Open Mouth...Insert Loafer

You might think that one of the main mandates of a fortune 500 CEO is to possess "good communication skills." As a matter of fact, click on just about any Monster or Careerbuilder posting and you will see it listed there as a token requisite for even the most trivial of jobs, right next to "good driving record" and "heartbeat." Consider for a moment some of the choice excerpts to come out of GM, Toyota, and DaimlerChrysler over the past couple of weeks and you have to wonder if these guys shouldn't start pleading the fifth anytime someone brings a microphone into the room.

GM vice chairman Robert A. Lutz responding to questions on increasing fuel costs:

"Everybody thinks high gas prices hurt sport utility sales. In fact they don't, rich people don't care. (Hybrids) just don't make business sense."

OK, here is the reason in a nutshell why things are going to get a whole lot worse for GM before they get better. Sure 80% of their profits come from SUV and truck sales and they have a right to be ticked off at high gas prices. But guess what, I don't care what your numbers or models say, you've just had a month with a nearly 13% decline in sales, while Hybrid sales were up 81% in 2004, 96% of which belong to the Japanese brands. Lexus has 12,000 pre-orders for the new RX400h, yet GM would rather sue for lower fuel efficiency restrictions in California.

It isn't just the fact that they try to save face for so long. It's more their attitude that gets most people. What the powers at GM simply don't understand (or accept) is that even if gas were cheaper, people just aren't going back to the days when SUVs were thirstier than an afterburning Pratt & Whitney. Not only is it politically reckless and environmentally irresponsible, consumers will not tolerate being force-fed products from companies that drag their feet on technological improvement.

So was this an isolated incident when Bob let just a little more go than he should? Look what GM Chairman and CEO Rick Wagoner said with regard to Toyota:

"We've been ahead for 73 years in a row, and the betting odds are we'll be ahead for the next 73 years."

Now if GM is so into their numbers and models, lets look at the pure facts. GM market share is down by over 5% over the last ten years in North American while Toyota is up by about the same margin. With total worldwide sales of 8, 241,000 vehicles GM's income totaled $3,7 billion on revenues of $193.5 billion in 2004. Toyota, on the other hand, with global sales of 6,719,000 vehicles saw $11 billion in income on revenue of $163.6 billion. Interesting. GM has cash on hand to the tune of about $30 billion and Toyota has about $36 billion. The real kicker however, is that the total market cap of GM, Ford, and DaimlerChrysler combined does not equal that of Toyota.

DaimlerChrysler and Toyota incidentally are not immune to babbling missteps of their CEOs, either. Mercedes' chief Eckhard Cordes' recent and most insightful take on whether or not it is even worth striving to be ranked number one by J.D. Power is just as absent minded as Toyota chairman Okuda offering to raise his company's US prices to let the Americans "catch their breath."

Taking a page out of Dubya's book of "strategery" and firing off an edgy or controversial comment once in a while for argument's sake is one thing. When your company has to back-peddle as a result of something you said, however, you have got to start wondering if everyone is even on the same page.

"No comment" never sounded so good.

Comments

[good]

This is a good article and offer some helpful information for me,thank you!

[Jeff Scherer]

This smug attitude is EXACTLY the main reason why GM (and other US mfrs) are hurting. You'd think that with the Japanese manufacturers proving their efficient processes make for better business, that GM would be more receptive to changing their antiquated methodology. But hey, what do I know. I'm only an american consumer.

[Jim Rockford]

I think hybrids are the wrong way to go because they increase complexity to the vehicle (two separate power sources) and thus the likelihood of breakdowns. They are also likely to be more costly to maintain, with specialty parts. They also have issues with safety (gotta shave weight to load in the batteries/electric motors) which compromises the ability of the vehicle to resist crushing forces in crashes. Last, the battery elements are toxic AND skew the car to be front-heavy and less safe in handling.

Low sulfur, cleaner burning diesel (which can also run bio-diesel) seems the way to go. I wouldn't mind Lutz going that way above but he'd need to be a car guy and actually love/understand his products. Hell Chip Foose could run GM better.

[ronbo]

Lutz' comments are amazing. Of course there is a segment of the market that is relatively insensitive to fuel costs. And of course they won't be deterred from buying large SUVs (or Vettes or Vipers, for that matter). That segment probably could swallow a higher gas-guzzler tax, too.

If Lutz simply wants to capture that niche, fine; but GM is going to be a much smaller company. If he wants to sell to the mass market, however, he will have to put fuel efficiency into the product equation along with reliability, styling, price, etc.

Actually, I wouldn't mind seeing a GM consisting of Cadillac for luxury and GT cars; GMC for SUVs and pickups; and a combined Chevrolet/Pontiac with a reasonably sized product line plus sports cars. That company would be smaller than today's but much more focused and efficient. So it will never happen.

Ron

PS - Found you through "Carnival"