By on October 27, 2009

Burn him! Efficiently though... (courtesy:annarborbusinessmagazine.com)

Walter McManus, former GM economist and current head of the Automotive Analysis division of the University of Michigan Transportation Research Institute, wants you to know GM’s SUV strategy of ignoring efficiency as a marketing input was his fault. In an interview with Energy and Environment News [via Edmunds Green Car Advisor], McManus explains how surveys in the 1990s showing consumers did care about efficiency were ignored:

The survey would estimate that people would estimate fuel economy fairly highly. Being a good economist, I said, ‘No, they don’t,’ and I changed the results. There was a systematic bias against such results. Our job was not to seek the truth, but to justify decisions that had already been made… It’s my fault they had the wrong vehicles until now

Can you say culture issues? McManus’s explanation for the insular attitude is a familiar refrain, namely that decisions “are being made by upper-middle-class white males, by and large. They don’t understand that the customers are not the same as they are.” Now that gas prices have made efficiency impossible to ignore though, McManus sees change coming.

People have a hard time thinking about their fuel savings. It’s hard for people to understand the abstract, that a mile per gallon means this many dollars saved every month. But if you actually start experiencing by driving the vehicle, then you understand it.

And for the domestic automakers who buried their heads in the sand on efficiency, declining market share is having a similar effect.

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25 Comments on “Former GM Economist: Detroit Ignored Demands For Efficiency...”


  • avatar
    John Horner

    This kind of thing is just amazing. We had the data but choose to fudge the results because they didn’t fit our “gut” instincts! How much are guys like this being paid?

  • avatar
    gslippy

    Mr. McManus can stop the self-loathing. Concern about fuel efficiency is inversely proportional to the price of fuel. Plenty of people bought/buy GM SUVs without much concern about the vehicle’s thirst, particularly when gas was $1/gallon in the 1990s.

    And when you get down to it, I’m not sure an MDX is much more efficient than a TrailBlazer. You can’t compare a TrailBlazer to say, a Rav4.

  • avatar
    Jerome10

    Ok, seems weird and odd. I get that.

    But consumers are notorious, especially in the auto industry, for saying something and doing something completely different. how many times have we bagged on Detroit for consumer clinics? Here they seemed to actually do what they thought was right. And in most ways, at that time, I think they were correct.

    Meanwhile though they should have been ready on the car side, just in case. That is the failure in my eye.

  • avatar
    Autopassion

    Welcome to modern corporate culture. This is not unique to GM, to auto manufacturers, to private corporations in general, or to just the private sector. It’s just about everywhere and to change it, one has to start at the very top, to the boards that run these organizations.

  • avatar
    jmo

    The survey would estimate that people would estimate fuel economy fairly highly. Being a good economist, I said, ‘No, they don’t,’ and I changed the results.

    The question isn’t do they care, the question is how much do they care. Did they care enough to get a Civic rather than a Tahoe, the evidence doesn’t seem to be there?

    The bigger question for GM was – Are we prepared for an oil shock? The answer was no. McManus should have been looking at scenarios that would get Americans to care. It might not have been the rise of the BRIC countries resulting in high oil prices, but he certainly could have seen a Iran/Israel conflict or a revolution in Saudi Arabia that would have sent oil to $150+ a barrel.

    What plan did GM have for dealing with another oil crisis – did they even have a plan?

  • avatar
    vww12

    Agree that the self-loathing and abasement, while normal among a certain kind of people, is utterly unnecessary.

    Witness the most fuel-efficient car of the land, hybrids excepted: the smart for two. To be had for less than $15K, well-equipped.

    See many sales going that way?

  • avatar
    SherbornSean

    I’ve never seen a job description for an economist that included the duty of “fudging consumer research.” I guess Detroit really is another world.

  • avatar
    jaje

    My undergrad as based around economics and I did several analysis of GM back in the 90’s. Wondering how GM could think that nothing is wrong, they were building the cars everyone wanted, and the quality gap was only a made up perception gap where in reality it was quite damning. I stayed away from the (Big 3 back then) as they had no real concern for their customers. Decisions were made and data was created to support those decisions (not vice versa). Funny thing was a previous employer of mine did the same thing – decision first – data and support second…they went bankrupt pretty quickly. The old adage of build it and people will buy it no longer works where there is a true competitive market – Detroit took advantage of those customers who would not buy a foreign car for too long and killed their golden goose.

  • avatar
    rnc

    But consumers are notorious, especially in the auto industry, for saying something and doing something completely different. how many times have we bagged on Detroit for consumer clinics?

    +1

    Consumer clinics are good and should be taken into consideration, but they are also how you end up with a Ford Five Hundred if you aren’t careful.

  • avatar
    George B

    Actions speak louder than words. GM delivered light trucks to a market that demanded light trucks and those trucks had relatively good fuel economy compared to their peers. Jmo correctly states that GM’s problem wasn’t fuel efficiency, but lack of competitive small car products when consumer demand expressed in actual purchases shifted away from trucks. In my opinion GM’s powertrain engineering is pretty good at achieving good fuel efficiency.

  • avatar
    gslippy

    “Concern about fuel efficiency is inversely proportional to the price of fuel.”

    My bad. I meant to say “concern about fuel efficiency is proportional to the price of fuel.” You get my meaning, I hope.

  • avatar
    mtymsi

    In GM’s case remember Lutz’s proclamation about 4 years ago when gas prices started to spike substantially. He said the sales of GM’s product offerings would not be effected until gas had reached $5/gal. Specifically he was referring to Suburban and by extension other large SUV sales. Obviously he could not have been more wrong as sales of those vehicles is still tanked to this day in comparison to what they were before the gas run up. A lot of those vehicle’s buyers are permanently out of that market. And of course it was Lutz who was in charge of new vehicle development as car czar. Some may claim I’m flaming Lutz but I have never seen another auto executive in a similiar position more completely out of touch with marketplace realities and basing product decisions on his gut instincts rather than those realities. Failing miserably of course.

  • avatar
    Robert.Walter

    “Consumer clinics are good and should be taken into consideration, but they are also how you end up with a Ford Five Hundred if you aren’t careful.”

    No, J Mays is how you get a Ford 500.

    I remeber being in the Ford Bldg. 2 Design Studio, and seeing the VW Passat sitting there, and saying to my colleague … “Oh no, they are going to try and out-passat-the-passat by copying boring design and making it bigger…”

  • avatar
    mtymsi

    Speaking of J Mays, it took him a while to top the 500 but he’s done it in spades with the MKT!!

  • avatar
    Daniel J. Stern

    I think an individual in McManus’ position who admits to falsifying data at his last job because he disagreed with its implications ought to be immediately suspended pending a careful investigation of his more recent work. UMTRI is one of North America’s premier auto safety research institutes, and it seems to me this stands to damage UMTRI’s credibility severely.

  • avatar
    Lumbergh21

    From GM to academia. From one insulated, we-can-do-what-we-want, don’t-let-facts-get-in-the-way-of-an-agenda, institute to another. He’s probably fitting in quite well.

  • avatar
    PeteMoran

    Un-be-f$#king-lieveable.

    I’ve told the story before, but it’s worth repeating in this context. In the early 1990s I and many others attended a petro-organised Peak Oil conference.

    On the way out we chatted with some GM (or Detroit at least) power-train guys who called it “bullshit” and stormed off.

    I always imagined the Toyota/Honda guys sitting up the back quietly taking notes.

  • avatar
    50merc

    jmo: “The bigger question for GM was – Are we prepared for an oil shock? The answer was no.”

    Yep, Mr. McManus and his colleagues at GM were piloting by looking out the side window, not the windshield. A common trait.

    The Five Hundred has good lines that will still look good thirty years from now. (Though the side did need a crease or spear or something to break up a rather big slab of metal.) The real mistakes were an engine short on low-end torque, an interior that was too plain, inadequate space up front for feet, and confusion as to whether the Five Hundred or the Crown Vic would be the flagship model.

  • avatar
    mtypex

    McManus has my resume. Hasn’t called me back, so I guess he does not need a research assistant?

    Walter, is U of M telling you to blame everything wrong with GM on “upper middle class white males”? Tell them this UMCWM is an Acura driver.

    Then again, don’t tell them anything – I’m interviewing with U of M (undergrad alma mater, BTW, in case we need to get in more of a bear hug) thesedays.

    Future UMTRI’er here if U of M can hire me this time and keep me around … if they can get more state and/or Federal funding. But enough self-loathing here in the Wolverine State, unemployment rate umpteenth percent and rising.

    Future Question for the Best-n-Brightest: What does TTAC think about the prospects of CAR, UMTRI … CSM Worldwide, JD Power, RL Polk, etc? Dodos or future leaders of the industry?

  • avatar
    mtypex

    @PeteMoran:

    “I always imagined the Toyota/Honda guys sitting up the back quietly taking notes.”

    Why else would Nissan, Toyota, Subaru, Honda (emissions testing lab), etc have offices in Ann Arbor, Farmington Hills, and so on? They want to see the carnage up close. The research-universities-are-here-and-so-is-the-engineering-talent thing is a smokescreen! They’re strictly here for the show. Pass the popcorn.

  • avatar
    shaker

    I’d say that McManus’ ‘CO2 meter’ is pegged – of course, if he hadn’t made the decision, they would have found some one else who would…

    At least he’s owning up to it.

  • avatar
    Pch101

    Here they seemed to actually do what they thought was right. And in most ways, at that time, I think they were correct.

    The point is that the automakers should not be in the business of being “right” or “wrong” about predicting future oil demand. They simply don’t have the ability to reliably predict the future.

    For the sake of simplicity, let’s divide the consumer vehicle market into three basic segments: gas guzzlers, gas misers, and the stuff in the middle. At any given point, there is some demand for all of these.

    The answer is to provide a good product for each of these segments, so that all three buyers have something worthwhile from which to choose, and to combine that with flexible production lines so that the company can change the volume and ratio of production in order to match the market.

    There was nothing wrong from a business standpoint of GM selling SUV’s. The business problem is that they had nothing else to sell, and no ability to easily switch from SUV’s to smaller vehicles if and when the market changed.

    It really didn’t matter how the market changed. There was simply no way for the company to adapt to **any** changes in the market, of any kind.

    A completely inflexible system, operated by completely inflexible managers. No wonder they can’t hack it; the management talent isn’t there.

  • avatar
    don1967

    I’ve told the story before, but it’s worth repeating in this context. In the early 1990s I and many others attended a petro-organised Peak Oil conference.

    On the way out we chatted with some GM (or Detroit at least) power-train guys who called it “bullshit” and stormed off.

    I always imagined the Toyota/Honda guys sitting up the back quietly taking notes.

    Actually GM was right to scoff at “peak oil” hype in the early 1990s. They made a ton of money on SUVs for years after that conference, whereas Honda and Toyota missed that boat. GM’s mistake (among others) was in failing to develop its non-SUV products for when the SUV craze would inevitably end… oil bubble or not. The company succumbed to new-era groupthink, and got lazy.

    The 2006-08 oil bubble did not prove Peak Oil Theory any more than the 1998-2000 dot-com bubble proved the existence of a New Economy. Most theories which try to rationalize price bubbles are bullshit, and calling them so is the most intelligent thing to do.

  • avatar
    PeteMoran

    They made a ton of money on SUVs for years after that conference

    Yeah, that’s the American spirit. Damn the torpedos and screw the customer. They won’t remember that they ended up with worthless oversized vehicles when (apparently) other companies were thinking a bit more deeply.

    whereas Honda and Toyota missed that boat

    What did they miss? Camry and Accord were two of the strongest sellers during that period. Profitable too. While Corolla was (is?) the “most” popular car in the world.

    Toyota and Honda grew faster than any time in their histories, and established the product leadership they have now.

    GM’s mistake (among others) was in failing to develop its non-SUV products for when the SUV craze would inevitably end

    … and thinking they could just arrive on the scene claiming “well, we knew how to do fuel efficiency after-all”.

    The 2006-08 oil bubble did not prove Peak Oil Theory …. calling them so is the most intelligent thing to do.

    Conservation isn’t bone-headed. Recognising that an item’s supply is finite for provable reasons and taking steps early to avoid the consequences is much more intelligent. That would involve thinking past this quarter and being able to understand what is meant by “scientific theory”.

  • avatar
    rpn453

    I don’t blame GM for selling people trucks and SUVs that customers wanted to buy. I do blame them for not making a competitive small car. When I bought my Mazda3 in 2004, it was competing against the Cavalier and Sunfire. Those cars were even cruder than the ’87 Grand Am (RIP) I was replacing.

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