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Behind GM's Attempt to Change Its Image Is Ambivalence About Its Car of the Future

By Michael Leahy
Washington Post Staff Writer
Sunday, June 7, 2009

WARREN, Mich.

Even now, as General Motors fights for survival, there is something ambivalent about its prescription for saving itself, a conflict implicit in a bit of symbolism that recently greeted arrivals to the Detroit Metropolitan Airport even before they reached baggage claim.

One of GM's touted new automobiles sat on display in the center of the automaker's airport gift shop. It was not the coming electric car, the 2011 Chevrolet Volt, championed by Bob Lutz, the GM executive most identified with the Hail Mary that the vehicle represents for the bankrupt company, which faces the immediate future as a ward of the federal government. It was not one of the relatively new GM hybrids. It was not even a mid-level sedan called the Chevy Malibu, which has received flattering reviews and awards, in part for its better-than-average fuel economy.

It was instead a car that flies in the face of all the worries about the American automotive industry, all the calls to make it more environmentally responsible and therefore more viable: the 2010 Chevrolet Camaro SS with a V-8 engine, General Motors' version of the fast and powerful model that automobile enthusiasts commonly call a muscle car.

With an estimated 25 miles per gallon on the highway, the 400-plus-horsepower Camaro SS is not a car renowned for being fuel-efficient. It is another Bob Lutz car, a monument to Lutz's and GM's enduring hope that even as the company struggles to escape bankruptcy as a smaller, leaner producer of fuel-efficient vehicles, the glory days can somehow be resurrected.

"Sexy with charisma," is how Lutz recently described the Camaro while in his office on a square-mile expanse known as the GM Technical Center, the nucleus of the company's research and development efforts. It is the kind of Detroit-speak he favors. "Some people don't care for those kinds of descriptions today -- it's a different time," says Lutz, who drives a gas-thirsty 2009 Corvette, a dream car of muscle lovers. "But we have new vehicles, too. We have the Volt. We are committed to the electrification of the automobile. We know this is the time."

If you were to believe that Lutz commissioned the Volt because he thinks the environment needs to be saved from carbon dioxide emissions, or that the United States has a moral obligation to lead a greening of the planet, you would be wrong. "If you look at most of the mainstream media, you get the impression that 95 percent of Americans today want a vehicle like the Chevrolet Volt or a [hybrid such as the] Toyota Prius," says Lutz, until recently the former head of GM's global product development and nowadays the company's vice chairman and senior adviser. "And that, by God, the reason General Motors is in trouble, is that we have not offered a vehicle like that. But when you look at the reality, at today's fuel prices, most Americans still want a conventional car."

Why the Volt then? "Because it is an important symbol. We need it. It has a chance to change our image," he says.

As GM's situation has become increasingly dire, and interested parties from President Obama to shareholders have demanded that the company start making more fuel-efficient cars, GM has pointed to the Volt as evidence of its changing ways. But the values that have long shaped this iconic company are deeply held, especially the passion for pushing the envelope of automobile performance and power. In many ways, the Volt, and GM's subtle shift from old design priorities, represent a contradiction of those values.

Meanwhile, some industry observers are unconvinced that the Volt, even if it runs flawlessly, can be the company's savior, and view it as a miscalculated effort to woo back customers by awkwardly trying to demonstrate a new cutting-edge bent.

"I just think GM is focusing on the wrong thing," says Daniel Roos, an engineering professor at the Massachusetts Institute of Technology who studies the automobile industry. "The quality of its cars was horrible in the '70s and '80s, but it's much better now. It has world-class vehicles: the Malibu and the Cadillac CTS. They should be [promoting] those and capitalizing on their strengths."

While regarding the Volt as a sign of modest progress within GM, some critics see the car as basically another half-step in a company prone to half-steps. They point to the Volt's internal-combustion gasoline engine -- dubbed by GM as a "range extender," meant to supply electricity to the motor after the vehicle has exhausted its 40-mile range on battery power alone -- as an indication that the plug-in electric car is not quite what it purports to be.

To these critics, the Volt neatly reflects long-standing problems in GM's corporate culture: a propensity for knee-jerk responses, an inbred caution even in the midst of reform and a lingering preference for comfort over efficiency.

Lutz vociferously rejects such characterizations. Not only does the Volt demonstrate GM's "commitment to changing," he says, but also the car is simply "the first generation of an electric vehicle from GM" that will produce successive generations of enhanced Volts, ultimately leading to a car running entirely on electric power in excess of 150 miles.

Producing a car that does not scare away the customer with its technology or cost must be GM's mission for now, he says.

The Volt has staunch supporters, too. A school of automotive analysts thinks that the car represents one of the last opportunities for GM to distinguish itself, to lure environmentally conscious buyers, in particular. Admirers and detractors alike largely agree on one point: that, if GM is to recover, the Volt must be part of a broader effort to reform the company's culture and push it toward acquiring new automotive passions. The question remains how GM executives, so proud of their company's history, so in love with the cars of an earlier generation, will cope with their own ambivalence to change. And no one in the corporation embodies that ambivalence more than Bob Lutz.

Putting the Past Behind

Lutz strikes some observers as an unlikely figure for launching an electric-car program. The 77-year-old silver-haired, tanned and gregarious former Marine aviator rides motorcycles, pilots a helicopter that his GM colleagues say he lands on his driveway, once called global warming "a crock," and appeared on David Letterman's and Stephen Colbert's shows to banter about GM's hopes for the Volt. Just the new language associated with environmentalism irks him. He momentarily looks bewildered when asked whether the place of the modern vehicle is undergoing a change in the culture, whether in time Americans might chiefly appreciate a GM car simply for its "utilitarian" value, a reliable conveyor of riders from point A to B.

Lutz raises his eyebrows. "Utilitarian?"

A car is not an appliance, he says. A car is not a washing machine -- the proof of which is that people do not lust after their washing machines. They lust after a beautiful car, he says. If you want reliable, go get yourself a refrigerator. A gorgeous car, he says, is an expression of power and yearning, especially for owners who hope the vehicles will inject excitement and romance into their otherwise mundane lives. "Show me a washing machine that can do that," he says.

For years, Lutz worked under GM chief executive Rick Wagoner, a longtime company finance chieftain who green-lighted the Volt but was preoccupied in the last years of his tenure with issues of GM's crushing debt and how to keep the company from collapsing. Last November, when Wagoner made the public relations mistake of flying to Washington on a corporate jet to ask congressional officials for government bailout loans, his image was irrevocably damaged.

A month later, in one of his last high-profile appearances, Wagoner rode in a Volt prototype along Washington streets before the second round of hearings on the nation's crippled auto industry, part of his effort to trumpet GM's evolving environmental focus. But by then the executive's fate was sealed, a consequence of the belief that he was linked with an out-of-touch company. Pushed out by the Obama administration, Wagoner gave way to new chief executive Fritz Henderson, who quickly reaffirmed the company's commitment to the Volt.

During the tumult, Lutz went on working, a self-described car man ensconced at a safe remove from the finance men's woes and budget-slashing, and happiest when he is talking about horsepower, speed and performance. His office at the Technical Center here in Warren sits amid a research-and-development behemoth. Security is tight; visitors are screened for camera equipment and anything else that might procure trade secrets about prospective vehicles.

Near Lutz's office is a reflecting pool -- immense enough to be a large pond. Farther down is a building called Design North, where for decades, in a special showroom, executives unveiled new GM automobiles for the brand's dealers and other VIPs in a venue that once doubled as a theater of sorts for entertainment luminaries flown to Detroit to perform for the dealers, a roster that included Lucille Ball and the Beach Boys.

GM's only real competition at the time came from Ford Motor Co. and Chrysler Corp., backyard rivals with nearly identical union-negotiated labor costs and roughly similar product lines. It was an era of near absolute power for the Big Three in the American auto market: They could set a car's retail price at virtually any amount, certain that consumers somewhere would buy it.

Prodigious profits led in time to prodigious costs. Pressure and the threat of strikes from the United Auto Workers union, wanting its share of the Big Three's bounty, guaranteed not only rising wages that served as workers' ladder to the middle class but also lifetime health care and growing pensions. In time, GM was responsible for funding more than 1 percent of all the health-care costs in the United States.

While smaller and fledgling auto companies in Japan and Europe were disciples of lean operations during the 1960s, in preparation for one day becoming viable competitors, GM preached expansion in the name of more product brands and winning vehicles, shying away from no expense if it might mean producing a more artful, powerful and extravagantly appointed car.

"A lot of waste in the glory days," observes Lutz, who remembers former GM design chief Bill Mitchell authorizing the purchase of a new Ferrari V-12 engine just so he could demonstrate to subordinate engineers what he wanted the engine of another GM car, the 12-cylinder Pontiac Firebird, to sound like. "He spent what today would be like $75,000 to get the engine," a laughing Lutz says. "He could have done the same things with a recording or he could have rented a Ferrari for a day. It's hysterical when you think about it, crazy. It was a flamboyant era."

That is all gone now. GM long ago stopped bringing famous entertainers to Design North. In late March, the car being shown off there is the four-door Volt, its metallic aquamarine paint job twinkling preternaturally under track lighting. Powered by lithium-ion batteries and scheduled for sale in November 2010, the Volt will be able to transport a driver as many as 40 miles on battery power alone before it needs to be recharged, a task as simple as plugging into an available outlet.

The Volt was Lutz's idea, part of his goal to remake GM's image from that of a corporate dinosaur mocked for creating the kind of gas guzzlers he tends to favor personally into a cutting-edge 21st-century technological force capable of besting any of its Japanese competitors. No rival occupies so much of his attention as the company that has supplanted GM as the world's chief auto seller, Toyota. Lutz sees several reasons for Toyota's ascendancy, none more important than becoming the darling of media analysts and environmentalists in the wake of its seminal hybrid, the Prius.

Seeking Its Prius

By early this decade, the Prius had become a genuine phenomenon, envied by competing auto executives less for its sometimes pallid sales numbers than for how the hybrid with the funny-looking sloped roof had stamped Toyota in consumers' minds as the industry's leader in technology, fuel-efficiency, reliability and forward-thinking environmentalism.

In early 2006 -- "much too late," he acknowledges now -- a troubled Lutz saw that driving a Prius constituted nothing less than a values statement for many of its owners, a means to bask in the perception of their own enlightenment. Even more alarming, thought Lutz, was that some consumers not enamored of the Prius itself nonetheless saw its existence as proof of Toyota's wisdom. The Prius's presence alone was drawing people to Toyota lots, where the curious bought everything from bigger sedans to sport-utility vehicles and trucks with about the same gas mileage as their GM counterparts, groused Lutz. Part of what he called the "halo effect."

One sporadically selling hybrid, he realized, had greened an entire company and catapulted nearly every vehicle in its product line. It was a disturbing sea change for GM executives. What the 1920s Model-T had been for Ford -- a transformational vehicle cementing the impression of the company's dynamism -- the Prius was proving to be for Toyota. Meanwhile, American automakers, including GM, suffered under the perception that they were stuck in yesteryear and saddled with cars of inferior quality.

Personally, Lutz was scornful of much about the Prius. He thought it "pretty ugly," he says, and technologically unexceptional. But he could not deny the shrewdness of Toyota's long-range strategy. He came to see a benefit in what he regarded as the Prius's homely features, particularly the sloped roof.

"That's where Toyota did a very clever thing: The Prius had its own unique appearance," he says. "Just like the Volkswagen Beetle was ugly in the '50s, the Prius had a certain ugly chic about it that appealed to a lot of people, the same kind of trendsetters who'd bought the Beetles long ago because to do it was cool and showed you were not part of a materialistic society."

If any moment presented GM executives with an opportunity to overcome the unfavorable perception of the corporation, Lutz thinks, it came on the eve of the Prius's arrival in the American marketplace. The Prius was already a moderate success in Japan, where Toyota had introduced it in 1997, and GM executives had to decide how, if at all, to respond to a competitor's hybrid in the United States: Should they enter the hybrid competition, too?

Lutz and other GM executives met at the company headquarters in Detroit to ponder the matter. "Somebody said, 'Do we have [hybrid] technology?' " Lutz remembers. " 'Oh, yeah,' was the answer. 'Oh, yeah, we got the technology. We've been building hybrid prototypes since the late '60s.' "

Another executive asked what the cost of the hybrid investment would be.

" 'Well, we're probably talking about $600 [million] to $700 million,' " someone answered, as Lutz recalls.

Finally an executive asked, "What would we sell this thing for?"

"Well, the answer was: No matter how we twist the numbers, we were going to lose a couple of hundred million dollars a year," Lutz recalls. "And Rick Wagoner quite rightly, along with the finance people, said, 'We can't do that. We can't go to the board of directors and come up with a program [for hybrids] costing the bigger portion of a billion dollars and when the board of directors [asks] why are we doing this, we say, 'Well, we're going to lose money on it, but, well, we're doing it to show that General Motors is technologically advanced and environmentally aware.' You know, back then, that wasn't going to receive a very warm welcome."

The decision was made not to go forward with a hybrid program.

For a while, nothing that Lutz and other GM executives saw in the Prius's sales number made them think they had made the wrong decision, Lutz says. But within a couple of years of the Prius's release into the American market, he began wondering whether GM had made a serious mistake. The halo effect had created the perception that all Toyota cars and trucks, regardless of size, were imbued with the company's famed fuel efficiency. Meanwhile, Lutz noticed that the attention paid the Prius had not diminished Toyota's eagerness to produce big profitable trucks and SUVs. The rival was climbing in every category.

Going Electric

In early 2006, Lutz decided that GM could no longer afford to be without a dramatic response to the Prius and other competitors' models. He walked into the office of Jon Lauckner, vice president of global program management and director of the corporation's advance design, and said he wanted a "game-changing car" capable of reestablishing GM as the worldwide technological leader.

Determined to leapfrog the Prius and all other hybrids, Lutz proposed a purely electric car, powered by lithium-ion batteries, which would have a range of 150 miles or so before needing to be recharged. He was an ardent believer in battery technology, following a three-year stint as the chief executive of a battery company during the 1990s.

It was not the first time someone at GM had said he wanted an electric car. The last such effort at the Technical Center had not ended well: During the '90s, the automaker spent more than $1 billion developing a small two-seat electric vehicle known as the EV1, using heavy nickel-lead batteries before concluding that it was cost-prohibitive for consumers and scrapping it to the disgust of fervent EV1 fans and environmentalists.

Lauckner, who had carefully studied the EV1 and thought that the car would have been wholly impractical with nickel-lead batteries, saw similar problems with Lutz's vision of a car intended to go far on lithium-ion batteries. "Too expensive," said Lauckner, who made clear that with all the batteries needed for a vehicle to travel about 150 miles, Lutz would merely be making another battery-heavy, cost-prohibitive car.

Known in GM corridors as "The Wizard," Lauckner immediately had two suggestions: a smaller battery pack that would at once make the car affordable while guaranteeing the typical American worker a ride long enough for a round-trip commute each day; and a modest gasoline engine that would kick in only if and when a driver ran down the battery power. The engine would have an entirely different use from the standard internal-combustion engine, generating electricity to power the electric motor and, in the process, extending the vehicle's range.

Then Lauckner removed a fountain pen from his pocket and started furiously scribbling calculations that in time proved prescient about everything from the necessary battery size to the dimensions of the little gasoline engine. Later, with GM surveys indicating that 78 percent of U.S. workers had daily round-trip commutes of 40 miles or fewer, Lutz posited that the vast majority of Americans who drove their electric cars would ordinarily never need a drop of gas.

Forty miles became what Lutz and Lauckner called the "sweet spot" for their new battery's range, the distance at which they surmised that most buyers would feel comfortable with their electric car's capabilities, knowing they had the backup of a gasoline engine capable of taking them more than 300 miles. What made the 40-mile battery range so ideal, Lauckner said, was that the distance did not necessitate a mammoth-sized battery pack that would put the car out of the financial reach of all but the rich.

For the first time, Lutz thought he saw a viable plan. And while the presence of a gasoline engine meant that GM could not call it a purely electric vehicle, Lutz and the marketing people finally settled on an alternative description that struck Lauckner as just right: "extended-range electric vehicle."

Not every GM official has always shared the Volt team's confidence or agreed with the timetables of Lutz, who by early 2008 openly talked about the Volt coming out on the market in late 2010. Noting the ongoing questions about battery issues, Wagoner publicly indicated then that he was not so sure, saying only that a release date for the electric vehicle was "fluid."

But in the summer of 2008, at a forum attended by other auto executives and then-presidential candidate Barack Obama, Wagoner recalibrated his position. Under increasing pressure from government officials to demonstrate GM's broad commitment to more fuel-efficient vehicles, the beleaguered chief executive confidently restated GM's goal to bring out the Volt in 2010. After Wagoner's resignation this year, the newly installed Henderson and his lieutenants reiterated the company's support of the Volt, despite indications, he said, that the car would lose money in its early years.

Pros and Cons

For all the bold talk, the Volt project exudes caution. Only about 10,000 of the vehicles will be built in the first year, a limited production run that, with the considerable cost of the lithium-ion batteries, virtually guarantees a high market price, probably about $40,000. Lutz is not worried: He expects the 10,000 cars to be purchased quickly by well-heeled electric-vehicle diehards who will receive a federal tax credit of $7,500.

While acknowledging that the price is a lot to ask of middle-income consumers, Lutz stresses that he sees the Volt falling to $25,000 or $30,000 in future generations as technological advances and economies of scale cut the cost of batteries. But no matter the vehicle's cost or loss in the early years, he thinks the Volt must be built for his desperate company to have any chance of displaying its competence and new attitude. Failure now would be a public relations disaster, he insists. "We're talking about our image here -- about remaking GM; it is essential to get this done," he says.

Just the same, he would like to see more help from the federal government, perhaps a boost of the $7,500 consumer tax credit for the Volt, arguing that with the considerable support that Asian and European auto companies have received from their governments that such a subsidy is richly warranted.

The Obama administration, however, has projected its own concern at times about the Volt, an ambivalence that in moments has resembled that of skeptics. While administration officials have offered flattering descriptions of the Volt's potential, Obama's auto task force noted the persistent questions about the car's expected losses and whether its high price tag might limit its appeal.

Lutz senses the government's surprise over how much it will cost to realize its vision of a remade auto industry. Recalling a visit to the Technical Center by Obama task force leaders Steven Rattner and Ron Bloom, he says, "We took them through a lot of our advanced technology plants. And I will tell you that when they saw the cost of some of these solutions" and technologies such as batteries and hydrogen fuel cells "they were stunned. These are very intelligent and well-informed people, but they, Bloom and Rattner, were just amazed about what a lot of this stuff is going to cost."

Despite the seeming worries, Lutz sees important social forces working in the Volt's favor, notably the passionate desire of influential environmentalists and the intellectual establishment to have electric cars succeed, he says, a movement that strikes him as already creating an artificial marketplace, a rigged game of sorts. His cynicism seeps out when he ponders whether a single vehicle can restore GM's charisma and consumers' confidence.

"Yes, it can, because sex and charisma are to a certain extent redefined today, especially by the media and especially by the government," he says. "The focus now is on conservation, the lowering of CO2s, sustainable energy and so forth. So today, to be frank, we've got two markets."

Lutz thinks something else is working on his side and that of the Volt: "Obama has said that he wants a million plug-in vehicles on the market by 2015." The federal government, which will effectively own about 70 percent of GM, must be heeded now, he realizes. For now, Lutz views the Volt as nothing less than the vehicle that helped deliver a government life preserver to a drowning corporation. "Think where GM would be now if we had not made the decision to productionize the Volt, a year and a half ago," he says and leans back in his chair. "That is the real question. You could argue that we were late but that the Volt has now become the focal point, the rallying point for the pro-GM forces. We can say, 'See, we can transform the automobile; we can be the company that electrifies the automobile.' We can say, 'Yes, we can.' "

Lutz grins.

Not everyone shares his view that it is the right car at the right time. Barry Bluestone, a political economy professor at Northeastern University whose late father spent years as a United Auto Workers vice president dealing primarily with General Motors, fears that the Volt will look far less attractive to consumers than an array of new and established hybrids selling for much less.

"The car isn't coming out for another year, and it has an extraordinarily high price," he says. "I don't see how many people are going to get excited about a $40,000 car, even with a tax credit, when they can spend about half of that in some cases to get a hybrid. The Volt might be the car of the future, but it certainly isn't the car of the present."

The vehicle will face an array of competitors. Tesla Motors, a Silicon Valley company, already has produced and sold a small number of all-electric cars priced at about $100,000, with reported plans to sell an estimated 1,500 cars this year. The Mitsubishi Corp. is launching its own electric car, MiEV, this summer in Japan. And China will soon present an electric vehicle that it eventually hopes to put on the foreign market. "There's already an enormous amount of competition and perhaps a global overcapacity," MIT's Roos contends.

But GM's greatest hurdle remains its own image. Lutz and other company executives are looking at what might be a Gordian knot. How do you continue promoting and selling the big powerful glory cars while arguing that you are a new GM? "You do it with a car like the Volt," Lutz says. "But we can't make any mistakes with the Volt. We know we're facing a perceptual problem."

He frowns and encapsulates what the modern view of the company has become: "It's that we make all our money off sport-utility vehicles and large pickup trucks and V-8 engines, that we don't care about the environment, that we pooh-poohed the Toyota Prius as being economically unsound" -- he pauses and plunges ahead -- "which, at today's fuel prices [about $2.40 a gallon at that moment], it still is, by the way." He knows how impolitic that will sound to some people. He smiles ruefully, not backing down. "The customer will never recover the premium paid for the [Prius] hybrid system in fuel economy," he adds.

The Conflict Within

Lutz is of two minds when talking about the auto industry's evolution. The executive in him trumpets the Volt as a key to the company's future. The romantic in him wishes the government, the media and the critics would leave the big, powerful cars alone. He is already mourning what he sees as an inevitability: the slow, painful death of the dazzling machines.

"In time, the government is going to legislate out of existence cars like the Camaro, the Corvette, the Cadillac CTS -- all these acclaimed vehicles that have lately gotten rave reviews from the automotive press around the world," he predicts. "So, ultimately, we are driven by legislation into the kind of excitement provided by the Volt."

He says this without a scintilla of sarcasm. At his core, as he frequently tells people, he is a car guy, drawn to the technological challenge the Volt presents, fascinated by the potential of batteries, understanding that whoever prevails in the electric-vehicle competition may be immortalized along with his car. It is just that he cannot shake his conviction that, in the name of change, Americans are being asked to give up something that defines them and their culture, a beauty and roar to which no monetary value can be attached. Few things in his existence give him more pleasure than driving his Corvette for the hour it takes him to get to his home in Ann Arbor.

He smiles while talking about the 2010 Camaro, the car still sitting at that moment in the GM airport gift shop. "Given the tough economic times and the high priority of fuel economy, we were almost wishing we hadn't done the Camaro," he says. "We looked at it as something radically mistimed." But he says the high number of advance orders for the car has justified his skepticism about just how deep the public's love for green cars will ever be. "When you get out into the marketplace, it's probably just 5 percent of the public that desperately wants something environmentally sound and is willing to pay a premium for it," he says. "I would say the East and West Coast intellectual establishment kind of lives in its own world. When you get to the broad American marketplace, excitement is still kind of defined in the way it used to be."

He is finished for the day. His career is winding down, he says; retirement will come later this year. "Nice afternoon for a drive," he says, ready to head out for the 60-mile ride back to Ann Arbor, a university town, the kind of town in which GM cars are not very popular, he says. The closer he gets to home, the fewer GM vehicles he will see, especially the big kind, the ones that college towns typically deplore, the sexy kind, he says. It is what he most yearns to drive, even as he pushes on behalf of the small electric car back at Design North, the one he hopes represents the company's salvation, glittering under the showy lights.

The conflict in him mirrors the history of GM's and a country's ambivalence, just another reason why any green transformation of the industry will be fitful, he suspects. Driving to Ann Arbor reminds Lutz that GM's survival hinges on a successful fight for the souls of American auto buyers. It just so happens that, all along, his soul has been one of them.

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