Bob Lutz speaking at the 2009 LA Auto Show
Given what Bob Lutz said at the last two Detroit Auto Shows, what will he say this year?
Preparing for the first Detroit North American International Auto Show of the new decade (press days Jan. 10-11, public show Jan. 16-24), I needed to clear space on my trusty digital recorder and discovered I had several General Motors press conferences from last year's show still on it.
These are small group Q&A sessions with top GM execs (one at a time), mostly for major newspapers. Last year's included Fritz Henderson, who was then second banana to CEO Rick Wagoner. Since Fritz was widely regarded both inside and outside GM as one of the best and smartest guys in the business, I decided to sit in to see what he said.
Of course, it was all about the state of GM's business at the time, which was not good. As we know, Fritz was elevated to CEO a couple months later when the new Prez canned Wagoner, then was jettisoned himself by government-appointed Chairman Ed Whitacre after skillfully guiding the company through its incredibly painful, but mercifully short, bankruptcy.
Another session was with then-GM North America President Troy Clarke, a humble, blue-collar-roots guy with a sterling track record, mostly in manufacturing. I had interviewed him a while back for a business magazine and found him extremely impressive. Again, with mostly business reporters in the room, it was all about business. Now Troy, like Fritz, is gone. But Bob Lutz, who's always good for some attention-getting quotes, was and is there. See what he had to say after the jump.
Two group sessions still on my recorder were with Lutz, the silver-haired, septuagenarian consummate car guy who has led GM product development since September 2001. The first was from the January 2008 show, when things were still rosy. The second was a year later, following the catastrophic crash. Hmm. Both could be interesting, I thought.
The first question from 2008 was about meeting the new 35-mpg Corporate Average Fuel Economy (CAFE) requirement. Lutz said it could be done for $6-8,000 – in some "particularly difficult" cases, up to $10K -- per car, "with the vehicle spectrum more or less where it is today. But we will have to restrict some choices. So we are in the process of making a lot of decisions, and the configuration of vehicles will change. We'll have to take out a lot of weight, use more premium materials, which gets the weight savings but drives the cost up."
Then he opined that the only really effective way to drive down the consumption of fuel in this country would be to raise its price, as in Europe and elsewhere, where folks drive much smaller, more fuel-efficient cars simply because fuel is so expensive. "If we had had, for the last 15 years, a gradual rise in federal fuel taxation of say, $.15 per gallon per year, that would gradually put the customer into the equation. Every time people would go for a new vehicle, they would think, 'How much am I paying for gas? Is it time to go to a smaller vehicle?'
"We could over time, without any federal fuel economy regulation, use the market mechanism to gradually transition the American public into a vehicle mix that looks a lot more like Europe's. But we won't do that [in this country]. We want to hang on to gasoline that's less than half the price of what other people are paying, and at the same time, make the vehicles more frugal than what they've got in Europe. It doesn't compute."
"You're calling for higher gas taxes?" someone asked.
"No. I'm saying, as an instrument of national energy policy, and with the need to reduce the use of imported petroleum, the way you reduce the use of any commodity is to raise its price. All of us learned that in Econ 101. But we're trying to repeal the laws of economics thinking that we can reduce the usage of a scarce material without making it more expensive. That's like fighting obesity by telling clothing manufacturers they can produce only small sizes."
What did Lutz say a year later, with the new-car market and his company collapsing?
When the subject of CAFE came up again, he responded: "The only thing that is going to motivate Americans to consider other than the largest vehicles they can afford from a fuel-economy standpoint is some sort of consumer participation in the whole energy equation. We cannot have the world's most fuel efficient vehicle fleet at the same time we have the world's cheapest gasoline. It just doesn't compute.
"Politicians like to point out that GM and Ford are perfectly capable of producing a 40-mpg fleet...'look at the cars they build in Europe.' Yes, of course we build highly fuel-efficient cars in Europe. They're also very expensive. The equivalent of a Cobalt or a Ford Focus in Europe can easily cost $32-35K U.S. People are willing to pay big money for a well-equipped, fuel-efficient small car. Why? Because, depending on exchange rates and where fuel is at the moment, it's anywhere between $6 and $9 a gallon, of which more than $3 is taxation."
He was asked again what it will take to achieve a 35-mpg CAFE. "We know how to do it by putting a lot of technology into cars, but technology costs money. So the question is, given inexpensive gasoline and at the same time, government mandates for extremely fuel-efficient cars that will cost more money – mild hybrids, full hybrids, rack-mounted electric power steering, intelligent alternators, 6- and 7-speed transmissions, it's all cost, cost, cost -- at least $4-5,000 on average, with some cars going up way more than that."
What if gas stays cheap in the U.S.? "If gas stays cheap, and the American public says, 'I'm not interested. I'll keep my Tahoe longer,' it puts us in the industry in a position where we are at war with the customer. The customer, given cheap gas prices, is going to want one thing, and we're going to be forced by regulation to produce something entirely different."
One reporter asked whether GM would be in such a terrible position if its public perception were better, "if the public thought of GM the way it thinks of Toyota"?
Lutz's response surprised everyone: "Yes, absolutely, we would be in this same situation. If Toyota were us, doing basically the same volume, they would have the same cost base in the U.S. and the same legacy costs. They'd have four retirees for every active worker. They'd be fighting somebody from outside the United States who was importing stuff at a radically undervalued Yen. Don't ever let anybody tell you that the playing field is level. The playing field hasn't been level for the last 30 years, and it's not level now. But everyone is tired of hearing about that, so we don't mention it any more."
Agree with him or not, the 77-year-old Lutz – a former Marine fighter pilot who has also held high positions at BMW, Ford of Europe and Chrysler – knows his stuff and nearly always speaks his mind, whether or not it's politically correct or what people want to hear. This is rare and refreshing in corporate America, especially the struggling auto business, these days. Now that he is top advisor to interim CEO Whitacre – the former AT&T exec who admits he knows next to nothing about cars or the business – we're sure wondering what he might say next week.
Award-winning automotive writer Gary Witzenburg has been writing about automobiles, auto people and the auto industry for 21 years. A former auto engineer, race driver and advanced technology vehicle development manager, his work has appeared in a wide variety of national magazines including The Robb Report, Playboy, Popular Mechanics, Car and Driver, Road & Track, Motor Trend, Autoweek and Automobile Quarterly and has authored eight automotive books. He is currently contributing regularly to Kelley Blue Book (www.kbb.com), AutoMedia.com, Ward's Auto World and Motor Trend's Truck Trend and is a North American Car and Truck of the Year juror. Read his other AutoblogGreen columns here.