Driving Conversations: The official GM Europe blog

Through most of the last twenty years of the industry, the unrelenting push for quality supremacy was a constant headline in gauging product success and brand respect. But with the rising costs of energy and global awareness of climate change, it seems quality has drifted into the background of the discussion in favor of technology and fuel economy leadership. Is quality now simply a given, or is it still a differentiator in the market? And what determines quality? Is it performance in external “things gone wrong” measurements, such as the J.D. Power and Associates 2008 Initial Quality Study (IQS) or is it how the vehicle is perceived by the customer in areas such as fit and finish? These are important, but I suggest quality is about much more.

To be sure, it’s almost impossible to find “a bad car” with respect to quality. With the J.D Power IQS number, for instance, we’re talking differentiation in scores for “problems per 100 vehicles” of a fraction of a point in looking at simply 'average' cars to the best in the survey. On perceptual quality, I think things get a bit trickier. As pricing pressure and high material costs squeeze manufacturers, the temptation is to take costs out and to cut corners. To me, this is a no-win strategy. Mark Adams highlighted the importance of details in his recent post about the interior design on the new Insignia. The materials, fit, finish and attention to detail convey quality in every respect. I’m convinced this effort will pay off with higher consideration, better pricing performance and long-term brand equity benefits. The good news for GM is that these types of efforts are now the norm for our product development and design community, not the exception. But it hasn’t always been this way.

It’s taken some time and it’s still an on-going process, but the culture of “good enough” has pretty much left GM. Quality is not just about good process; it’s a foundation of the culture of the company. When I was at BMW, no matter where you worked – even if you were the second-ranking librarian in the corporate library—you strived to be the very best person in the industry at your position. It wasn’t something you preached, or had to remind people about, it was simply how most all employees viewed themselves. I think that passion bled through to all the products it created. At GM, I’ve found some of the most talented and inspiring people I’ve ever worked with, but the culture in the past always seemed to come up with a “simply OK” mindset. That’s not to say that GM hasn’t done outstanding products in the recent past, but if we’re honest, the sum total of the parts was not always compelling.

But today, I see a level of excitement and passion that is infectious. Our engineers and designers are pushing the envelope and reaching beyond even their own expectations to deliver product excellence at all levels. And importantly, this passion is finding its way into all parts of the business within GM. Our biggest leadership challenge is to foster and build this quality culture as we push through the current industry headwinds to build product momentum. Quality is about far more than just the metrics in the surveys - it’s a mindset that must drive the company.

Carl-Peter

What to make of last week’s breathtaking rise in oil prices? Look no further than Rick Wagoner’s comments at the annual meeting last week where he announced the shuttering of four major plants as part of a huge move to realign passenger car capacity. That move will take out more than 700,000 units of truck production and will forever reshape the landscape of the North American market. To put it bluntly, the rise in oil is having a profound and permanent impact on the fundamentals of our business – and not just in North America. Adding insult to injury, while energy costs are draining the consumer side of our financial equation, the impact of skyrocketing commodity prices and the huge disparity between the Euro and most other currencies are seriously dragging down the production side of things here in Europe. The big questions are “how high will oil go?” and “how deep will the impact be on the industry?”

On question one, the honest answer is that nobody seems to know. While there is serious debate as to what the blame is (a weak dollar, global demand, speculators, etc.) the reality is that markets always correct. Whether this is a case where oil has simply been exceptionally low for the past decades and is now correcting up, or that speculators and hedge funds have swarmed like locusts out of equities and real estate to commodities, still remains to be seen. At some point, the true fundamentals of the market will take over. In any scenario, the days of $50 a barrel of oil are long gone.

On question two, I think the only honest answer is that the impact on the industry is going to be extremely tough, which is already becoming very apparent. For GM, even when you factor in the exceptional growth we are experiencing in Eastern Europe, Asia and Latin America, it’s clear that the business in the mature North American and certain European markets could be dragged down to lows we haven’t seen since the recessionary days of the early 80’s. In a commodity dependent business with fixed labor costs that is dependent on a buoyant consumer, there aren’t many options for immediate relief in such dramatic cyclical downturns.

So, what is there to do? Simply put, you forge ahead and make the changes necessary to be as strongly positioned as possible when things improve. GM is focusing billions of Euros on advanced propulsion technologies to get our vehicles as fuel-efficient as possible – advanced petrol engines, clean diesels, downsizing/turbo-charging, mild and strong hybrids, battery electric vehicles, bio-fuel powered vehicles and fuel cells are all going to be critical technologies in an energy constrained world. We’ll have one of the most diverse and capable lineups of advanced powertrains in the industry. We’re also sizing our business to get our cost structure as competitive as possible to ensure we are able to keep a strong employment base in all the regions we do business. This is not about fleeing high labor cost markets for lower cost markets. Rather, it’s about getting as highly an efficient and productive cost structure in the regional markets you do business as is possible. And most importantly, we need to keep our focus on executing the best products possible. One thing that is very different from other serious downturns in our history is that GM is not pulling money off the table for future product programs. In fact, our product engineering centers around the world are loaded up to the breaking point with future programs to keep us as competitive as possible.

While nobody wants to be dragged through economic turmoil and uncertainty, it always seems darkest before the dawn. The auto industry is emerging from a huge transition as it sheds the economic model of the post-war era to the new economy of globalization. While it’s going to be a nerve racking ride getting there, I’m convinced that GM is going to emerge a much leaner, but ultimately much better, company on the other side of this difficult period.

Carl-Peter

I’m writing this from Detroit after a long week of meetings. That's one part of "being global" that can take its toll...a global business requires a lot of travel and while it’s necessary, I can’t exactly say it’s the most enjoyable part of the job. But there is the exciting side of the business, where the travel is actually welcomed. This weekend I’m off to Austria where I’ll join some of our former race drivers at the 21st Kitzbühel Alpine Rally, which is one of the largest and most popular events for historic automobiles in Europe. We'll have some of our Opel historic collection on hand, including an Opel Diplomat Coupe that I'll get to pilot on some of the most beautiful alpine roads you could imagine. Given the challenges of the business right now, I'm sure you can understand why I can't wait for the weekend. But it also reminds me that our business is about emotion and excitement -- that's why people love cars. And it's why I love being in this business -- cars are about passion, precision and freedom -- things that I think all enthusiasts can identify with.

And speaking of enthusiasts, I promised to bring back a report from our massive dealer meeting in Germany this past week, where there was a tremendous amount passion flowing. We had more than 6,000 dealers from all of Europe, representing all of our brands. It was an amazing event just to witness. To keep their attention we rolled out a substantial amount of our future product portfolio for all the brands. Overall, I would say that what we showed gave our dealers a substantial boost in confidence on where we're driving the business. While we were careful not to give away too much info, we gave a clear signal that our brands are well supported by distinct and powerful designs that are well targeted at growth aspirations. It was an interesting contrast in sentiment....the traditional mature market dealers are clearly feeling the pressure of a tightening economic situation, while the dealers in the developing markets were seeing huge new opportunities. It's amazing the stark contrasts you can see in such a close geographic proximity. We also got substantial feedback on the issue of CO2 and the need to be at the forefront of the technological arsenal that will be needed to address future challenges with the environment. As we move to the 120 gpm standards in the EU, we're going to need every option available to thrive...it's the biggest challenge I've seen during my entire career. That's a great topic for a future post...stay tuned.

Thanks for all of your initial responses on the blog. I will stay as engaged on responding as quickly as time will permit. Thanks to the Blackberry, I'm able to get the blog responses forwarded to me quickly...I'll do my best to keep on top of things. If there's a delay in hearing back, understand it's simply a function of a very packed schedule!

All the best,
Carl-Peter

First off, I want to say welcome to Driving Conversations. While the world is full of corporate blogs, GM has been on the leading edge of using this type of forum to elevate a more challenging and robust conversation with all the constituents that have a stake or interest in our business. And speaking frankly, I think a blog for GM Europe is well overdue. The intensity of press coverage regarding our European business and our products and brands has, at times, left part of the story untold. This is understandable given the massive changes and challenges that are occurring in the global automotive business as it undergoes fundamental structural changes. Being the biggest player in the industry with arguably the biggest challenges to overcome in respect to making these changes, it’s understandable how some external (and internal) perspectives have been shaped and at times have taken a critical tone. But this glass is not half-empty – not by a long shot.

While we’re in the midst of a fundamental change, the opportunities and challenges have never been more exciting. The product offensive we’re launching within Europe is considerable. We just a few weeks ago announced more than $9 billion in product programs for the Opel brand alone over the next several years. The new Insignia signifies a great future for Opel. All-new versions of the Astra, Meriva and Zafira are all coming soon after. Chevrolet continues to be the fastest growing automotive nameplate in Europe and is now expanding to a truly global product lineup that you will be seeing later this year at the Paris auto show. And Saab is now fully benefiting from our global product development program by getting an all-new 9-4 crossover with a striking new 9-5 soon to follow. These products will be supported by the biggest advanced technology rollouts in the history of GM, with a broad new lineup of small displacement turbo engines, advanced clean diesels, hybrids and the new E-Flex electric vehicle technology.

As we speak, I’m in Düsseldorf, Germany, this week to meet with more than 6,000 European dealers for our GM Next Centennial meeting and celebration, where we will lay out the big picture on product for the next several years to come. We’re using our centennial celebrations to look forward, not back, and to drive a new conversation around the future of GM. That future is about creating products and brands that reignite the affections of our customers and the pride and respect of our employees all over Europe. I look forward to bringing back a full report. In the meantime, I encourage you to use this space to let us know what you’re thinking. Share your thoughts and ideas – push and challenge us on whether we are succeeding. For my part, I promise to keep this an authentic, honest and open forum where all the issues can be put on the table. I hope you look forward to it as much as I do.

Carl-Peter