Jack Smith walks through the Design Dome at the General Motors Technical Center and is flagged down by a chief designer eager for feedback on a future project.
"Hey, Jack. What do you think of this new design?"
"Boy, that's really neat. We ought to put that in."
Wrong answer, Jack.
OK, that wasn't really GM President John F. (Jack) Smith Jr. in the dome on a sunny day last June, but rather someone pretending to be him. It was a bit of role playing in one of scores of make-believe scenarios staged around banquet-style tables by GM's top 150 product-development execs.
The goal: understanding what might be the biggest cultural shift in GM history as the company pushes to shave months off its new-product development cycle and dollars off their cost.
Arvin F. Mueller, vice president an group executive in charge of North American vehicle development and technical operations, explains that the make-believe Mr. Smith's answer should have been, "No that's not my part of the job. I'm just interested in what you're doing. You ask the VLE about that if you want to know."
VLE, another in the seemingly endless stream of acronyms from the automaker that literally has a book of them, stands for vehicle line executive."
It's a title worth getting to know. It will be an important one if GM can execute its latest reorganization, or "evolution of the vehicle-development process," as the top brass would prefer to call it.
By the end of the year, GM will select 16 to 18 VLES and vest them with the authority to make decisions on every North American vehicle by the end of the decade.
At the same time, an attempt to take full advantage of the seven marques under which those products will be sold will coalesce in the naming of 30 or so brand managers. one for nearly everyone of the 19 car and 14 truck segments GM has identified.
By the end of the decade, Gm',s average new-product development time will drop from an average of 46 months now down to 38 months. says Mr. Mueller. "That's not the end point-. we expect fly right by 38."
Although he underscores that "we aren't focused on head-count," by Jan.1, 1997, GM will have slashed 5,000 engineering and technical people from the 30,000 now working in product development at GM, its suppliers and outside engineering firms.
He won't say how many will be lopped off from each source, but suggests the cutback may have a minimal impact on Gm's payroll. Mr. Mueller also declines to put a dollar figure on the cost savings. Assuming that each job carries a $ 100,000-per-year salary/fringe package, however, GM's savings would be approximately $50 million annually.
VLEs will make the day-to-day decisions on products, supported by GM's core advanced engineering and technology groups. Car and truck division general managers and the "brand managers" will establish what the market wants at the outset of product programs and then market the vehicles.
The VLEs and brand managers "will be joined at the hip," says Mr. Mueller, adding that the scheme is assured success because each will be bound by "volume and profit objectives." In short, their performance will be measurable on the bottom line. "Before, we had 100 people making - or delaying - decisions," he says. "Now there will be just two."
No longer will GM folks with titles dwarfed only by the s.ize of their egos meddle in product decisions.
That's decreed by the North American Strategy Board, the politburo of GM's biggest business unit. Finally, GM swears it is going to run its North American Operations (NAO) like a business. And the 12-member strategy board will be the stockbroker, manipulating the 10-year product plan as a portfolio to maximize returns on its investments.
At the outset, at least, GM's International Operations (IO) will not be reorganized along VLE lines, but Mr. Mueller says they will develop common processes and work closely together - as they have been doing increasingly - on models that transcend international boundaries, such as the upcoming '97 Cadillac Catera and all-new minivans, both developed with GM's Germany-based Adam Opel AG subsidiary.
The strategy board will award charters for pre-production work and, later, contracts to VLEs to develop a new car or truck for one of three vehicle centers headed by group vice presidents: Small car, under Richard G. (Skip) LeFauve; Midsize-Luxury, overseen by Donald E. Hackworth; and Truck, under Clifford J. Vaughn.
The contract lays out cost targets, materials that will be used, quality objectives and, most importantly, deadlines. The VLEs and brand managers will be held accountable for them.
"The whole emphasis is that enough things are sorted out before this program comes to life that these guys can really go fast because they don't have to worry about inventing a process or worry about all the sourcing issues that are going to come along because the bill of material will have been sourced for the long term," says Mr. Mueller.
Sounds good. But, after all, this is GM, where ducking responsibility and covering one's posterior is an art form. Accountability? Yikes!
That's part of the reason the job description for a VLE is lengthy. NAO President G. Richard Wagoner Jr. wants the VLEs to have the following traits:
* Profound interest in the people who buy the products.
* Understanding of how a vehicle comes together, though not necessarily at the detailed engineering level.
* Openness to others' ideas, but decisiveness when the time comes.
* Leadership skills strong enough to enable them to manage a team and interact with supporters from other organizations.
"We've narrowed this down to a list of X-number of people to go through a very strict assessment process, which we have done for a job or two in the past," says Mr. Wagoner, who is charged with making this system work.
Ronald L. Zarelia, vice president and group executive in charge of NAO vehicle sales, service and marketing, is conducting a similar screening for brand managers.
The VLEs will in some cases be GM's stars of the future. But they won't rise through promotions every couple of years as has been the time-honored system at GM. VLEs will remain on the job through two cycles of their product, or about 10 years. Brand managers probably will stay for a shorter period.
That means reworking pay, perks and benefits to keep those people happy rather than giving them new titles every few years. "Clearly, you can't keep everybody in their jobs 10 years," says Mr. Wagoner, "but I think we've kind of gone the other way, where we've really moved a lot of people in short time periods. And that's hurt us in expertise, it's hurt us on networking."
Even if the chosen few buy in completely, Mr. Wagoner says he expects some resistance from what has been called GM's "frozen middle-management."
"I probably won't get 90% or 70% votes on anything, particularly if it's change and it's difficult," he says. "The leadership has reviewed this and discussed it. We think it's the right thing for the company.
"Ninety-nine percent of the people, once it's done, are going to have clearer jobs an be able to execute better and be able to contribute to the success of the company. Are some people going to complain? You bet. That's life." says Mr. Mueller. "I don't think there's going to be a way to not do your role and get away with it. Our intent is to get the redundancies and the overlap out ot'the organization and have single-point accountability for several functions."
Brand managers will be responsible for one or two vehicles. depending on the product. That includes setting prices and marketing strategy, tasks traditionally handled by division general managers.
The division managers still will have input in those areas, but their revised role will be to focus on the marque itself. That's easy in the case of Pontiac where brand management already is largely in place. but more difficult at Oldsmobile, which is trying to shed its murky identity and reposition itself as an import fighter in the image of Saturn.
For all their responsibility, the VLEs and brand managers represent only a small part, by some accounts as little as 20%, of the change in how GM will develop vehicles.
After the strategy board turns a program contract over to a VLE and his self-contained team of design, engineering, manufacturing, purchasing, finance and quality managers, the team is expected to focus on creating a product and avoid squabbling over issues that have delayed past products.
Mr. Mueller explains: "Say you had a midsize program that had four models coming out of it for four divisions - you'd have a voice from each division. You may have disagreement within a division. You may have disagreement across manufacturing units on how to configure the vehicle. You may have disagreement on what the profit targets might be. It was very difficult to process all those various points of view and get a timely decision."
Now the timing is established up front and big-picture issues involving manufacturing, engineering and design are dealt with across the entire NAO organization Planning ahead and knowing what demands are facing suppliers of big jobs, such as body shops, is critical.
"You can do that in an integrated way," Mr. Wagoner says. "It's a common-sense way to look at the business. We just haven't been doing it up until now."
Another major component is a leveling of resources. Product development bottlenecks born of having too much capacity in one area are being "Saturnized," a term usually used to describe some marketing division's imitation of GM's Spring Hill, TN-based subsidiary.
What John J. (Jay) Wetzel did as the head of engineering at Saturn, he's now doing as general manager of the NAO design and engineering centers.
"Looking at engineering as a set of process flows is precisely what we're doing," Mr. Mueller says. "So we know exactly how many dies we're capable of processing and we won't overload it so it gets behind and we know exactly how much resource is there ... what the productivity needs to be for that particular element."
Development time will continue to shrink, Mr. Mueller says, but with the breadth of GM's product line, offering pie-in-the-sky times, such as Ford Motor Co.'s stated goal of 24 months from concept approval, would be silly. "I don't get too excited about (Ford's claim)," he says.
But whether it's Ford's outright assault in its quest to overtake GM as the world's automotive leader or Toyota Motor Corp.'s yen-driven moves to boost capacity in North America, competitors aren't waiting for GM to get its act together. Nor is the marketplace.
A decade-long slide in market share is proof of that. Now, three years after Jack Smith's dark-days-of-1992 edict of "profits before market share," Mr. Wagoner declares the worst is over and share gains lie ahead. GM, he says, is sizing itself to claim 35% of the U.S. market, a share it last reached in 1991.
But botched product launches, notably Lumina/Monte Carlo and Cavalier/Sunfire, raise questions about whether Ford, now at 26.4%, or GM, down to 32.2%, will get to 30% first.
"Where we'll be launching a new Grand Prix, we have been enduring some of the pains of getting a new body shop in there up front, so that will be smoother startup than, say, Lordstown, where we basically blew the whistle, stopped, cleaned everything in the plant out, put everything new in, put in a new operating system and said `Go,'" Mr. Wagoner says. "But we're not going to be at a two-week turnaround."
Some GM brands, notably Cadillac, need help now.
"The vast majority of college-educated 42-or 43-year-old customers (Mr. Wagoner's age) don't even give GM a second thought when buying a car," says Lehman Brothers Analyst Joseph Phillippi. "They drive right by the GM store, in this case Cadillac, on their way to the Lexus dealer."
Mr. Wagoner recognizes Cadillac's delicate condition, brought on by the buyer exodus from traditional luxury cars to opulently appointed sport/utility vehicles and Cadillac's decision to drastically reduce its reliance on sales to daily rental companies from nearly 30% to about 10%.
The entry-level Catera can't arrive soon enough. But analysts wonder if what Cadillac doesn't need more urgently is a sport/utility to compete with the Lexus, Infiniti and Lincoln due later this decade: GMC has been assigned their role.
A lot of what GM is doing smacks of Ford 2000, the No.2 automaker's global reorganization that formally got under way in January, and of Toyota's global strategy. No surprise there since the sheer size of GM limits its structural choices. Instead of choosing Ford's approach and merging NAO with 10, GM decided to leave both intact and share products.
Mr. Mueller doubts a merger will occur between the two giant groups. "You've got to run your business on what makes sense for your company," Mr. Wagoner says. "We've kind of gone for a less formal organizational structure change and try to use an alliance concept."
That leaves Louis Hughes, Mr. Wagoner's 40-something counterpart on the international side, firmly in control of his own fiefdom across the Atlantic. And if Mr. Wagoner should falter, the unofficial race to succeed Jack Smith as corporate president and chief executive officer might come down to Mr. Hughes, with super-lawyer Executive Vice President Harry Pearce as a dark horse.
The third reorganization of GM's North American business in I I years - depending on how you count them - follows retired Chairman Roger B. Smith's creation of the small-car Chevrolet-Pontiac-GM of Canada and large-car Buick-Oldsmobile-Cadillac groups in 1984 and their dismantling by Jack Smith in late 1992 and 1993.
What GM has to prove to a skeptical Wall Street and media is whether it can execute on the new scheme.
Early returns on the VLE and brand manager plan are mixed. Business Week dubbed it GM's "two-headed monster" in an article that ran a week before Messrs. Wagoner and Mueller laid out the plan at a University of Michigan automotive briefing in August. Mr. Wagoner, somewhat chagrined by the characterization. says the choice of whether to dribble out developments or wait until the managers are named was a dilemma.
"We probably haven't moved fast enough in communicating what we're doing," he says. "There's some confusion in the organization because of it." And outside it.
"You've got so many brands and so many iterations therein, it's going to seem complicated to us on the outside," says Mr. Phillippi.
That raises the issue of where GM's supply base fits. The hard feelings of the days in the early '90s when purchasing chief J. Ignacio Lopez de Arriortua ran roughshod over suppliers are fading. GM has stayed with Mr. Lopez's system but cleaned up a lot of the problems - such as blueprint sharing in search of lower bids. Mr. Lopez left GM abruptly two years ago and now heads manufacturing and purchasing at Volkswagen AG.
"We are seeing a bigger role for our suppliers as we put this vehicle-development engineering factory together and integrate across NAO," Mr. Wagoner says. "They're willing to do it . . . you may get one out of a hundred that doesn't want to play. But we are getting all the input and support that we can handle."
Ed Gulda, group chief executive of Varity Corp.'s Kelsey-Hayes unit, says his company is in for the long haul. "We never had any hurt feelings. Our philosophy is consistent with what General Motors and others want us to do, so it's not a struggle for us," he says.
With a string of victories on the quality, customer-satisfaction and profit fronts lately, GM is quietly confident it can finish the job of remaking NAO. Believers come from some unexpected places.
"I just have an awesome amount of respect for GM," says Tom Gale, vice president of design and international operations for Chrysler Corp. "Anybody who discounts General Motors is just in for one hell of a rude awakening."
Mr. Phillippi, the analyst, says that despite some serious missteps, he thinks GM finally understands the big picture.
"The public's going to be the final arbiter of whether this thing works," he says, "and for the first time, GM seems to know that."
GM's cadence misses a beat
If the new-vehicle production system is supposed to end model delays, it's off to a questionable start. To get to what NAO President G. Richard Wagoner calls a "cadence" of new model introductions, GM delayed a raft of already-delayed models again.
None of the latest setbacks is more than six months, and none pushes a product into the next model year, GM says. However, the cumulative effects of previous delays, borne of money and manpower shortages, could mean some aged designs by the time they hit the streets.
For instance, the next-generation N models - Buick, Skylark, Pontiac Grand Am and Oldsmobile Achieva - will be on a seven-year cycle by the time they come out as 1999 models.
They were scheduled to be redone in the fall of 1995, then the fall of 1996. Last summer, it was going to be fall 1997. Now it's spring 1998. They were delayed six to nine months late last year, before the "retiming" schedule set by the strategy board.
Then there's he GMX 160, a replacement for the Olds 88. It was originally scheduled for 1998, then 1999. Now, it's due in model year 2000.
"Grante, Ford delays product programs and Chrysler delays products, but GM is the worst by far," says Chris Cedergren of the AutoPacific Group. "Ultimately, they need to simplify even further, but I think this is a start."
