Car Guys vs. Bean Counters: The Battle for the Soul of American Business

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Bob Lutz belongs to a dying breed which will be missed when it’s gone. Garrulous, opinionated, politically incorrect and unstintingly frank, it’s hard to see how he ever made it in corporate America, and harder yet to see how his like will ever make it again.

More is the pity is my assessment — and, for that matter, his too.

Over a long career Lutz held senior positions at all the big US automobile manufacturers and at least one European one. The closest he came to outright CEO was an eight year spell as Vice Chairman at General Motors from 2000 until it filed for bankruptcy protection in 2008.

This book entertainingly recounts that period and GM’s corporate history leading up to it. Lutz organises his history around the theory that GM was, from its heyday in the 1950s, laid low by the cult of “total quality management”.

For those in the financial services industry, Lutz’ passionate peroration may resonate. It did with me.

Now, of course, everyone believes things aren’t quite what they used to be. But even without knowing much about cars it’s hard to argue that any vehicle in GM’s 1998 fleet could bear favourable comparison with a ’57 Chevvy, a ’65 GTO or a ’68 Camaro.

By 1998 GM’s fall from grace was complete. Lutz identifies a number of factors at work. Some have the air of hobby horses (environmental skepticism) and bêtes noires (Toyota, and the “left wing” media’s love affair with it); many go against the political grain and are expressed indelicately (if entertainingly) enough to prompt those who wish to, to write the book off altogether: pooh-poohing concerns about the melting ice cap, Lutz remarks “Hello! Polar Bears can swim!”

Many, however, are insightful and benefit greatly from Lutz’ direct expression. Lutz writes simply, clearly, and he’s funny.

Chief among his targets, as the book’s title suggests, is the cult of the management consultancy which swept the world after the summer of love. The relentless drive towards cost cutting, commoditisation, brand segmentation and regularisation — all things, Lutz concedes, which have their place in a well-run organisation — at the expense of product excellence, instead of in support of it (a component of product excellence is reliability and value for money, after all) is the operating cause of GM’s long decline and fall.

Lutz’ anecdotes are never less than hilarious as they illustrate how process and efficiency was allowed to drown out all other components, including not just design and style but product quality itself. As long as the predominant management ethos is that $25,000 investment can be branded and flogged the same way a toothpaste can can (for decades GM assumed their customers chiefly wanted a low-cost means of conveyance from points A to B, and that anything more was a nice-to-have), the management strategy is bound to fail. After all, in that scenario GM is competing with the second-hand car market, a fight it simply cannot win. And nor did it.

Product excellence, Lutz argues, must be the overriding goal to which all other endeavours are aligned. Product line rationalisation is always justified if it permits greater focus of resources on better quality product. This is no more than a codification of the 80:20 rule — and ironically is no different from the philosophy of the Taiichi Ohno’s Toyota Production System. But somehow, with TQM, this truism of capital production was lost in the PowerPoint miasma.

Lutz is equally perspicacious on the subject of regulation. He isn’t quite the gas-guzzling scorched-earther you might expect. To Lutz, the sine qua non of GM’s trouble was political weakness following the 1970s fuel crisis. Instead imposing taxes at the pumps to constrain demand (like everone else in the west), the US congress took the politically convenient measure of constraining supply, regulating to constrain engine capacity and configuration.

US manufacturers suddenly found themselves having to drastically retool their entire fleets, by regulatory fiat. Where European and Japanese manufacturers, long used to higher fuel domestic fuel prices, immediately flooded the US market with well-developed cars with smaller engines, the hastily cobbled-together American four-cylinder cars were beset with teething problems, were grossly underpowered given their chassis and as a result performed poorly. The US manufacturers never really recovered. Lutz’ view is that pump taxes would have given GM the breathing room to modify its fleet over a sensible period of time.

That complete revision of the product range unhappily coincided with a period where the beanvounters were allowed the run of the ranch, and a catalogue of disasters, all brilliantly recounted, ensues. I had to wipe away tears of laughter at Lutz’ description of the GM ashtray that could work at 40 degrees below zero.

There are great lessons to be learned in this candid, entertaining book, and I dare say Mr Lutz would be an excellent raconteur.

Car-making, in essence, is a simple, business which requires the instinct of product experts — “car guys” — to be successful. The drive to manage away the idiosyncrasies of these very individuals in the name of consistency and process misses the stark fact that often times it is precisely that idiosyncrasy that generates the spark of excellence in the first place.

In the final analysis Lutz is grudgingly respectful even of Toyota: still a privately held business, with excellent processes and systems but still subject to an imperial will that Lutz found sorely lacking at GM.

A hymn to all those at the peril of management consultants and other well-intentioned parasites, this book is well recommended.

See also