Automotive News World Congress - Remarks by Robert A. Lutz

Robert A. Lutz Product Development and Chairman, GM North America Hyatt Regency Hotel - Dearborn, Michigan January 14, 2003

Thank you, Keith [Crain], and good evening everyone. It's great to be here tonight during the annual Automotive News World Congress.

I hope that 2003 has started off well for everyone, and that all of you had a terrific holiday season, wherever your travels took you.

This can be a trying time of year to travel, I know, and the world is an increasingly difficult place to get around in these days. There has been horrible winter weather in the northeast... high winds and wildfires in the west... and danger and uncertainty abroad.

There has even been some danger right here in the United States. I read where the California Parks Department has issued a warning to holiday travelers hiking or camping near Yosemite to be especially wary of bears, and to take extra precautions.

They advise people to wear noise-producing devices such as little bells on their clothing, to alert but not startle the bear unexpectedly. They also advise carrying pepper spray in case of a bear encounter.

It's also a good idea to watch for fresh signs of bear activity and know the difference between black bear and grizzly bear droppings.

Black bear droppings are smaller and contain berries and maybe squirrel fur ... Grizzly bear droppings have little bells in them and smell like pepper spray.

If I ruined anyone's dessert, I'm sorry, but I had to make sure you're very careful the next time you're out in the woods...

Hopefully the only bear you've had to deal with is battling Detroit weather and traffic for this event and for last week's auto show.

It was certainly worth the effort though. I thought it was a great show, not only for General Motors but for all the auto companies.

The show embodied everything that's great about the auto industry, and made me proud to be part of this business. I honestly can't recall when I've seen the bar raised so high from just one year to the next.

But before I get into that, I don't know if you saw Time Magazine over the holidays, but their annual Person of the Year issue came out. This time it was Persons of the Year - the winners were The Whistleblowers, the three women who bravely exposed what went wrong at Enron, WorldCom and the F.B.I.

Inside the issue was a blurb that looked back at a time when America celebrated its business leaders instead of those who rightly exposed their misdeeds. In 1955, believe it or not, Time's Man of the Year was Harlow Curtice, president of General Motors.

Those were different times - boom times. The article stated that Curtice was not named Man of the Year because he ran the world's biggest manufacturing company, nor because his was the first corporation to make more than $1 billion in net profits in a year.

No, the story said this: "Harlow Curtice is the Man of 1955 simply because, in a job that required it, he has assumed the responsibility of leadership for American business. In his own words, 'General Motors must always lead.' "

Although the world is a very different place today, I think this is still true. And being at GM, I'd agree with the sentiment that GM must always lead. But to take it a step further, in the big picture, I think the truth is "The automotive industry must always lead."

And that's what you saw down at Cobo last week... an industry preparing itself to lead once more. This industry will continue to stimulate the world economy in finding new and exciting ways of putting the world on wheels... while being responsible and sound corporate citizens.

But that's only part of its leadership. When the American economy really powered up in the 1950s, it was the auto industry that led the way - that's why Time Magazine made Curtice Man of the Year. He was a symbol: the most powerful man in the most powerful industry.

This business can once again assume the mantle of leadership for American industry. Other industries have been rocked by scandal and misfortune, and we've had some tough financial times too, but I believe we are poised to lead.

I'm not saying it will happen the same way, of course. For example, much to Rick Wagoner's disappointment, I don't believe Time Magazine will ever make the head of General Motors Man of the Year again.

But I do think that because of the efforts of all the executives like Rick and John Devine and Gary Cowger at all the auto companies, this industry can lead again.

That's because leadership, combined with a common sense approach, gives us an opportunity to create a new Golden Age of the Automobile, and our industry.

Now before you think I'm off my rocker, or need to be strapped to one, bear with me and hear me out...

In general a Golden Age arises from a confluence of two things: the brutally competitive nature and challenge of being in this industry, and the wealth of creativity to turn challenge into opportunity.

When I was asked to speak to you this evening, I asked the organizers if there were any specific issues they'd like me to address.

Our friend Ed Lapham replied by informing me that the theme of the World Congress this year is "Creating Sustainable Value Amid Brutal Competition."

He added that it might be a good idea to address that topic by expounding upon some of the things I talked about at last summer's Management Briefing Seminar up at Traverse City. And since he referred to my remarks there as "astute observations," quote-unquote, I thought I would do just that.

Now, for those of you who don't come home from work every night and watch a videotape of my Traverse City speech, let me try to summarize what I said up there.

I talked largely about common sense. I said how I believe common sense is the single most important tool we have at our disposal. And the best thing about common sense is that it's always improving. It's a skill that grows sharper with experience... honed with every failure and reinforced with every success.

I said that common sense is what keeps us from panicking in times of gloom and doom, because our experience has shown us that things will turn around.

I made the analogy that it was like watching a movie for the third time - you learn not to panic at the scary parts. You become more perceptive to nuances in certain scenes that you might have missed the first time around.

Ed asked if the movie has been reworked this time around... have the characters, locale and even the plot changed so much that the remake is different?

Interesting question. I thought a lot about it and I came up with an answer ... : No.

Even though new players come and go, new plot lines develop and new threats crop up, the basic blueprint is the same. In the end our common sense and hard work and guts will see us through.

I can't help but be optimistic about it. I know it's the gloomiest month of the year here, but it always starts off with the L.A. and Detroit shows and that can't help but make you optimistic.

Detroit alone had something like 60 product introductions and a dazzling array of concept cars. The level of sophistication and refinement in the products at the show was better than it's ever been, in my opinion.

There is a renewed focus at the auto companies on three things that will lead the industry into a new Golden Age: product, product and product. That means a new focus on great design and powertrains and advanced technology, which combine to make great products.

We as an industry have an opportunity, barring some kind of calamity in world events, to enjoy a period of prosperity and importance not seen since the last Golden Age of the 1950s and '60s, back when I was starting my career.

(Pure coincidence, by the way, that things haven't been exactly Golden since then!)

The '70s were bad, the '80s were worse and the '90s didn't start off so hot either.

But every Golden Age comes on the heels of trying times. The Age of Enlightenment followed the Dark Ages. What's referred to as the Golden Age of baseball came right after the Dead Ball Era.

And the first Golden Age of the automobile, in the '20s and '30s, came forth from the chaos and disorder of the industry's nascent years.

Most people, incidentally, define the Golden Age as the time in between when your kids are too old to need a babysitter but too young to ask for the car keys... but that's not what I'm talking about.

What I'm saying is, this industry has had some very trying times in the past few decades... some good times, yes, and some very bad times.

What it hasn't had, are periods like the '50s when people looked at an automobile like it was the most beautiful thing they'd ever seen... When they treated it like it was the most important thing in their lives... When cars or trucks became international cultural icons... When entire towns were employed and families fed and fortunes made because of the automobile.

I'm not saying all that is going to happen again, or happen exactly the same way. But I think the opportunity exists for the industry to perform as it did back in its glory days.

I think a few things need to be kept in mind to bring about this next Golden Age. I'll call them Lutz' Golden Guidelines, the Enablers of a New Automotive Golden Age. I was going to say I'd like to see it in full swing by 2004, but in light of recent events, now I'll give it till 2005.

The first thing to keep in mind is "The world is what it is: Deal with it."

That basically means, hey, we live in a very complicated world... accept it for what it is and adapt. Don't wait for it to adapt to you. These are difficult, uncertain economic times, and a steady, calm hand on the tiller is required.

That's the first lesson of success: Have the capability to manage it. Don't panic. Let's keep our heads while those around us are losing theirs. And let's do it with integrity, creativity, passion and innovation. Companies with common sense of purpose will be able to swiftly adapt to all sorts of market conditions, and those that cannot, will suffer because of it.

The current attack on SUVs is a good example. Beyond a reactionary book published last year, the anti-SUV factions are turning the issue into one of religious zeal and national security. And while we may find their arguments absurd, the best way to respond is to keep a cool head. The irrefutable fact is there are more vehicle choices in the market than ever before, and the highly intelligent, American public is choosing what they want from this broad array. Enough said.

The second guideline is "Like humans, all companies are different - do what's best for your particular situation."

Don't worry about what the guy up the street or across the sea is doing. Do your best to stay competitive, but don't waste energy agonizing about his every move. It makes you lose focus, and that means lost time, and eventually lost profits.

We're all different companies with different needs, strategies, perspectives, cultures and core markets. We should celebrate these differences and use them to our advantage, not bemoan our own situation because it isn't like everyone else's. It's the uniqueness that we should be exploiting that will lead to success.

We all have a tremendous opportunity to build the best vehicles that have ever been built. And part of the reason why is these diverging product philosophies that result from the diverse, creative talent pool at our collective disposal.

Which leads me to the third enabler... "The love affair with the automobile is NOT dead... but maybe we just forgot how to do it!"

Every love affair has hiccups. Maybe it wasn't the public that lost its lust for cars and trucks... maybe we just temporarily misplaced the manual.

I think we've found it again. If you don't believe me, go down the street to Cobo and see the passion and enthusiasm on people's faces as they look at all those beautiful new vehicles. The automobile is still the most emotional product on the market today.

No matter what you've heard, keep this in mind: They still write songs about cars.

I think the public's passion for cars and trucks will reignite, hotter than ever, as the vehicles continue to improve and inspire.

One of the areas that is improving and inspiring is design. Design must be at the forefront of the new Golden Age.

You saw at the show some of the outstanding design work being done on both exteriors and interiors. I told someone that the interior of the new Volkswagen Touareg looked like each car had been worked on by 15 German cabinetmakers for a week.

Volkswagen and Audi continue to lead the industry in outstanding interior design executions, and the competition is bound to take notice and catch up.

There was no shortage of beautiful exterior designs there last week, either. The Cadillac Sixteen was much praised, and rightly so, because I think it's the crowning achievement of Wayne Cherry's great career with GM Design.

The Sixteen shows the world that we are committed to returning Cadillac to its proud position as the Standard of the World, and that we intend to take a back seat to no one.

Beyond design, the Sixteen is a showcase for another area that will help usher in a new Golden Age of the automobile, and that is powertrain.

The new Golden Age of the powertrain will be a responsible era. Yes, the Cadillac concept has 16 cylinders, and yes it makes a whopping 1000 horsepower. But it also can run at 20 miles per gallon in real world, highway conditions. It weighs less than our Vortec 8100 V-8 and is more fuel-efficient than the V-10s and V-12s of our competition.

That is due to our Displacement on Demand technology, which allows the V-16 engine to run on all 16 cylinders only when necessary, and on eight or even four cylinders at most other times. And it's all seamless to the driver.

Displacement on Demand is going to help us make our powertrains more efficient across the board, starting this year with our full-size pickups.

We're also committed to putting hybrid powertrain technology on more than a dozen models, with potential there for a million units. That also starts later this year with full-size pickups.

And we're not the only ones. Many manufacturers are researching hybrids, diesel technology, fuel cells... and embracing the philosophy of responsible powertrains because it's good common sense. It's a challenge, it's an opportunity, and it's leadership.

Beautiful design, great and responsible powertrains, outstanding quality, and the inclusion of relevant advanced technology... this is all what will stir public passion and contribute to a new Golden Age.

The fourth and final guideline follows from the third, and it's more of an observation, really, and that is: "17 million buyers can't be wrong."

Now what do I mean by that? Simply that four years of 17 million-plus sales counts for something. The demand and attraction still exist ... if the passion part of the equation has stagnated a bit, well, that's going to change.

But no one can look at a 17 million-unit market and not see opportunity.

This isn't a 12 million-unit market in a dwindling economic climate ... people have been buying in record numbers. Yes, they're incentivized, but they are shopping. They're going into the showrooms. They're coming out with new cars. And every time they do, someone gains a sale and, yes, someone loses a sale. The product still matters - perhaps more than ever.

And as our products get better, more beautiful, more reliable and more celebrated, guess what, the love affair will continue.

And then where are you?

You're in the midst of a Golden Age.

Call me delusional if you must, but we are on the precipice, and we can get there, as an industry, if we use our common sense, and follow our guts.

I for one see plenty of opportunity ahead. And I'm not the only one. With solid and sustained leadership, this industry can enter a new Golden Age.

And I think that's exciting to be a part of.

I thank you for your kind attention, and I'd be glad to take any questions now