Thursday morning we had a mandatory 7:00 a.m. encounter group meeting; all of the managers in the dealership attended, and it was led by our shrink. Now, I thought that would have been a great time to bring up issues between departments that could be solved, with all the managers there to help decide how to eliminate the problems, thereby improving the customer experience. I was told that was too aggressive an idea for our warm and fuzzy get-togethers.

Instead I would refer to those Thursday morning meetings as our time to throw roses at each other and profess our undying love for our management staff. We even started off those meeting by reciting our corporate motto: “We are dedicated to you, the customer, and until your perception of us is one of excellence we will not be satisfied.” Eventually, I stopped by a pool supply store and bought one of those floating dolphins, the one with the bottom weighted so it looked like Flipper was standing out of the water. I wrote down our motto on a piece of cardboard and labeled the float toy, “Our Corporate Porpoise.” I put it on the table for our next love-in.

Up at Ford Bob Lutz was equally frustrated with that nonsense and wrote in a memo, “Ford terminology in memos, meetings, and reports is changing at an accelerating rate. New words are emerging almost daily as yet another group strives for supremacy in communicative obfuscation.” Lutz then suggested his own new verbiage for Ford management, “Committees were now to be known as interactive synergistic substructures, and a bigger committee would now be an enhanced synergistic substructure.” For the record, Lutz lost his job first, but both of us moved on to other things.

Show the Heroes the Door

Lutz took over design at Chrysler and created the company that exists to this day because of his accomplishments. But, because he and Iacocca weren’t getting along all that well, Lutz was bypassed to take over Chrysler when Iacocca retired. Instead Bob Eaton, who would shortly sell Chrysler to Daimler Benz, was given the job. Lutz was then out of the auto industry for a few years, but Chrysler survived because Lutz had forever changed its image with the public. In 2001 Rick Wagoner, who had just been made CEO of General Motors, hired Bob Lutz to remake the corporation’s vehicle lineup.

There’s a perception today that Wagoner caused GM to fail, but that’s not true in any way. Wagoner didn’t put GM $80 billion in debt; he inherited a 40 year old mess when he took over the company. And in the shocked-still economy after 9/11, we also saw the start of offering super-sized incentives to sell vehicles. During the first decade of the new century, instead of the occasional $1,500 rebate offered to increase sales of Chevy Suburbans in the Nineties, now it would often take four, five, even six times that amount of money to move the market.

Moreover, all the automakers had made the same mistake in the last half of the Nineties, doubling and tripling down on SUVs and trucks because gasoline prices had fallen for the entire decade, and by 1999 gas cost 99 cents per gallon. But even before Bill Clinton left office gasoline had jumped back up to $1.60. After Hurricanes Kristina and Rita damaged offshore drilling rigs, in 2005 gas suddenly hit $3, and three years later it passed $4 a gallon just as the entire world’s economy collapsed. But by then Bob Lutz had created a new modern era for GM vehicle design, both inside and out. It was Lutz who convinced GM to create the Chevy Volt and to abandon the push toward hydrogen fuel-celled vehicles. I has been asked to write the critical outside review of fuel-celled cars that circulated around GM’s upper management.

David Welch, formerly of the Star-Telegram, at the time Detroit Bureau Chief for Businessweek magazine and now holding the same position for Bloomberg, said it best. The reason General Motors is even alive today is because of Bob Lutz’s product design turnaround and Fritz Henderson’s reorganization of the company after the bankruptcy.

Lutz, Henderson, and Wagoner were all shown the door.

Lutz was there for BMW’s critical push to become a legitimate luxury car manufacturer, just as he was there to save Ford during the Second Energy Crisis. From there, every Chrysler dealer in America today owes their continued existence to Lutz’s work in the Nineties. And GM might not have survived bankruptcy if Lutz hadn’t made its vehicles so desirable during the first decade of this century.

And now Lutz is passing judgment on everyone else in the industry, and he doesn’t hold back. That story next week.

Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, bestowed by the Anderson School of Business at UCLA, and hosts the top-rated talk show, Wheels, 8:00 to 1:00 Saturdays on 570 KLIF AM. Email: edwallace570@gmail.com
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