Bob Lutz has discovered the cure for the common car atCorp. Too bad he had to travel halfway around the world to find it.
It was late February when the jetlagged vice chairman and a team of top executives from the No.1 auto maker arrived in Australia to sample the works of Holden Ltd., its auto making subsidiary.
There was nothing secret about the mission. The trip was well publicized, and Lutz gave a speech at a media luncheon that laid bare his admiration for Holden. The products are exciting, he said, the brand has heritage, the teamwork is tremendous and the operation is making money.
“In many ways, Holden today is a microcosm of what we want GM to be,” Lutz told the crowd. “It works with various sources within GM and within the GM alliance structure and operates with limited funds, but with unlimited creativity and ingenuity.”
At the New York Auto Show a month later, Lutz heaped praise on Holden as the shining star in the GM fold — the one entity that gained three points of market share last year while GM's other operations lost share or remained static.
Holden's Australian market share grew from 16.7% in 1991 to 21.4% in 2001, according to Ward's Automotive Yearbook, and so far this year the auto maker is trending at 22% for 2002.
In the late 1990s, word began to circulate in Detroit that GM was looking for ways to expand Holden's role. Back then, the future of the Pontiac Firebird already was in doubt, and replacing it in the lineup with a Holden-based sports car was always the first option mentioned.
So it wasn't a surprise — or an original idea — when Lutz announced at the New York Auto Show media breakfast in late March that Holden's Monaro sport coupe would come to the U.S. as a modern-day interpretation of the heralded Pontiac GTO muscle car. With 5.7L V-8 power, rear drive and a 6-speed manual gearbox, Lutz is convinced the Monaro will do the GTO heritage proud.
The Monaro would serve as the flagship for Pontiac, the struggling GM division that is losing Firebird and gave Aztek to the driving public. Lutz reasoned that importing the Monaro as Pontiac's flagship was “much faster than if we had to develop it ourselves.” Watch for the GTO at the 2003 Detroit or Los Angeles auto shows, going on sale later in the year.
Lutz makes it all sound so simple, but the logistics of retooling right-hand drive cars for a left-hand-drive market and shipping them more than 9,000 miles (14,400 km) to the U.S. presents tremendous challenges. And while Holden is glorified for flourishing in some markets, it should be noted that its success at home comes as top competitorAustralia is bombing.
Holden also in many cases is arguably just an extension of GM's financially beleaguered German-based Adam Opel AG unit, selling Vectras, Zafiras and Astras badged as Holdens. Moreover, Holden's lineup is a retirement community for brand names (e.g. Caprice, Statesman) and there are some products that would appeal to almost no one outside Australia.
But the charismatic Lutz, who studied Holden in the early 1960s when he worked in GM's overseas operations, apparently has the swagger and clout to expand Holden's role within GM.
Initial plans call for importing fewer than 20,000 Monaros. What about localizing Monaro production in the U.S.? “That's a possibility,” GM-North America President Gary Cowger tells Ward's. “But let's first get that one over here and see how it does.”
Peter Hanenberger, chairman and managing director of Holden, tells Ward's there are no plans or requests for U.S. production. “But you can never say no in this truly global age,” he says. Hanenberger was appointed chairman of Holden in June 1999 and before that was executive director of Opel's Technical Development Center in Russelsheim, Germany.
Lutz conceded after his New York speech that importing Monaro is a risky proposition from a labor perspective. “We can't talk about overcapacity in the U.S. and at the same time bring in tens of thousands of vehicles from Australia,” Lutz says.
The fact that there was a 3-month waiting period for Monaro in the Australian market as of March could complicate matters even more. Holden's already overburdened Elizabeth plant north of Adelaide assembles 32 Monaros a day and expects to sell 7,000 of the coupes in Australia this year.
And the limited success of Australian exports in American showrooms in the past weighs on GM's Holden strategy.Motor Co.'s Mercury Capri arrived with a lot of hoopla, but lasted only five years after sales totaled 55,000 units from 1990-'94. Likewise, the Australian-built Diamante is the Japanese auto maker's slowest-selling car (and most expensive, at about $26,000) in the U.S. Diamante sold 17,200 units last year, according to Ward's Automotive Reports.
However, Holden is no slouch when it comes to exporting, even though its annual production of 130,000 vehicles is minuscule to the 5.5 million cars and trucks GM made in North America last year.
Hanenberger says the company's Elizabeth facility is one of the most versatile plants in the industry worldwide, producing no fewer than 19 domestic and nine export variants. He wants Holden to “play a global niche role for GM where possible.”
Manufacturing consultant Ron Harbour of Harbour & Associates in Troy, MI, says Holden is among GM's best performers in quality and productivity. “That helps from a cost standpoint,” Harbour says. “And it's appealing for GM to bring in a car they shouldn't have to worry about dragging down their quality numbers or tarnishing the GM name.”
With GM departing the muscle car segment by dropping Camaro/Firebird, Harbour says the Monaro/GTO is a “relatively inexpensive way for GM to see if there's a little life left in that segment.”
Holden has exported cars since 1954, when FJ models were first shipped to New Zealand. By 1966, Holden vehicles and completely knocked down (CKD) kits were being shipped to nearly 60 international markets, the company says.
In the 1980s, Holden emphasized exporting engines, rather than complete vehicles. Holden Powertrain Engineering's new 1.8L 4-cyl. powers GM's Opel Astra in Europe, South America and Latin America. A high-tech V-6 also is in the works at Holden's new engine facility in Melbourne.
Holden continues to export vehicles, however, to the Middle East (its largest off-shore market), Brazil, South Africa, Namibia, Botswana, Brunei, Fiji and New Zealand, and the company's goal is to export 50,000 units a year (up from 28,784 in 2001) by 2005, accounting for a third of domestic production. Such a goal could require the addition of a third shift at the Elizabeth plant.
Holden's export revenue in 2001 reached $1.1 billion, bolstered by a weak Australian dollar.
But Holden's export experience was no slam-dunk for the U.S. GM spent considerable time studying the business case because the Monaro requires re-engineering to meet U.S. federal regulations.
The GTO/Monaro, which is based on Australia's best-selling car, the Commodore, needs significant structural modifications for the U.S. Headlamps, for instance, must be reconfigured.
Holden says a left-hand-drive version could be done by rearranging plant shifts and would require little new investment.
It takes 20 days to ship vehicles to the West Coast of the U.S. and about 45 days to reach the East Coast from Australia, Hanenberger says. Because of the moisture in the ship's hull, Holden cars exported to the Middle East, for instance, get extensive protective dressing, including “wrapguard” on the exterior panels and corrosion protection on the underbody, engine bay, driveshaft, tension rods and machined surfaces.
Sold in low volumes, the Monaro/GTO should come with a premium pricetag, to help offset the significant cost of shipping.
And if the Monaro experiment goes well, perhaps GM will bring another Holden product to U.S. shores. During his Australia visit, Lutz also identified the Commodore pickup as a modern-day version of the Chevrolet El Camino.