Recession Blocks GM's Road To Profitability General Motors has emerged from bankruptcy with its eye on regaining the trust and the dollars of the American consumer. But Bob Lutz, GM's vice chairman, says the automaker can only hope to break even in this economy.

Recession Blocks GM's Road To Profitability

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This is ALL THINGS CONSIDERED from NPR News. I'm Robert Siegel.

In the Bible, it took 40 days of rain to rid the earth of all the creeping things that creepeth and let Noah's shipload start things over. And with equal promptness, it took 40 days in bankruptcy court to transform the antediluvian General Motors into the transfigured GM: streamlined, unburdened and now government owned. And the question is, will they still make creeping things that creepeth?

GM emerges from bankruptcy with four core brands: Chevrolet, Buick, Cadillac and GMC. And the lifelong auto exec they brought back to manage, in the words of a press release, creative elements of products and customer relationships is Bob Lutz, who joins us now. Mr. Lutz, welcome to the program once again.

Mr. BOB LUTZ (Vice Chairman, GM): Good to be here. Thank you.

SIEGEL: How soon can GM be a profitable automaker with its U.S. market share on the rise, or at least not slipping?

Mr. LUTZ: Well, actually, I'm very optimistic about our market share going forward. Right now it looks a little bit weak because we're not doing a lot of fleet business and it's quite understandable that sales to corporations would be off because they were worried about our bankruptcy. You know, a lot of people are reluctant to deal with companies that are in bankruptcy. But, actually, our retail share has been performing very well. And our new cars and trucks have received enormous critical acclaim and they're, in fact, selling well, albeit, in a very, very depressed market.

SIEGEL: I'd like to play you something that General Motors CEO Fritz Henderson said at his news conference this morning. He said the emphasis at the new GM will be on customer's cars and culture, but number one, he said, customers.

Mr. FRITZ HENDERSON (CEO, GM): At the new GM, we need to make the customer the center of everything, and we're going to be obsessed with this because if we don't get this right, nothing else is going to work. It's that simple.

SIEGEL: Mr. Lutz, you're in charge of customer relationships, how will you do that?

Mr. LUTZ: Well, the problem that we have right now is getting the breadth of the American public on both coasts and in the Midwest to realize the transformation that has taken place in General Motors' quality, design, fuel efficiency and so forth. And to expunge some of these (unintelligible) old conventional wisdoms that General Motors builds gas guzzlers, General Motors has sloppy interiors, General Motors this, General Motors that, none of which is true anymore. But the problem is, how do we get 300 million Americans to realize that? That is basically my new task.

SIEGEL: One idea that GM has floated is a test program of auto auctions on eBay in California, and I wonder whether you see a potentially new paradigm for how we buy cars, less reliance on the traditional dealership, maybe to go test drive the car there, but more and more buying online or by other means.

Mr. LUTZ: Yeah. But let's face it, all of these online experiments will purely be for the customer to make her pre-selection of the car, and ultimately, that vehicle will still be delivered by a dealer. There is no model, which can legally permit automobile companies to sell directly to the customer - that's just prohibited by law in almost all states.

But what we hope to do by this is the dealers put up the car on - in that Internet auction and then the customers can bid on them. And then once the bidding is successful, the customer, of course, then contacts that dealer for the pick-up. And there's always one issue that can never be dealt with on an Internet sale and that's the question of the used car that the customer wants to trade in.

SIEGEL: So the dealer as a model for marketing, you think has some inherent good reasons for its survival.

Mr. LUTZ: Listen, every 10 or 15 years or so, and I've been in this business since 1963 and almost all of it in sales and marketing, every 10 or 15 years, some genius invents a system that's going to eliminate car dealers and everybody always gets excited and sometimes Wall Street puts a lot of money into it and it always fails because the franchised independent retailer is the way to go. It's the model that works best.

SIEGEL: Having spent 45 years or more in the auto business, you, at all three big U.S. automakers, plus BMW, you've seen good times and you've seen bad times.

Mr. LUTZ: Yeah.

SIEGEL: But there's a younger generation, I should think, coming up at GM, that's grown up in bad times. Is there a generation of future industry leaders there or do you have to look for people who've known a little bit more success to take over from your (unintelligible)?

Mr. LUTZ: Well, you know, General Motors has never had a shortage of good people. We know how to run the business. The problem has really been for us that we have had these crushing legacy costs. This has been a burden which no matter how hard we worked on the other parts of the business, it just - when the sales volume - the industry sales volume collapsed, it just dragged us down.

SIEGEL: But GM CEO Fritz Henderson said today, he spoke of reestablishing GM's role as the maker of the best vehicles in the world.

Mr. LUTZ: Yeah.

SIEGEL: Something he said, that General Motors was known for for many years. There's an acknowledgment there that what GM was known for for many years, it hasn't been known for. How do you understand that decline? What is it?

Mr. LUTZ: Well, I would've liked to intervene when Fritz said that, actually, because where we really messed it up and took our eye off the ball in terms of product was in '70s, '80s and early '90s. And I think we've - in the last five or six years - we've had a radical transformation in the way we approach the product and our goals for products and look at the awards we've gotten. We got car of the year.

SIEGEL: But when you take your eye off the ball for more than 20 years…

Mr. LUTZ: Yeah, well, that was bad. But, you know, I have to say, none of us were here at that time. So now we're trying to clean up that legacy.

SIEGEL: Well, Mr. Lutz, thank you very much for talking with us and good luck to you.

Mr. LUTZ: Thank you very much.

SIEGEL: Bob Lutz, who is vice-chair of the new General Motors.

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