Vrroooom At The Top

Still, as with any great movie or music executive, Lutz's greatest asset is an uncanny sense of what makes a hit. He compares Detroit to Hollywood, arguing that in both cities, cost controls and clever marketing--while obviously important--will avail you little if you don't make popular products. And like many successful entertainment execs, he holds that focus groups will take you only so far: there's always an element of gut, and of risk. Lutz used his gut to propel a struggling Chrysler to greatness in the 1990s with a series of cars and trucks that initially raised eyebrows internally but have since became household names: the Viper, the Ram pickup, the PT Cruiser.

That's why Wagoner decided to hire Lutz. The two had never talked much until last May, when they found themselves seated together at a Harvard Business School function in Detroit. The GM CEO started grilling the former Chrysler vice chairman on "how to make cars people want to buy." Not too many days later, Wagoner asked if he could drop by Lutz's office for a 6 a.m. breakfast. (Lutz, not a morning person, nearly balked.) "I asked him how I could find a 50-year-old Bob Lutz," recalls Wagoner. "And it took about 13 seconds for me to realize there wasn't anyone as good for us as Lutz himself."

During the previous year, while working as CEO of industrial battery maker Exide, Lutz started Cunningham Motors, to produce a racy, V12 coupe for the enthusiasts who otherwise would buy a Ferrari for a cool $250,000. Fortunately for Lutz, GM in December announced it would become a major Cunningham investor.

At GM Wagoner has made it clear that Lutz has the authority to redesign products already in the pipeline, kill pet projects and install his own. So far, this has not posed a threat to top GM executives, for a simple reason. Says David Davis Jr., founding editor of Automobile magazine: "Everyone, including Bob, knows he's not going to be chairman of General Motors."

In November Lutz brought in an outside consultant to help fix the design process. But mainly he has simply let it be known that the designers are now in charge. That approach has worked famously well at newly revived Nissan, where one of CEO Carlos Ghosn's first turnaround maneuvers was to take designers out from under the arm of engineering. "You have to unleash the creativity," says Ghosn. "Otherwise, you are dead."

Lutz and GM North America president Gary Cowger have also reviewed GM's entire product portfolio, axing some models and slightly delaying others so that their designs can be tweaked. On the basis of a few Lutz remarks, for instance, designers have, by one account, "changed every millimeter" of a future Cadillac STS, in particular massaging its roof line to give it a sportier, more European look.

Still, the test of Lutz's magic will not come until these cars hit the road in several years. Meantime, the company faces daunting challenges. One is a testy relationship with the autoworkers' union. Another is that despite a hefty profit margin on trucks, GM's overall global operating margins last year were a paltry 1%, to Toyota's 7%, according to Morgan Stanley's Girsky. Today's weak yen worsens that situation by boosting Japan's dollar profits even further. GM's vast overseas operations, with the exception of its joint venture in China, remain a disparate amalgam of brands like Saab and Opel and partnerships with struggling automakers like Isuzu and Fiat.

On the plus side, in recent years GM has made vast engineering gains that are beginning to show in components like the light, powerful new I-6 Vortec engine. In marketing, last September GM initiated the 0% financing program, applied it widely and got a bigger sales boost than its rivals. That lifted its U.S. market share nearly a point, to 28.1%. Analysts warned the program would result in fewer buyers in 2002. But GM has drawn down its inventories enough that new customers will have to pay top dollar for particular models they want--which could offset incentive costs.

Looking forward, auto-industry analysts are encouraged that CEO Wagoner, 48, has brought in outsiders like Lutz and chief financial officer John Devine (recruited from Ford a year ago). The hope is that they will be able to energize GM's vast talent pool, the engineers and designers largely ignored by bureaucratic prior regimes.

Lutz believes GM will be a turnaround story like Chrysler by the time he leaves in three years. "This gang has just the esprit de corps and even more capability than we had back then," he says. He acknowledges that once he left Chrysler, the company lost sight of its high-design, low-cost mission. "I realize now that what I have to do here is leave behind a system that works." Really, that's Rick Wagoner's job, but now he'll get a jump start from Bob Lutz.