General Motors' Lutz Predicts Gradual Recovery in 2002, Urges 'Back-To-Basics' Approach

DETROIT, Jan. 10 -- Speaking at the Automotive Outlook Conference of the Society of Automotive Analysts, Robert Lutz, General Motors Chairman of North America and Vice Chairman of Product Development, said US light vehicle sales were likely to be in the ``15 million-plus'' range for 2002, down from 17.2 million in 2001, and said the current economic climate calls for a back to basics approach for the industry. ``The economy remains volatile, showing signs of recovery and then just as quickly showing signs of continued uncertainty,'' he said.

Despite the uncertainty, Lutz indicated economic forecasters at GM believe the economy has neared the bottom of its downward slide. ``The trough is likely to occur in the first half of this calendar year, with a gradual recovery ramping up in the second half.''

Comparing the current recession to that of the early 1990's, Lutz said, ``There were 1.2 million jobs lost in non-farm employment from March to November of 2001. During our last recession, in 1990-91, 1.4 million jobs were lost, total. Affluent new vehicle buyers have been better shielded during this downturn, which explains how the industry managed to regain some of its momentum.''

Lutz credited General Motors' zero percent financing campaign, Keep America Rolling, for the strong 2001 sales finish, indicating 2001 sales could have been significantly lower without it. ``Retail sales were actually down 7% through the first nine months of the year, but Zero Percent Financing, led by our Keep America Rolling campaign, offset that decline in the fourth quarter. The bottom line is 2001 was a good year for General Motors, and for the auto industry as a whole.'' He noted, however, that the industry's better than expected performance in 2001 has been tempered by the fact that ``it was a particularly horrifying year for our nation, and for the world, because of the course of world events.''

Commenting on General Motors' performance, Lutz declared ``GM broke the industry calendar year record for truck sales in 2001, with more than 2.6 million total truck sales. We led full-size pickup truck sales for the first time since 1994 ... We surpassed Ford in both overall truck sales and share of [sport] utility [vehicle] delivery.'' Reflecting on this last fact, Lutz said, ``Our sales of large and luxury utilities continue to climb. Buyers of those vehicles continue to grow in affluence and degree of education.'' He noted GM's first gain in market share in the US in several years, stating, ``Not only have we seen improvement in our share, we have seen improvement in the quality of our share - namely, in our retail business, especially in trucks. Our momentum there is unmatched, and we plan to let it seep right over to the passenger cars segments and see what we can stir up there.''

Lutz stated 2002 will be a more difficult year because of increasing competition and industry overcapacity and because of continued declines in vehicle pricing levels, all of which will put increased pressure on industry margins. To cope with these difficulties, he recommended the industry adopt a ``back to basics'' approach. ``Cut costs, eliminate waste, stay focused, and create the proper environment for building the one thing that distinguishes automakers in good times or bad: great product ... In times like these, the companies who fail will be the ones who lose their way, get bogged down in the periphery, and move away from the basics of what the motoring industry is all about.

``The companies who succeed will be those who stay focused on providing the 20 percent of the car that represents 80% of the importance to the buyer: a great engine, great vehicle dynamics, great quality and, especially, great designs, both inside and out.'' Elaborating on this theme, he said, ``You get one chance -- one -- to make an impression on a prospective buyer with your vehicle's exterior. It's pass/fail. If your design inspires passion, if it's emotionally compelling, you pass. The importance of a great, beautiful, seductive exterior design simply cannot be overstated ... You certainly want to have a beautiful interior as well, but if the exterior doesn't grab anybody, they'll never see the interior package anyway.''

Lutz said GM is well positioned for the coming year, with upcoming new products such as the Pontiac Vibe, the Saturn VUE and the Saturn Ion, and that it will continue to seed the market with its new GM Overdrive campaign. ``We think offering $2,002 dollars on nearly every car and truck we have will keep people shopping our showrooms during these long winter months.''

Lutz delivered his keynote comments on Tuesday, January 8 during the 14th annual Automotive Outlook Conference of the Society of Automotive Analysts at the Detroit Marriott Renaissance Center, held in conjunction with the North American International Auto Show.

A complete transcript of Lutz' comments is available on the SAA website at www.cybersaa.org .

For additional information, contact SAA headquarters at 800-704-0051.

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