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?

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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.