Lutzisms that Saab could do well to listen to

There was a time when Bob Lutz was talked about in these pages with metaphorical devils horns and pointy tails. I still hold him accountable for the cancellation of products in the last decade that could have benefitted Saab in a very real way.

But all of that doesn’t mean the man doesn’t have smarts, or vast amounts of industry experience. Lutz is still a man worth listening to when he talks about the car business.

Lutz appeared on AutoLine After Hours a few days ago. You can watch the 90-minute episode if you like, but I’ve summarised a few points below, as well as providing some possible adaptations for Saab’s business.

Lutz retired from GM last year and I know he and VM are on good terms (Lutz was the man VM first contacted about buying Saab). Maybe a consultancy would be a good use of some of Bob’s spare time?

——

Build the best product you possibly can for the customer.

Lutz compares American beer to premium beers from Germany, Japan and Mexico (in his opinion, the American beers don’t stack up because the businesses are run at a price rather than being operated to make the best product). He also compares international air travel between American carriers and airlines like Singapore Airlines, Qantas, JAL, Swiss and Lufthansa. Again, the US carriers are left severely wanting.

I don’t drink beer, so I’ll have to take his word on that.

I’ve flown international with United, as well as Lufthansa, Singapore, Qantas, JAL, Finnair, Malaysian and a couple of others and I’d completely agree with his air travel contention. I would never fly United out of choice on a Sydney-US route. My most recent US trip was with V-Australia and it was superb in every way (with the possible quibble over the hardness of seats).

Service and the quality of a consumer product are the keys to a consumer-based industry. There’s no way around it. Whilst they do have a fantastic product, it’s widely acknowledged that Saab need to lift to varying degrees in varying aspects in order to compete with the companies they want to compete with.

Saab have to define themselves and then build the best product, and offer the best customer experience possible, in accordance with that definition.

Be a design-driven company

Lutz was talking about the design revolution that’s happened within various arms of GM over the last decade. Conflicts were present within GM because too much power was in the hands of the beancounters and vehicle-line-executives. The designers had little or no authority over the final product they were charged with designing.

This changed when design was given more authority and everyone started to work for the benefit of the product instead of covering their own a$$es.

Personally speaking, I see design as absolutely essential for Saab’s business, for two reasons. Firstly, it’s the car business and good design is a key to engaging the customer at all contact points with the company. Second – and I think this is something that might emerge more as time goes on – Saab’s key identifier, something that differentiates them from almost every other carmaker on the planet, is their Scandinavian origin. This is something that they can genuinely emphasise, esp with everything housed in Sweden once again. Design is such a big part of Scandinavian identity that for me, it’s a no-brainer that it should be a point of genuine emphasis for Saab.

Adding value rather faster than you add cost.

Self explanatory. If you add more features for the customer and can justify your higher asking price by virtue of a better customer experience, then you’re adding value. The key is to find value that costs (say) $800 per vehicle at the manufacturing level and delivers $5,000 worth of extra value at the retail end.

Imagine if Saab could cut $5,000 from their average incentives (over $7,000 per car sold in the US during December 2010).

If a car is successful then you haven’t over-achieved, you’ve done what you were supposed to do.

Lutz cites some people within GM who are a little worried that they might have over-achieved with the Cruze. There’s considerable talk here about the higher production cost of the Cruze compared with the model it replaced. This means they’ve packed more features into the car, which is great for the customer, but consequently they have less wiggle room on transaction price. The car’s been successful for them so far and they’re achieving higher transaction prices as a result (there’s a lesson there for Saab).

The implication here is that people involved are worried that they might have set the bar a little high for future endeavours. Lutz argues that if you’ve succeeded, then what you’ve done is achieve your objective. People should expect success and work for it accordingly.

Be wary of driver distractions

In relation to gadgetry being loaded into cars, which Lutz refers to as “a fashionable trend”.

Lutz’s contention is that if car companies don’t self-regulate in terms of the amount of connectivity they offer, they risk that regulation coming from the government. There is useful gadgetry, and then there is stuff that takes away from the important task of driving, even to the point of becoming distracting and possibly dangerous.

Useful gadgetry is stuff like Bluetooth, navigation, enhanced audio. Connectivity to chat facilities, Facebook, etc, would come under the “distracting” category and this stuff is already being planned for by some companies. Greater tie-ins with mobile operating systems are happening right now (and don’t forget Saab’s co-operation with Sony Ericsson here). The challenge is to include the right things, rather than including everything.

The flagship

Lutz is asked about building a big expensive flagship vehicle to establish Cadillac’s credentials in the luxury marketplace. He sees merit in the possibility of doing a $160,000 car for Cadillac, but acknowledges that such a car would probably cost (i.e. lose) Cadillac around $100million (ballpark), which they’d then have to write off to marketing.

I just thought I’d include this to put the idea of a flagship vehicle into perspective. It’s the sort of thing you can do once you’re up, running and successful (or at least when you have the resources to burn).

Lutz pays some attention to the loss of $100mil in his part of the conversation, but not as much attention as you might think $100mil would merit. (All three panelists agree would be a good statement to make, by the way). But that cost isn’t seen as prohibitive relative to the benefit it might bring.

Saab don’t have $100mil to play with and one would have to ask “What would be the statement they’re trying to make at this point?” anyway.

Saab could indeed benefit from a flagship, but a super-special edition of a current vehicle would suffice as long as it really is distinguishable.

29 thoughts on “Lutzisms that Saab could do well to listen to”

  1. I never thought Id hear myself say this but I definitely agree with Bob Lutz. except for the part about American beer which has to be the worst out there unless you get the good stuff from microbreweries.

      • US airlines are considered by most international travelers the worst in the world, the buses….. CQ SQ, the Asian supremo’s Cathay, Singapore, Thai, Malaysian et al with exception of the non Cathay Chinese airlines are all great, LHF, Lufthansa, BA and other Euro airlines good, not as good as asian but nevertheless not even comparable to the US airlines, United, CO AA US et al are the worst carriers in the world.

      • Zippy, I’ve clarified Lutz’s position in my writing (sorry for it being unclear at first draft). He didn’t like either (mass market) American beers, or US airlines.

        Unless, of course, you prefer both US offerings 🙂

        • I thought something didnt look right when I read the original draft, Swade. 😉
          Everything else except the beer and airline analogy seemed to make so much sense.

  2. Wouldn’t the obvious be a 95 performance vehicle, say aligned with the M5, I would love to see that.

    • Car manufacturers do not build performance cars in order to make money. They just build them for prestige purposes only. They make their money mostly from the ordinary cars that you and I buy for our every day business. What Saab needs now is to survive and become profitable. So I wouldn’t expect a performance-oriented car to be in their immediate business plans.

  3. don’t disagree Swade, if drunk on US beers, a difficult feat in itself, then maybe the airlines would pass as one wouldn’t have much recall hopefully.

    One may be bloated and remember everything though, in my view the more likely outcome.

  4. Bob might be all about “building the best product you possibly can for the customer” – but I would never call him a “service after the sale” kind of guy.

    GM’s goal during his tenure was to sell cars – and they pretty much ignored the service side for the most part, which cost them a lot of customers. Interesting I am now seeing the company try to raise the bar in that area now after so many years of neglect.

  5. FWIW, I don’t personally know a single fellow American that drinks mass market domestic beer.

    Smaller craft brews are hot business these days, especially in the under-35 crowd. (Not counting the silly hipsters drinking PBR.)

    Now I’m off to finish my Deschutes Jubelale… 🙂

  6. You leave absolutely nothing to disagree with, and I think people should reflect on this post as they watch the decisions made by Saab in the next year. I think in light of next weeks Detroit Auto Show, I’ll reiterate the fact that they’re not exhibiting in the hall yet hosting across the street in their own “SNO HUS” as an excellent way to achieve value without adding cost, simply in their marketing operations. It seems like they’ve gone top to bottom in the operation to look for efficiencies wherever they can, and that’s a positive sign. It’s another thing I’ll add to what makes Saabs so remarkably smart and well designed to me, the fact that they’re not wasteful.

    After watching CES explode with new vehicle tech and discovering Translogic, Autoblog’s sibling auto/tech site, I’m left wondering what can be done to really compete given that the controller companies that everyone uses like Visteon (to control HVAC, radio controls, etc) are standardizing and consolidating. Pretty soon everyone will have access to these platforms to integrate whatever mobile device/tablet you may want, the question is how well Saab can present their own face on that interface which makes the driver’s life easier.

    Nice summary of the interview, I couldn’t watch that much Lutz, so thanks for taking the salient issues out for me 🙂

  7. I’m quite a Lutz admirer. His vision and experience in the auto industry is legendary and 2nd-to-none. I think we should be careful formulating our opinions of Lutz and that he’s *not” GM, nor was GM him. He was part of a huge bureaucracy (GM) that was slow to change, slow to improve, and steeped in traditions, “if-it-ain’t-broke-don’t-fix-it” thinking and governed mostly by the “good ol’ boys” network. GM would have been in much worse shape (is that even possible ?!?) in 2008/9 had Lutz not joined them back in 2002 and championed, amongst other things:

    “While at General Motors, Lutz championed the import of the Holden Monaro to the United States as the Pontiac GTO. Other cars such as the Cadillac Sixteen Concept; Saturn Sky and Pontiac Solstice; Pontiac G8; Chevrolet Malibu; Cadillac CTS; Buick Enclave; Cadillac Converj Concept; Cadillac CTS Coupe Concept; Chevrolet Camaro; Chevy Beat, Groove and Trax Concept Studies; and 2010 Buick Lacrosse, Chevrolet Equinox, and Cadillac SRX are said to be Lutz initiatives. Lutz has also emphasized a need to produce fuel efficient vehicles, backing the 2010 Chevrolet Volt[5] which is estimated to gain up to 100 mpg.”

    http://en.wikipedia.org/wiki/Bob_Lutz_%28businessman%29#Chronology

  8. Totally, totally agree w/ Lutz that Scan design is the fundamental point that differentiates Saab and should be a focus of their marketing, at least in the USA.

  9. Totally agree w/ Lutz that Scan design is the fundamental point that differentiates Saab and should be a focus of their marketing, at least in the USA.

  10. Saab’s new 9-5 is a real flagship price-wise if you ask me. The fully-loaded version has quite a price tag, with good reason of course.

    🙂

  11. Fully agree with the importance if good design, though I have the feeling that in recent years, the designers are given too much influence, resulting in “over designed” cars (not the 9-5!).

    Flagship: is beyond Saab’s resources of course, but what about flagship details? E.g., they could upon special order, provide a 3.6 l biturbo version of the Holden V6. The block should fit, and developing costs might not be too high. The cars should not be speed limited, and go beyond 300 km/h, challenging the Flyin Spur. Or Saab could offer a “limousine” version of the 9-5, including a separation wall (don’t know the English technical term) between chauffeur and rear passengers. Or they could build a somewhat stretched version of the 9-5 for exhibition on car shows (Coleman Milne of the UK could build it for Saab).

    • And of course, it is less about actually selling this stuff, but about marketing and staying in the public perception.

    • The smartest would be to develop a up-scale 9-5 hatchback “flagship”, and name it for example 9-6, just like Audi did with the A7. This should be fully loaded and with upgraded interior and a performance engine (maybe the 3.6?). This could prevent Audi from “stealing” the luxury hatchback segment that Saab should reign.

    • There’s a reason there isn’t a turbo 3.6L V6: cylinder wall resistance and engine durability. Now if GM ever developed a twin turbo version of its Direct Injection 3.0L V6… That could be a good engine to play with 😉

    • Car manufacturers do not build performance cars in order to make money. They just build them for prestige purposes only. They make their money mostly from the ordinary cars that you and I buy for our every day business. What Saab needs now is to survive and become profitable. So I wouldn’t expect a performance-oriented car to be in their immediate business plans. Saab has Spyker for this. Spyker would well be Saab’s performance division. However, performance has and always is a good marketing tool to attract customers. So Saab engines have to “perform” well against the competition.

  12. Lutz has been around a longtime he a lot of experience but the key is knowing when your time has past. That time was a few years ago. His mouth generally gets him into trouble and on the odd occasion puts the survival of a 60 year old company in jeopardy.

    let us not forget that this is the man that said “Saab is a luxury we (GM) can no longer afford”.

    This is the same man that is quoted as saying that Lotus’ business plan has “60% chance of success”. yet wrote SAAB’s business plan off in saying “They (SAAB) are just not worth saving”.
    This is the business plan that has been approved by various authorities.

    My lasting impression of Bob Lutz is he says what he expects his listeners to hear. Maybe SAAB should slip him some cash to say “Selling SAAB was a big mistake by GM. they were sat on a goldmine and failed to invest the money to extract the treasures”.

  13. My issue with Bob is that, if you believe him, nothing was ever his fault.
    He is always the first in line to take credit for any success, but he’s also the first to point a finger at someone else when things go wrong (and we all know that plenty went wrong while he was at GM). I’m in no position to tell for sure, of course, but the likely explanation is that he’s embellishing his legacy by a fair margin.

    Car companies build “halo” cars in order to make their regular cars seem like a better deal, simple as that. Tons of marketing studies show that people have no problem dropping money at the second most expensive restaurant in town, but they think that they are overpaying if they drop the same amount at the “first” most expensive restaurant.

    Saab needs a $70,000 car to quiet those that complain about their $50,000 car. Make it an AMG-defying $90,000 500+HP beast with a Spyker interior, and 9-5 haters will sound like they are reminiscing about 5-cent Hershey bars and free lemon wedges at the Automat.

    They may only sell a few hundred of these halo cars every quarter, but it will do wonders for the public perception of every other car in the range.

    • +100
      I’ve never seen a Beamer owner who wouldn’t act like his entry level car is one of the M-series. The same thing happened to Audi drivers after the S-line came out. This is what makes even the base cars so desirable.
      What did GM do in late 80’s? When they found out how good Saabs where (40 years of building cars to handle the arctic weather can do miracles), they cancelled the engine that could take on the Germans. Just so that their other products wouldn’t be exposed for what they where.

    • For me this sounds strange and “not Saab”. For me the brand is something else, not a supercar for 90 000$. Thats not Saab soul at all to build a big engine with 500+HP over 3,0L or something like that.

      belive me when the gas prices rice to levels not even American can ignor. No one want´s these in just two years (gas prices ricing and it can happend faster than you can imagine). The big block engines is history allready, and I don´t even think it “rhyme” with Saabs will to take responsobility to environment.

      Actually I think the size of the NG9-5 was a mistake aswell (a Saab over 5 meters sounds wrong to me) but the big boys in Detroit did it the American way and her it is (it´s almost impossible to not love your child). But a true Trollhättan developed 9-5 would not be 5 meter cos thats not really Saab. I want Saab to play on there home field, not even saying that the Germans is there biggest opponents. A good produkt that buyers cant resist is good enough. Saab is a small company, independent and scandinavian nothing else.

      The answer to this (you say) is of coures what you written but I hope that Saab does not loose themselves and there identity to something they don´t are (big and bold).

      • When the 9000 was launched (a looong time ago) it was very big for a SAAB.
        Simon Padian has said the OG 9-5 was originally designed larger until GM changed it. Now Saab was left with a smallish 9-5 for 13 years while the competition kept on growing. Many stayed away from Saabs because it hadn’t the sufficient space (especially in the back) compared to most. Just look how the V70 has been doing.
        There would have been absolutely no point in making the NG9-5 smaller. You shorten the car from the front it loses some of its magnificent safety. Shorten it from the back you lose cargo space. Cut 10 cm from the cabin and you’ve created a 9-3.

        We’re not used to high power engines in Saabs because GM never allowed them. There’s a SAAB V8 sitting in a car museum as proof of what they had planned until GM killed it.
        20 years ago a 500 hp family saloon would have sounded ridiculous even to Audi and BMW owners but times change and Saab needs to catch up with its true competition as hp is so important in making the brand image ‘premium’.

        I believe Bernard meant Saab should have a $70k high end 9-5 that would make some of its $90k rivals look plain silly.

  14. If Saab has neither the time nor the money to build a “flagship” model (which is probably the case right now), what about offering a Hirsched version of at least the 9-5 – both engine and interiors – supported by a full manufacturers warranty?

    • I ever thought Hirsch tuned cars has full Saab warranty. They (Hirsch) uses Saab facilities for testing, they “fight” about the final performance values.
      Warranty cases on Hirsch Troll, Saab performance or normal Saabs with Hirsch tuning are handled via Saab. Never heard this about Maptun, Nordic,..

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