Lutz Warns of Hazards Inherent in Global Industry

GENEVA – With first-quarter results still a month away and the next round of United Auto Workers union contract talks more than a year out, General Motors Corp. is in full spin mode.

Vice Chairman-Global Product Development Bob Lutz warns that job losses for salaried and hourly personnel will become a way of life in the U.S. and Europe unless there is a significant restructuring of GM’s fixed costs.

“The traditional places where you make cars are threatened unless they (workers) can adapt,” Lutz says in a thinly veiled reference to the wages and benefits GM pays its employees. “There’s nothing new there. We’ve been saying that for a long time,” he adds.

“If there is no adaptation and the unions become very rigid, (saying), ‘We will make no concessions; we will not lengthen the work week; we will not relax our practices; we will not reduce benefits;’ then I would say traditional high-cost Western manufacturing locations are in a for a rough time.”

On the salaried side, Lutz notes India is churning out world-class engineers who are willing to work for a fraction of what engineers earn in the U.S. and Europe.

Bob Lutz

GM is redefining its vehicle engineering and assigning new-vehicle development programs to global engineering teams in other talent-rich regions, such as large rear-drive cars in Australia, midsize cars in Europe and light trucks in Brazil.

Lutz makes his remarks at the Geneva auto show, where GM unveils the Opel GT roadster, a project that began in Europe, was executed first in the U.S. with the Pontiac Solstice and Saturn Sky debuts, and then returned to Europe.

Such proficiency leaves no doubt GM engineers, no matter where they are based, are as talented as any in the world, he says.

But the auto maker is uncompetitive on cost.

“The business is intensely competitive and as it becomes more global, the competition obviously becomes ever more intense,” Lutz warns.

Hourly workers in the U.S. no longer are faced with a choice between high-paying jobs and low-paying jobs, he says. They must choose between jobs “or no jobs at all.”

The expansion of Asia-based auto makers is accelerating this shift because their costs are rooted in economies that are years away from a development level that would rival the U.S.

“In a few years time, it’s clear that the Chinese automobile industry will be capable of exporting products,” Lutz says. But with GM’s strong foothold in that country, he adds: “There’s no doubt that someday we will be (using) GM China as a source of products. I’m very optimistic.”

The creation of GM Daewoo Auto & Technology Co. in 2002 leaves the auto maker “uniquely positioned” as globalization unfolds because of the South Korean assets purchased.

The Captiva, which also debuted here, is proof of the leverage GM Daewoo brings. (See related story: Chevy Epica, Captiva Making Geneva Debuts )

The purchase was “perhaps one of the boldest and best strategic moves that General Motors ever made,” Lutz says.

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