Gary Cowger President, GM North America - GM From The Horses Mouth

Remarks to the Automotive Press Association September 24, 2002

Thanks, Good afternoon everyone. That commercial is the latest in the corporate Overdrive series, and it might be the best one yet.

Nothing obscure about the music this time. Who was it?

You got it. Madonna.

I tell people all the time that our cars and trucks are better than ever.

But I'm also really pleased that our music is a lot better, and maybe a little surprising for what some people still think of as stodgy old General Motors. I mean, you have to admit it.

I mean, whoda thunk it - Led Zeppelin and Cadillac?

Biff Naked, Wilson Pickett, Smashmouth. They've all been in our Overdrive campaign.

Actually, getting the Wilson Pickett song - "Land of 1,000 Dances" - led to one of the funniest moments.

Before you use any song in a commercial, you have to have the attorneys review the lyrics to make sure there isn't something offensive or inappropriate ... whatever.

So you can kind of imagine all of these high-powered attorneys, sitting across a conference table:

"Can we go over this one more time, please? I have 'Na...na-na-na-NA...na-na-na-NA-na-na-NA-na-na-NA...na-na-na-NA.' Is that correct?"

"Yes, it is, counselor."

"Thank you very much."

And I hate to think what that cost us.

You know, it seems I'm spending more and more time with you guys in my role at GM these days, which is a LOT more fun when your company is on a roll.

I saw a number of you in Santa Barbara last month where we had our Product Seminar - sort of a sequel to the GM seminar we did in Brescia, Italy, back in 2000.

And I'm sure at least a few of you made it out to the Buick Open in Grand Blanc last month. One of the perks of this position is a little on-the-job golf.

I got to play in the Pro-Am with Tiger they tell me because he just really admires my game.

Plus I was the one who showed up in the Brink's truck carrying his monthly retainer.

You haven't lived until you've beaten Tiger Woods over 18 holes at a wonderful course like Warwick Hills.

I've never actually DONE that, but I imagine it would be, uh, you know, pretty memorable.

I did, however, inspire him to win the tournament. He is good, you know.

Well, let me get to some business here.

I mentioned the Product Seminar a couple of minutes ago. That event - and most importantly the vehicles we showed from North America and our regions around the world - really illustrates my topic today - How GM is getting its groove back.

The momentum we have is for real ... and we plan to keep it.

Our U.S. market share this year is up eight-tenths of a point though August. That's the largest share gain by any automaker this year. Our retail car share is up 23 percent. Every division but Oldsmobile is up.

We have done a tremendous job in our plants and in our initial quality, not just over the last year, but over the last three years. We've had double-digit improvements. We're the first domestic in the top three of quality as reported by J.D. Power.

It took us a lot of years to say those three little words - three top spots. So forgive me if I wear 'em out a little.

GM had ten of the top 14 assembly plants in J.D. Power initial quality, and we swept the top three spots. We actually tied for third with NUMMI, which is one of our partners. The quality story within our plants really is a joint story with the UAW, the IUE and the CAW.

If you look at our initial quality trend over time, it's reasonable to expect that durability and reliability also will improve. And that would give us a better showing in Consumer Reports.

Our productivity improvement is pacing the industry. We lead in assembly efficiency in six of the 13 segments that are covered in the Harbour Report. And we had the most productive plant in North America in 2001 - our Oshawa #1 car assembly plant.

I think our coverage in most news outlets is easier to take than it used to be. We regularly took our beatings, and sometimes we deserved them.

I think inside GM, we knew we were on the road to better days. We just had to keep doing the right things for the business and not get distracted.

It wasn't easy. When you've basically lost market share for 20-some consecutive years, the drumbeat of negativity can be deafening. Even the good things we did seemed to go down in flames. (Pause)

[Show 'XXX' trailer of Vin Diesel body surfing Corvette off bridge, and explosion of Corvette at bottom]

Man, some guys will do ANYTHING to get out of a lease.

Our problems were mostly self-inflicted wounds. We were all responsible. No excuses.

The real turnaround started about 10 years ago -when the company was in serious trouble - and Jack Smith was put in charge. Over the next few years, he took on many of the core problems, setting the stage for where we are today.

You didn't always hear a lot about what was going on because Jack's motto then was the same as he lives by to this day: "Deeds, not words."

That motto describes the cultural change that has occurred at General Motors over the last decade.

Some of you may believe that what's happening at GM is an overnight success or some kind of flash in the pan. In fact, maybe some have fire extinguishers.

I believe what you are seeing is the early payoff of a decade of hard work and heavy lifting.

The progress we're making is just the start. Our goal is to lead the industry in quality and productivity. We won't rest until we are the benchmark that others are measuring against.

Some may have once laughed at such a thought.

Heck, some of our people laughed when we first set that goal.

But then an interesting thing started to happen: no one laughed.

When I left the Manufacturing Center to become President of GM de Mexico in 1994, I knew our productivity and quality programs were already taking shape.

Some of you have gotten a deep dive into the GM Global Manufacturing System. Its focus is on supporting the person on the plant floor in building cars and trucks right the first time.

That's an oversimplification of GMS. But it makes the point: People and the processes have to mesh.

One of those manufacturing processes is called the Direct Run Rate.

I think there's some misunderstanding about the term itself - it is not the percentage of defect-free vehicles that come out of our plants. If it were, we'd have some serious heartburn.

The Direct Run Rate comes from multiplying the percentage of defect-free vehicles at three key areas on the assembly line.

The percentage of defect-free vehicles that pass through the first quality gate is multiplied by the percentage at the second gate and at the third. That gets us to the Direct Run Rate.

Our goal is an 85 percent Direct Run by the end of this year. That requires first-time quality at each of those checkpoints to average almost 95 percent.

That, ladies and gentlemen, is world-class quality.

It's hard to quantify how much money that saves in unscheduled overtime.

Overtime is like cholesterol - there's good overtime and bad overtime. The good stuff is when you are building more vehicles to meet demand. The bad stuff is when you are fixing vehicles that were not built right the first time.

You only make the kind of improvements we're seeing when you've got the buy-in of your people. And we're getting it - from our people ...from our unions ... and from our dealers.

When we started our productivity and quality initiatives, I can't tell you how many conversations I had with people that started out, "We can't."

Now these conversations start out "We can." And, "Hey, we can do better than that."

In the old GM, we would set the bar low and celebrate when we cleared it. Now, we set some goals so high that they can't be reached unless absolutely everything goes just right.

Hey, you know, we're actually failing better than we used to succeed!

The other word for that is stretch. It's one of Rick Wagoner's four cultural priorities. The others are to act as one company, move with a sense of urgency and create customer-focused products.

One company thinking started years ago ... before we ever put words around it.

We collapsed 27 purchasing organizations into one.

What used to be a dozen engineering organizations is now one.

Ditto for manufacturing.

Redundant marketing systems have been combined into a one organization - VSSM - that does the stuff the customer never sees. The divisions and products are more differentiated today than ever.

Today, one-company thinking extends to product. Take the Pontiac GTO. We said we would bring back the 'goat' when we had a car that deserved the name. Turns out we had the car - the Holden Monaro.

I'm not sure how many of you got to see the movie "Triple X" this summer. But it seems like half the teen-agers in America did.

The Corvette clip I showed you a few minutes ago was in the movie.

But of all the cars Xander Cage, the hippest spy in the universe, has to choose from ... the one he picks is...

By the way, we're having a little trouble incorporating the rocket launchers into the sealed beam headlight system in the new GTO, but let me tell you, they work way better than flashing your high beams.

The Monaro-based GTO also embodies our sense of urgency cultural priority. Bob Lutz drove the Monaro on a trip to Australia earlier this year. The Pontiac version is getting some powertrain improvements up here before it goes on sale next year - less than two years after the discovery.

Our fourth cultural priority is customer-focused products.

I hope you saw the Cadillac XLR roadster outside when you came in.

This is, of course, the production version of the Evoq concept car that was the best-of-show concept here in Detroit in 2000.

The XLR, the GTO ... these are the kind of must-have products that we are bringing to market. Add the Chevrolet SSR and the Corvette, and that makes four halo products. Our newest division, HUMMER, already has its halo - the H2 - so that's five.

In fact, the folks out at 310 Motoring in Hollywood - the tuner shop to the stars - tell us the H2 is joining the Escalade as the hottest celebrity vehicle in the world right now.

But what about the mainstream? Well, we know over half of that is the truck market. And we are running flat out to keep up with demand for our full-size pickups and utilities. The same goes for our mid-size utilities. Next year, the midsize Chevrolet Colorado and GMC Canyon pickups join our truck lineup.

In '04, we'll add the Chevrolet Equinox in the compact utility segment.

So the truck portfolio is covered from top to bottom - full size to small.

But what has happened on the truck side of our business is now coming to cars as well. I don't expect you to take my word for it. It is deeds, not words, that matter.

Last week in Texas, some of you got your first driving impressions of the ION - Saturn's new line of small cars. The ION joins the VUE and a freshened L Series giving Saturn an all-new lineup by the end of the year.

Later this week at the Texas State Fair, we'll take the wraps off the 2004 Pontiac Grand Prix.

Nah, why wait. Let's do it right now.

The ninth-generation Grand Prix will be the best yet. You can see some design cues of the Solstice concept car in the new Grand Prix.

At the rear, large corner-mounted taillight shapes integrate into the decklid and bookend the flowering rear spoiler. Twin-styled dual exhausts.

In profile, you've got a cleaner look. The protective moldings are nicely integrated into the design.

The new Grand Prix has versatility unmatched in such a sporty looking sedan. The rear doors swing open to almost a right angle. It's easier to get in and out of The 60-40 rear seats and the front passenger seat fold nearly flat. That gets you enough space for a nine-foot kayak - with the trunk closed. I mean, if you got one.

We've been talking about refining the look and feel of our interiors, and this is a great example. Larger analog gauges have a three-dimensional appearance. Satin-nickel accents on the doors, wheels and shifter create a stylish, upscale feel.

There's a lot more coming after the Grand Prix. Next year, Chevrolet gets a new Malibu, and Buick is in line for a new Regal. Stay tuned for more details.

Nothing succeeds like success, and you've got to see what happens. But if today's Impala, the Cadillac CTS, the Pontiac Vibe and the new ION are any indication, we're going to deliver.

Now we've got another kind of customer-focused product, too. You heard it during the reception. It's XM Satellite Radio. One hundred channels of digital-quality sound on stations for just about any taste you can imagine. Push a button and you can see the artist and title of the music playing - anytime during the song.

Allow me to demonstrate:

[Preset #1 - BET Uptown #62] This is urban beat.

[Preset #2 - Aguila #90] Latin top 40.

[Preset #3 - BPM Club Hits] I'm told this is what's in the dance clubs these days.

It's not gonna be a preset in my car, but, hey, that's the beauty of having so many channels.

[Preset #4 - World Zone #100] A little bit of everything on the World Zone.

We're doing factory installation of XM in 25 of our 2003 models. XM is an added revenue stream because the money comes from subscriptions, instead of a one-time purchase like the car itself. The best part for the customer is that they can roll that subscription fee right into their GMAC monthly payment.

I think there's something pretty significant about XM that goes beyond the novelty of it.

And that's its diversity.

Think about what I just played: African-American music, Hispanic Top 40, stuff from the clubs where young people are dancing ...

Last week, we had 250 of the top GM leaders in North America spend half a day focused on the diverse markets. These are groups of people - African-Americans, Hispanics, Asians, Women and Youth who bought more than 10 million cars and trucks last year.

Communicating to the diverse markets requires that we make the effort: --to speak their language --understand their needs, --and treat them with respect.

We also have to change some spending priorities. We're already using agencies with specific expertise to create our advertising for the diversity markets.

And we have to do our homework. Like knowing that, guess what, John Madden's a bigger draw with young males than Dennis Miller. The only way to be customer-focused is to really know your customer.

Our efforts to reach these groups will be just as intense as the focus we put on quality when we started our "Quality as a Value" initiative a couple years ago. And we're getting results there. I know what General Motors people are capable of when we pull together to find solutions to a challenge.

Despite our progress, some of the analysts say we are "buying" market share with zero-percent financing and other incentives.

I disagree. We are earning share because we have products people want.

I think incentives can drive traffic into the showroom, but people have got to want what you are selling.

In this business, every sale is a win. If you're gaining share ... and making money for your shareholders at the same time ... Well, I'll apologize about a lot of things, but winning sure isn't one of them.

People tend to forget that even before 9-11 and Keep America Rolling; there were lots of incentives in the marketplace.

Our statistics show we've been looking at negative net pricing now for five years. And we don't think the competitive incentive landscape's going to change anytime soon.

And there are a lot of types of incentives. We've been emphasizing customer incentives - the kind you see and read about. Some companies put the marketing money with their dealers - dealer cash - the kind you don't see or measure. Everybody's doing it some way. And in August and September, everybody is out there with their gloves off.

But, as I just said, the important thing is that price incentives are only part of the equation. Think about the best vehicles out there: * The price is an incentive. * The product itself is an incentive. * The way it looks is an incentive. * The way it performs is an incentive * The quality is an incentive.

You've gotta come up with a whole lotta incentives to make someone hand over $20-$30,000 dollars - and come back three or four years later and want to do it all over again. And that's what we're doing.

One of your brethren asked me the other day if I thought the auto business was beginning to resemble the weekly deal-of-the-century furniture business.

I told him I hoped not. ... Besides, the best jingle for that - "We're known by the money you keep" -- is already taken.

Our business is about passion for products that are an extension of someone's personality. This business is competitive, sure, but it is full of passion.

I don't know about you, but I don't get excited about my couch.

In all seriousness, we cannot back off in any area - quality, productivity or product. Especially product.

That's why we have 20 new or significantly refreshed models for 2003, including mid-cycle enhancements on our full-size pickups and utilities that have only been in the market for four years.

That's why we will have 12 to 14 new products every year after that for the next five years.

General Motors has become a basketball team ... where we used to be a football team. Both need great teamwork ... but their approaches to the game are quite different.

Football players are specialists ... they know their positions and their plays. After each play, they regroup and their coach sends in the next play.

Basketball is way too dynamic to allow time to plan, execute and regroup. Each player has to excel in every aspect and be ready for constant change ... on the run.

That's why, when we have something to celebrate, we do it on the run - like basketball players exchanging a high-five on the way back up the court after a great shot.

"Gotta have" product is what matters in this business. I've said it so many times that some of you are tired of hearing it. Or, hopefully, you know I mean it.

You know, one of the stories I read out of the Product Seminar in Santa Barbara talked about the GM senior management "Dream Team." There's Rick, the CEO who sets the vision. John Devine, the CFO with the great credibility with Wall Street. Bob Lutz, the product czar. And Gary Cowger, the "GM lifer."

I wasn't sure how I felt about that description at first. It's certainly accurate, and I won't mention who wrote it. But Paul meant it affectionately.

But you know, the more I thought about it, the more it pleased me.

No question, my experience does bring a certain depth and perspective to what's happening.

You see, for most of my 37 years, I've been managing the downside of the business.

That's why I know that despite the roll we've been on the last 18 months, we haven't won anything yet. We're still hungry, and we're aware how quickly things can change.

We won't get complacent because we have nothing to get complacent about.

What we have is momentum born of a lot of lot of hard work over the last decade.

And a new culture at General Motors - one that values learning over knowing, stretch over status quo - and product over everything else.

We have the right processes.

We have the right people.

We're starting to get the right products.

And that, ladies and gentlemen, is how GM is getting its groove back.

Thanks very much.