Cars & TrucksRe-Igniting the Passion

The following is a speech by Bob Lutz gave yesterday to the Swiss American Chamber of Commerce in New York. It's caused quite a stir, and we thought you'd be interested in it.

Thank you, Ambassador Loretan, and good afternoon, everyone.

Thank you for that introduction, and I’d also like to thank Mr. Dinerstein for your fine welcome, and all your hard work for the Swiss American Chamber of Commerce.

It’s a pleasure to be with you today.

It’s also a pleasure for me to be a part of Swiss Roots— it’s a wonderful project with admirable goals, and I’d like to take the opportunity to thank the people here who are doing the real work!

The Swiss Roots web site is up and running, and it’s going to facilitate closer ties between our two nations — my two nations — and among the 1 million Americans of Swiss descent, and their countrymen in Switzerland.

Switzerland and the U.S. have a long tradition of friendship and cooperation, and they have much in common, not the least of which is multiculturalism. Both countries have a very rich and diverse cultural composition, although the Swiss have embraced it more perhaps, at least from a language standpoint.

Despite the penchant on the part of Americans to get the rest of the world to speak English, we really do have a lot in common, especially the values we espouse, like individual freedoms.

That’s why I felt no conflict of loyalties by serving in the U.S. military, because the two countries, so vastly different in size, were so similar in values, especially during the Cold War.

I thought I would become a military lifer, but to become a senior officer, I needed to get a college degree. So I enrolled at the University of California at Berkeley, and before I left there, I’d decided to pursue a career in business, in particular, the automotive business, starting with General Motors. And now, after more than 40 years and many stops along the way, I find myself back at GM.

Which seems fitting to me. Because not only is there a long, friendly history between Switzerland and the United States, there is a similar one between Switzerland and General Motors. But that shouldn’t surprise anyone, given that Louis Chevrolet was Swiss, and the Chevy Bow Tie logo isn’t a bow tie at all but a derivation of the cross on the Swiss flag.

When I was growing up in Switzerland, GM had an assembly plant that produced beautiful vehicles every day. Back in those days, this business was such that you could have a local assembly plant in nearly every country. Eventually, the auto industry transitioned to regional assembly, and regional optimization.

Now, the industry is rapidly entering a new chapter marked by global competition.

At GM, we’re positioning ourselves to compete in this global industry by leveraging our vast global resources.

We have streamlined our product development process, and aligned our planning, design, engineering and manufacturing capabilities under global auspices. It’s not possible any longer to operate as GM once did, as four regional and semi-autonomous auto companies.

Now all of our regions will be operating as one company going forward. And that will show in our improved product lineup. In fact, the process has already begun… the products we’ve recently introduced, and the ones to come in the short-term, are the best we’ve ever introduced. But it’s hard to get people to realize that.

Why? Let me give you a few examples of what some people are saying about us. You may have heard of this first guy:

President George W. Bush: “[The U.S. auto industry] needs to develop a product that’s relevant… GM is going to have to learn to compete.”

Another senior administration official told The Wall Street Journal: “The American auto industry needs to focus on producing cars that Americans want to buy.”

Automotive analyst Maryann Keller: “GM has forgotten how to make cars that people want to buy.”

Business Week’s David Kiley: “[GM] is not making very many cars that people want to buy.”

Are you starting to see why sometimes we think there’s a herd mentality out there? Here are some more…

The Wall Street Journal’s Lee Hawkins: “GM is having a hard time persuading Americans to buy its cars.”

Automotive analyst David Healy: "GM's problem is that … its products are boring."

St. Louis Post-Dispatch editorial: "Its real problem is that people aren't buying GM cars... To be blunt, GM cars are boring."

Fortune reporter Carol Loomis: “In product design, [GM] lost the magic long ago.”

Forbes Magazine senior editor Neil Weinberg: "[GM’s] biggest problem is product.”

The Wall Street Journal’s Paul Ingrassia: “Robert Lutz has been surprisingly ineffective at GM, as if mired down like a raisin stuck in oatmeal.”

I’m especially fond of that last metaphor — that was a new one for me. I didn’t even know raisins got stuck in oatmeal; I always thought they sort of floated there proudly, going about their business.

Anyway, well, now let’s look at some of our awful, boring products and see just how unpopular they are:
Chevrolet HHR

* We’ve raised our forecasts twice for this model, from about 60,000 initially to now about 132,000 annually.
* March was its best retail month since launch, with very little spent on customer incentives.
* California, Texas and Florida are the top three retail states since launch. Those are not traditionally strong markets for GM cars.
* So far in 2006, HHR has outsold the Chrysler Pacifica, Nissan Murano, Dodge Durango, and Honda Element.
* Our dealers are requesting 200% of our ability to supply…

Chevrolet Impala

* We are building 250,000 of these a year, and demand is running about 300,000.
* March was its best sales month yet. It overtook the Nissan Altima as the third-best selling car in America, behind Camry and Accord.


Buick Lucerne

* March was its best sales month since its launch last year, and 91% of sales were retail, meaning non-fleet, non-rental companies.
* Lucerne has the second-lowest turn rate in the segment, 25 days, trailing the Toyota Avalon by just one day.


Chevrolet Corvette

* The world’s great affordable sports car, Corvette is sold out.


Pontiac Solstice

* Solstice? Sold out. Best turn rate of any vehicle in its segment.


Saturn Sky

* “All available production for 2006 is accounted for.” In other words, sold out.

Before I go on, I’d like to show you the Sky we introduced at the New York auto show just this morning, and the other Saturns we showed:

* Saturn Sky Red Line
* Saturn Aura
* Saturn Outlook
* Saturn PreVue


So we have big plans for Saturn, as we do for all of our brands. But at the moment, perhaps what we’re most proud of is our new fullsize sport utilities. Let’s look at what the “experts” had to say before they came out earlier this year:

University of Maryland business professor Peter Morici: "They're married to large vehicles and big engines, and consumers just aren't buying them right now… SUV sales are going to continue to lag and GM is almost in denial on that issue."

Analyst David Healy: "GM is … betting the ranch that they can sell SUVs in an environment of $2.50-a-gallon gasoline, but the big SUV segment will continue to shrink, and GM is going to have its work cut out for it."

Autobytel analyst Brian Chee: “Everybody else is coming out with subcompacts, crossovers and smaller cars while GM is alone in the woods when it comes to these big SUVs.”

By the way, it’s worth pointing out that we are most certainly not alone in the woods; Chrysler and Ford are coming out with new fullsize SUVs, and, would you believe it, Toyota is readying a new line of fullsize trucks, too. So, apparently, not everyone thinks this segment is dying out.

It makes you wonder just how these experts get to be experts!

Well, we went ahead and launched our new SUVs anyway. Let’s see how they’re doing:

* Year-to-date GM share of the large utility segment is 67.5%, up 8.6 pts from year ago
* Non-GM Source of Sales of ’07 models: Tahoe (29.8%), Yukon (27.8%), and Escalade (26.4%)
* Average transaction price increase versus last year’s models: Tahoe (+$6.5k), Yukon (+$6.7k), and Escalade (+$10k)

So, we’re selling more of them, for more money. The pundits will say that’s just because they’re brand new, but we’ll see, because we think these are the best SUVs that have ever lived. Take a look at them:
Chevrolet Tahoe

* March retail sales were up 35% from February, and it’s doing great on the West Coast.
* Total ’07 model year sales are the highest in the segment
* In March, it had a turn rate of just 19 days, compared to 80 days for the Ford Expedition and 41 for the Toyota Sequoia

GMC Yukon

* March Yukon sales were up 109% from February, and it had a turn rate of just 16 days, on average.

Cadillac Escalade

* March sales were up 73% from February. Its total sales lead the Lincoln Navigator by 300 units, and it has outsold the Infiniti QX56, Range Rover and Lexus LX 470 combined.
* Vehicles turned in an average of 7 days in March. That means the inventory is turning four times a month.

Now, all of this is amazing to me. We don’t make any cars or trucks that anybody wants to buy… but we sure do sell a lot of them. Either we are holding a lot of customers at gunpoint in our dealerships and forcing them into our vehicles, or the so-called experts are absolutely blind to what is happening in the marketplace.

It’s as if the folks working the op/ed and business pages don’t even read the product reviews anymore. Because if they did, they’d see that our cars and trucks are getting largely rave reviews.

Anita Lienert in The Detroit News: “The redesigned Escalade stands out as the sexiest full-size SUV on the market, an awesome Detroit offering that hits a bull's-eye in such important areas as horsepower and cabin design.”

Paul Eisenstein, The Car Connection.com: “The Escalade is about as good as a full-size SUV gets.”

And how bout this one?

Joe Langley, CSM Automotive analyst: “GM’s redesigned full-size SUVs will prove the segment is alive and well despite unexpected events that try to wreck their place in the market. The segment is far from dead. I recommend taking any of them for a drive, and you’ll be as surprised as I was.”

I make that same recommendation to all of you, on the SUVs or any of our new vehicles. They’re really a big step forward for GM.

All we have to do now is make people aware of it. We have to get word out that we’ve improved, and the marketplace bears us out.

For the first quarter of this year, our launch vehicles — that is, our newest cars and trucks —accounted for 30 percent of our sales. That’s more than double where we were a couple of years ago.

We expect that recently launched vehicles will account for 29 percent of our U.S. sales volume this year, and as much as 33 percent next year. That’s up from 22 percent in 2005.

And I should point out that despite our financial difficulties, we backed up our commitment to great products by raising our capital spending in 2005, and we’ll increase it again in 2006 to $8.7 billion, the bulk of it on developing new cars and trucks.

It’s full speed ahead for us.

Perhaps you have heard the economic parable about the old man who sold hot dogs on the street corner. He was hard of hearing so he had no radio. He had trouble with his eyes, so he read no newspapers. But he sold good hot dogs.

He sold so many that he increased his meat and bun orders. He bought a bigger stove to take care of his booming business. Business was so good he brought his son home from college early to help him out. And his son said:

"Father, haven't you been listening to the radios or reading the newspapers? The economic situation is terrible. All of our jobs are going away — we’re headed for depression. This is no time to be spending like this."

The father thought to himself, "Well, my son's been to college, he reads the papers and he listens to the radio, so he ought to know."

So the father cut down his meat and bun orders, took down his signs, and his hot dog sales plummeted almost overnight.

The father said to the boy, "You're right, son, we certainly are in the middle of a great depression."

Well, we don’t care what the newspapers, or the radio, or our kids tell us. It becomes a self-fulfilling prophecy; we’re not going to listen to the naysayers — we’re going to listen to our customers.

Finally, let me just say that perhaps the title of my remarks today was misleading…. We said “Americans and Automobiles: Re-igniting the Passion.”

But what we really mean is… Americans and American automobiles… and particularly, General Motors automobiles.

People who think it doesn’t matter who owns our auto industry are flat wrong. They think it doesn’t matter because the Japanese and Germans and Koreans are “producing” in the states now. But they’re not “producing”— they’re “assembling.” The parts are mostly brought from overseas, and the profits for reinvestment don’t stay in the U.S.

These are facts about our domestic auto industry:

* GM, Ford and DaimlerChrysler account for 4% of the U.S. GDP, and 11% of all manufacturing shipments.
* We collectively employ 400,000 people — that’s nine out of 10 American autoworkers — and affect 7 million jobs in auto and related industries.
* We provide healthcare for 2 million Americans, and pension benefits for 800,000 retirees.
* We buy 80% of the auto parts sold in the United States.
* And we’ve made 85% of the total investment in the U.S. auto industry since 1980.

So remember those facts the next time somebody says it doesn’t matter what country’s supplies the cars and trucks we buy.

If you’ll indulge me, I’d like to read you a letter from someone who understands this. It was written by Congressman John Dingell of Michigan, to the president, in response to his comments on the U.S. auto industry. Congressman Dingell writes:

“The American auto industry is not being hurt, as the Administration suggests, because of the vehicles it is producing. Contrary to the statements of your chief economic adviser, American manufacturers lead the industry in fuel economy in nearly every segment. Our automakers face healthcare and pension costs which foreign automakers do not.

“These problems are only compounded by the Administration’s failure to prosecute unfair trade practices by our competitors, counteract currency manipulation by Japan and China, and relieve the crushing burden of healthcare costs.

“Mr. President, we owe the auto industry a debt of gratitude for its contributions to this country and I am troubled by… the Administration’s complete disregard for this escalating crisis. The industry is anxious to restore its competitive edge, but they cannot do it alone.”

He’s right. We are not looking for any handouts. We just want a level playing field, and a chance to compete. We want people to consider our products again, because they deserve consideration.

Our quality numbers are way up from where they were in the past. Our designs are more compelling, more dynamic.

I am intensely and unapologetically proud of what we’re doing at GM, and also of what all of the so-called Big Three are doing these days. And I’m allowed to be: I’ve worked for all of ‘em.

GM has the broadest product lineup of any manufacturer … we have more models that get 30 miles per gallon or better on the highway than anyone else … we have OnStar, the industry’s leading safety and security service … we have the best large SUVs on the planet … and we have a host of great new cars and trucks worthy of your consideration.

Once we get that consideration… once we raise people’s awareness… once we get back on their radar screens, we will put them in the kind of cars and trucks that inspire passion.

Don’t take my word for it. Go drive one of our vehicles — I think you’ll be pleasantly surprised at what we have out there now, and what we bring out in the very near future. And I think you’ll be as proud of our products as I am, just like we’re all proud of our Swiss Roots.

But before you head out to our dealerships, I’d be glad to take some of your questions.