Lutz on the Payoffs of GM's Re-Engineering

General Motors is beginning to see the payoff from better execution of some common-sense measures the auto industry has been talking about for decades, such as sharing costs across product platforms while keeping the resulting models distinct. For instance, the 2008 Cadillac CTS saves money, by sharing electronic parts with other models, out of sight of the customer.

In the long run, GM’s strategy includes measures like sharing costs and parts among several large, rear-drive models developed by its Holden subsidiary in Australia, to be built and sold around the world. Ford is taking a similar strategy, which it calls “One Ford.” Past attempts at sharing turned out poorly, like the notorious, Chevrolet-based Cadillac Cimarron of the 1980s. At the recent New York International Automobile Show, Bob Lutz, GM’s vice chairman for global development, chatted with me about some of these changes. Here are a few excerpts:

Q: The industry has been talking for years about sharing “architecture,” or “platforms.” But somehow the industry never got it right, sharing the things customers don’t care about, and keeping the things distinct that customers do care about. Why does the industry in general and GM in particular seem to be getting it right, all of a sudden? Why now?

Well, I’m glad to hear you say, ‘GM in particular.’ As to why now, I like to think we have smarter people in charge.

Q: What else has changed?

We had a regional model. We believed in the concept of four regional automobile companies. They were run by seasoned and good automotive executives, but they each had their own capital budgets, their own engineering budgets, their own design groups. It was basically four autonomous companies, with General Motors acting as a holding company at the top, to consolidate the financials. In a way, GM never really was the world’s biggest car company, because the only way it was a single company was in the financial results.

Q: How is the new structure better? Can you give a concrete example?

That is not an efficient way to do business any more, not when you’re competing with companies that are truly global. There was monumental waste. For instance, the previous-generation Chevrolet Malibu was separate from the Opel Vectra, which was separate from the Saab 9-3, which was separate from a model developed by Daewoo, and there was another one for the Buick Lacrosse.

There was no interchangeability, no ability to inter-build in common assembly plants. Today, we did a new global architecture, taking five architectures down to one. They can still have a different width, a different wheelbase and different height … and they look as much different as they did before, and they feel as much different as they did before.

Q: Can you put any numbers on the cost savings

Look at what it costs to develop five different air conditioning systems. Then having done that, you buy 200,000 here, and 150,000 there, all different systems. Now you go to a supplier with the same, common air conditioner, and you say, “What am I bid to build 1.2 million air conditioners?” … The customer doesn’t care about the size and shape of the air conditioning unit, as long as it works.