RICK KRANZ

Why the U.S. auto industry failed, according to Bob Lutz

Rick Kranz is product editor for Automotive News.Rick Kranz is product editor for Automotive News.
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The American auto industry’s decades-long decline can be summed up in five points.

That’s Bob Lutz’s analysis.

During a 30-minute, question-and-answer period with a handful of journalists last week at the New York auto show, the former General Motors vice chairman covered a wide range of topics.

Today, Lutz, 80, is an adviser to sports car maker Lotus.

Why Lotus? It a way to keep connected to the auto business, he says, although on a smaller scale.

As for the why the Detroit 3 tanked, Lutz offered these reasons

CAFE: “By selecting a fleet average as the way to get fuel economy, we handed the market to the Japanese. They were all better than the average because of their small-car lineup. We were all worse because we did the big frame, V-8 cars...

"Basically the American car industry had to trash its whole model lineup, top to bottom, V-8 engines, longitudinal automatic transmissions. We had to switch to V-6, front-wheel drive, transverse mounted. There was way too big of an engineering and financial task to be able to accomplish that.

"And the Japanese did not have to change anything…because their specialty was the bottom end of the market.”

Exchange rate: The “State Department at one point in the Cold War -- in the early 60s or may be ‘70s -- had given Japan a favorable exchange rate.

“Everyone always complained about the undervalued yen. The Japanese for decades had about a $3,000 to $4,000 cost advantage per car. It’s very tough to compete with that.”

Big 3 executives: “Management was more focused on financial results than actual product excellence. Big 3 management is not blameless in this whole thing. There was way too much Harvard Business School-type, profit-optimization thinking as opposed to customer excellence focus.”

UAW: “The fourth reason, it is tied-in somewhat with management, is the UAW -- the UAW’s refusal to understand that this cow could not be milked forever.”

Media: “And then I blame the general media a lot for what I call the long-lasting, pro-import bias. If it is Japanese or German, it is good. If it is made in Detroit or by a Detroit company, it is bad.”

I would add one other reason.

Exterior styling: During this period the Big 3 produced a long list of mediocre-looking vehicles. Additionally, the interiors were composed of cheap-looking materials. Sometimes the execution seemed to be decided at the 11th hour.

In hindsight, everyone shares the blame.

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