By on August 5, 2015

Bob Lutz  Picture courtesy dailytech.com

My goodness, when isn’t former General Motors exec Bob Lutz just the best? The former GM chief recently appeared on an Automotive News panel and boy that guy has vision and the rest of us have bifocals.

Car and Driver correctly points out that Lutz makes good points regarding a merger between GM and Chrysler, but the sage’s wisdom doesn’t stop at the following quote:

“The knowledge that one is to be hanged in the morning focuses the mind wonderfully.”

Lutz, alongside TrueCar President John Krafcik, former BorgWarner CEO Tim Manganello, Aston Martin CEO Andy Palmer, among others, waxed philosophical on the car business and its apparently shrinking economy of scale.

Lutz said GM tried to buy Chrysler twice and that it would have made sense for the automakers: their headquarters are close, and there were efficiencies in their powertrains, i.e. Hummer and Jeep.

“I was always in favor of GM acquiring Chrysler and I honestly think it would deserve a serious look now. You would get synergies … which would be massive,” he told the panel.

And “Maximum Bob” being “Maximum Bob”:

“We look at DaimlerChrysler as having been a failed merger. Well, it wasn’t failed for the Chrysler shareholders. At the time of the merger, the Chrysler shareholders realized an enormous gain.

“The subsequent execution was flawed in that Daimler never stepped in. Everybody kept doing their own architecture, and you had the hubris as part of the Mercedes [side] that said, ‘We will never use a Chrysler engine.’ I have news for you: Our four-cam V-6 engine 3.2-liter was every bit as good as the equivalent Mercedes-Benz.”

And then cynical, coal-powered Bob:

“I don’t know if anybody noticed, but full-size sport-utilities used to be — just a few years ago used to be $42,000, all in, fully equipped. You can’t touch a Chevy Tahoe for under about $65 (thousand) now. Yukons are in the $70 (thousands). The Escalade comfortably hits $100 (thousand). (Eds Note: It gets comfortably close.) Three or four years ago they were about $60,000. What this is, is companies trying to recover what they’re losing at the other end with what I call compliance vehicles, which are Chevy Volts, Bolts, plug-in Cadillacs and fuel cell vehicles.”

Don’t you dare change, Bob.

Get the latest TTAC e-Newsletter!

Recommended

93 Comments on “Lutz: GM-Chrysler Merger Makes Sense...”


  • avatar
    Chocolatedeath

    Lutz: GM-Chrysler Merger Makes Sense
    Only in his mind.

  • avatar
    jjster6

    “My goodness, when isn’t former General Motors CEO Bob Lutz just the best?”

    When was Bob Lutz ever the CEO of General Motors?

  • avatar
    Kendahl

    These days, if you want Chrysler, you have to take Fiat, too. That should be enough to kill the deal.

  • avatar
    28-Cars-Later

    Lutz is right about this, but not about a GM-Chrysler merger.

    “I don’t know if anybody noticed, but full-size sport-utilities used to be — just a few years ago used to be $42,000, all in, fully equipped. You can’t touch a Chevy Tahoe for under about $65 (thousand) now. Yukons are in the $70 (thousands). The Escalade comfortably hits $100 (thousand). (Eds Note: It gets comfortably close.) Three or four years ago they were about $60,000. What this is, is companies trying to recover what they’re losing at the other end with what I call compliance vehicles, which are Chevy Volts, Bolts, plug-in Cadillacs and fuel cell vehicles.”

    • 0 avatar
      ajla

      He is a major reason the Volt exists!

    • 0 avatar
      jacob_coulter

      +1

      He’s 100% on the money with that point about $100k Escalades.

      I’m almost wondering if one of the Big 3 will decide it’s going to be cheaper to pay a gas guzzler tax and opt out of CAFE rather than building a bunch of cars nobody wants to buy.

      • 0 avatar
        dal20402

        Seeing that they were instrumental in creating the new CAFE standard, I doubt it. Oddly enough, the new standard treats them (and their big trucks) relatively leniently, and makes life harder for foreign manufacturers with more midsize and large cars in the mix.

        • 0 avatar
          jacob_coulter

          He may be talking out of both sides of his mouth, but at least here this former GM CEO is saying they are having to jack up the price on the cars people actually want to buy in order to subsidize the compliance cars.

          It doesn’t sound like this was all part of a master plan to me, most companies don’t like to be forced to make cars that are loss leaders unless their strategy is hoping it weakens their competition. In the Big 3’s case, trucks and SUVs are the only thing keeping the lights on.

          • 0 avatar
            dal20402

            They knew CAFE was not going away — the good alternative, a much higher gas tax, is a political nonstarter — so they molded it to their interests as much as possible.

            I think Lutz, well known for environmental skepticism, is exaggerating the degree to which the higher prices for full-size SUVs (and trucks to a lesser degree) are there to subsidize compliance cars. I think CAFE is part of the reason those prices are there, but through a different mechanism: to shift the product mix by encouraging people to buy more CAFE-friendly “normal” cars, from V6-powered pickups to Sonics, that are still profitable. The other reason the high prices are there is just a market reality: the casual buyer no longer buys full-size SUVs (having experienced their disadvantages during the SUV craze) and the remaining full-size SUV buyers are passionately devoted to the segment and willing to pay more.

          • 0 avatar
            jjster6

            Again, Lutz WAS NEVER THE CEO OF GM!!!

          • 0 avatar
            amca

            If you want to make the case they’re jacking up prices to make money to subsidize compliance cars, you’re going to have to so that they’re restricting supply to do the price jacking.

            Otherwise, they’re price jacking on plain old strong demand.

            Which, i suspect, is what is going on. They’re building ’em flat out. Now, maybe they haven’t brought on new plants, I’ll grant you that. But no reason to believe they’re holding back either to jack up prices or to ration their use of compliance credits.

          • 0 avatar
            Ron

            Car companies price to maximize profits, not to offset losses on compliance cars. I remember Lutz bragging “I just made Chrysler $200 million”, after raising the price of the all-new 1994 Ram pickup by $1,000 a few weeks before it went on the market.

        • 0 avatar
          bball40dtw

          The domestic manufacturers are almost getting exactly what they want with CAFE. For example: the 2.7TT F150 already meets the 2024 CAFE standards and makes up 30% of the F150s retail mix. That amount a volume is a big deal.

          • 0 avatar
            jacob_coulter

            If domestic manufacturers were getting exactly what they wanted, there would be no CAFE.

            Every time new regs come up they are always trying to put as many loopholes and push it off as long as possible. And for good reason.

            the only case you can make for CAFE is that one of the manufacturers uses it as some sort of weapon to hurt a competitor.

          • 0 avatar
            bball40dtw

            Well no, they don’t want CAFE to exist, but they have figured out how to get it administered.

        • 0 avatar
          Robbie

          You’re right. CAFE is a proteectionist set of rules, essentially subsidizing large gas-guzzlers built by the
          Big Three. It is designed to prevent bankruptcy of Chrysler, GM and Ford.

        • 0 avatar
          stuki

          …And darned near impossible for any outsider/startup who wants to focus narrowly on where the protected insiders’ markups/profits are: Trucks. Exactly as the lawmakers intended.

    • 0 avatar
      DeadWeight

      “I don’t know if anybody noticed, but full-size sport-utilities used to be — just a few years ago used to be $42,000, all in, fully equipped. You can’t touch a Chevy Tahoe for under about $65 (thousand) now. Yukons are in the $70 (thousands). The Escalade comfortably hits $100 (thousand). (Eds Note: It gets comfortably close.) Three or four years ago they were about $60,000.”

      Bull$hit! No less of “authorities” & economic experts than Ben Bernanke, Janet Yellen & Paul Krugman claim inflation is not only extraordinarily low, but toooo low.

      Food, energy, medical bills, housing (rent or otherwise), tuition/education – it’s not only not keeping pace with wage growth, but declining in price as weighed against real wages and wage growth /total sarc.

      • 0 avatar
        28-Cars-Later

        The Bernank said there was no inflation, therefore it must be true.

      • 0 avatar
        Pch101

        You’re doing a fine job of proving that you don’t understand inflation.

        • 0 avatar
          DeadWeight

          You’re doing a fine job of naively repeating the official and FOS official line that actual, real world inflation is anywhere as low as what’s being officially reported.

          You’re as absurd as Fox “News,” just on the other end of the spectrum, and you’re also the resident “know everything with 100% certainty” member of TTAC.

          I need to write a Bud Light “real men of genius” jingo for you.

          • 0 avatar
            Pch101

            You seem to get a real thrill out of being misinformed. You’d rather scream about the Fed and Krugman than understand them.

            Here’s the issue in a nutshell: Higher fuel prices have blown out the lower-end buyers who used to be in the full-size SUV market. The people who are left are those who can afford (or at least think they can afford) and are willing to pay for the fuel. They aren’t inclined to buy the base models.

            Naturally, the automakers will then position their offering to this demographic. You may have noticed that this has also happened with full-size trucks — the purchase prices are higher because the buyers who remained are loading them with options.

            That isn’t inflation. People volunteering to spend more on vehicles with higher trim levels does not equate to inflation.

          • 0 avatar
            dal20402

            Let’s see credible evidence that reporting of inflation is incorrect. Anecdote doesn’t count. The BLS is widely respected by both parties and by pretty much everyone involved with statistics, and relied upon by everyone in business and finance, so an accusation that they’re fudging the numbers is a pretty wild accusation.

          • 0 avatar
            stuki

            @Pch

            But the blowing out, on account of cost increases for expenditures less discretionary than autos, of large swathes of buyers, IS a result of inflation.

          • 0 avatar
            Pch101

            You folks need to look stuff up prior to posting.

          • 0 avatar
            stuki

            @Pch

            Looking up and regurgitating highly biased official party lines, is rarely all that enlightening. As an economist studying the Soviet labor market, you could of course simply “look up” the unemployment rate; and find it was zero. Again. Or, you could try doing something with at least some potential to be useful.

          • 0 avatar
            Pch101

            Do you guys play the socialist/communist/Soviet/etc. card because you’re not smart enough to know that it isn’t clever, or are you just trying to avoid admitting that you don’t understand the subject matter?

          • 0 avatar
            stuki

            @Pch

            Can’t speak for anyone else, but in my case, neither. Rather, for better or worse, it’s a matter of understanding the subject all too well to be satisfied by “looking up” and mindlessly regurgitating something stated by someone else, who quite obviously does not.

          • 0 avatar
            Pch101

            Aside from Advanced McCarthyism, you don’t seem to have studied much.

        • 0 avatar
          runs_on_h8raide

          http://www.mybudget360.com/cost-of-living-compare-1975-2015-inflation-price-changes-history/

          PCH101 just took a wrong turn off a cliff.

          • 0 avatar
            dal20402

            That’s not inflation. It’s an increase in the standard of living, predominantly driven by two-earner households. Houses are more expensive because they’re a lot bigger and have more stuff. Compare like with like and you get a different result.

          • 0 avatar
            Pch101

            If that’s the garbage that you’re reading, then it’s no wonder that you’re ill-informed.

      • 0 avatar
        koshchei

        But a bottle of Coke was only 5 cents 50 years ago, proving whatever point I was trying to make. Also, former-President Kissinger said that General Motors was going to establish a lunar factory to assemble the all aluminum Camaro Regency Brougham with 400 horsepower from an engine the size of a grapefruit.

    • 0 avatar
      thornmark

      >>Lutz is right about this, but not about a GM-Chrysler merger.

      <<

      It appears QE is building bubbles all over the place, not just real estate and the stock market. This automotive bubble is due to easy low or 0% financing. Look what easy financing has done to the cost of a college education. Easy financing has blown up college costs far in excess of any measure of general inflation.

      They sell these barges on monthly payments and QE makes them unrealistically cheap. Until it doesn't.

  • avatar
    an innocent man

    The reliability of Chrysler, the competence of GM. I say do it.

  • avatar
    bball40dtw

    That 3.2L/3.5L V6 was a good engine. It had especially good power numbers for the time. It was also better than the Mercedes M112 V6.

  • avatar
    mcs

    Hey Bob, how are those Destino sales going?

  • avatar
    rpol35

    And now a word from the Donald Trump of the car biz…….

  • avatar
    dal20402

    A GM-Chrysler merger would really be GM purchasing Jeep. The rest of Chrysler (and Fiat) would get shuttered, with the better technologies moving to GM products.

  • avatar
    PrincipalDan

    Bob Lutz = General Buck Turgidson

    I need to go home and watch Dr. Strangelove now.

    • 0 avatar
      28-Cars-Later

      General “Buck” Turgidson: Sir, you can’t let him in here. He’ll see everything. He’ll see the big board!

      • 0 avatar
        PrincipalDan

        General “Buck” Turgidson: We-he-ell, uh, I’d like to hold off judgement on a thing like that, sir, until all the facts are in.

        President Merkin Muffley: General Turgidson! When you instituted the human reliability tests, you *assured* me there was *no* possibility of such a thing *ever* occurring!

        General “Buck” Turgidson: Well, I, uh, don’t think it’s quite fair to condemn a whole program because of a single slip-up, sir.

        • 0 avatar
          Zackman

          Dan, after reading the article, I finally fully understand why you chose the funniest, most awesome avatar to ever grace the internet! I still smile every time I see it.

          Maximum Bob is is just that!

          Funny that he says GM/Chrysler fits so well – 30 years ago Lido said the same thing in his book about Ford/Chrysler. At least their products, style-wise DID fit right in.

  • avatar
    Volt 230

    If GM wants another bailout if a couple of years, then go ahead with the merger.

  • avatar
    ajla

    “Our four-cam V-6 engine 3.2-liter was every bit as good as the equivalent Mercedes-Benz.”

    It was a SOHC V6. Is “four-cam” the right terminology?

  • avatar
    dwford

    Besides the Jeep name, what would GM get out of this deal? A mishmash of brands none of which is full line?

    • 0 avatar
      dal20402

      These are things I can actually see GM using from FCA. It’s a pretty small list.

      – uConnect.
      – The Wrangler.
      – The JGC/Durango RWD CUV platform.
      – The expertise in putting serious-ish 4WD hardware into transverse unibody platforms.
      – A few of the truck gimmicks like the extended crew cab and the bedside boxes.
      – The small diesel pickup engine.
      – A good very small engine family for Europe and Asia.
      – The Fiat brand, for use only in Europe.

      Other than that, GM’s got pretty much everything FCA currently does covered.

  • avatar
    OneAlpha

    I think that big corporations tend to get shat on far more than they actually deserve – for being “evil,” for example – but I’ve been noticing big corporate mergers for decades now and have to wonder.

    At what point will each specific industry (aerospace, automotive, computers) be merged and monopolized into one huge, single company?

    At what point will the situation be that if you want to buy a car, you have to buy it from Automobiles, Inc? Or your internet from Internet Connections, Inc?

    Talk about You Will Be Assimilated…

    • 0 avatar
      tonycd

      It’s axiomatic that unregulated monopolies are beneficial only for the monopolist.

      That’s why we used to have a quaint little archaism known as “antitrust laws.” Ah, those were the days…

  • avatar
    revjasper

    Ten years after GM paid Fiat $2,000,000,000 to get out the deal so they wouldn’t have to merge, Lutz likes the idea of a merger with FCA? In February 2005, Lutz was still Chairman of GM North America. One would think he had something to do with the merger rejection. How much would a merger cost now?

    Maybe GM would be better if Sergio were running the show?

  • avatar

    If GM joins Chrysler, they will make Chrysler’s cars SUCK.

    HELLCAT may be the last product I ever buy from them. I guess I’ll have to go back to leasing S550’s.

    W223 I guess.

  • avatar
    28-Cars-Later

    ..and we’re back…

  • avatar
    Hummer

    The only two American car companies that can make American vehicles combining? Terrible idea, no competition would turn that mismatch into a Ford in no time.

    Getting rid of the crap cars and billions of waste on the battery tech side? Great news for us that want SUVs, there is a very large number of people that want these, but the prices have really kept a lot of people in old vehicles with no new vehicle replacements in sight.

    • 0 avatar

      Okay, I’ll bite…. How are you not considering Ford an American company when it’s about the last American family controlled big business left? They have huge amounts of US production as well. No, they no longer have top marks for content, but that is always a changing tide. I think the only two lines sold in NA that don’t have production in the US are the Fiesta and the Transit Connect. At this point, Challenger and Camaro aren’t even built in the US.

      • 0 avatar
        bball40dtw

        He doesn’t think Ford makes “American vehicles”. Whatever. It isn’t worth arguing about.

      • 0 avatar
        Hummer

        All of Fords offering are plagued with less than American design and options, none save the old expedition even appear to have been designed for the American market.
        Certainly Chrysler and to a lesser extent GM are willing to offer more traditional American styling and options for their vehicles. Fords has tried for the last several years to just combine the Euro division and American division with intent of destroying the products that didn’t match the European tastes, save the trucks.

        • 0 avatar
          bball40dtw

          Well that’s not exactly true. They have taken European platforms, updated or complete redone them, and then made them more American. A good example is the Transit van. While it has been a big seller in Europe, it was not built to what American consumers would have wanted. Europeans get a better Transit now that engineers for Dearborn got their hands on it. At the same time, it is a much better product than the E-Series it replaced.

          Also, the Expedition refresh was led by a team from Ford Mexico (with input from Dearborn).

        • 0 avatar
          VoGo

          FCA is a Dutch company headquartered in the UK with a mostly Italian leadership team. The only thing American about FCA are the people their advertising con into thinking they’re buying American.

          • 0 avatar
            Hummer

            That’s great and all Vogo, but that has nothing to do with the general design and options that FCA gives Americans. It makes Ford look like a complete sell-out to the American buyers, that a company, FCA, that has so little American behind the scenes could offer product this true, while Ford cannot.

            Toyota is much more American in product than Ford, Fords number 1 car competitor should be seen as VW as that is seemingly their benchmark.

  • avatar
    RRocket

    The guy is 83. Not quite as sharp as he once was…

  • avatar
    Pch101

    Assuming that this happened (which it won’t), this would have diseconomies of scale written all over it.

    One of the underlying issues is that GM used to be quite good at acquisitions — it wouldn’t have existed without them — but it is now very bad at them. Since it would be the senior partner in such an arrangement, it could be expected to blow it.

  • avatar
    Jeff S

    Tata is calling. Tata/Fiat/Chrysler has a nice ring to it. That would be good makings for a Bollywood movie-Slum Dog Automobile Inc. I don’t think GM will merge with Chrysler, but I do think there is a good chance of GM becoming a Chinese corporation.

  • avatar
    tomLU86

    I like Lutz. He is usually right and often statest the unspoken truths others are afraid to utter.

    That said, a merger is not a good idea. GM can barely run itself. It’s not doing a bad job, mind you, but it’s not in a position to put more on its plate.

    The Jeep and Ram franchises are worth something. GM would have to retain Chrysler engines for Ram to differentiate (they could replace cheap Chrysler trim and other parts with better GM parts).

    The 300/Charger platform, and plant are worth keeping. Maybe the minivan.

    The rest would have to be junked. To make it look like a ‘merger’ vs an acquisition, you’d have to cut a lot of GM white-collar worker. This would create lots of turmoil…and GM can barely run itself now.

    Bad idea. In 10 years, GM-Mopar will have 20% of the market, vs 18 plus 11% now.

  • avatar
    86er

    If this merger had happened it would’ve only served to right the wrongs that Lutz felt happened to him with the Iacocca succession and the Daimler takeover.

    Otherwise it makes little business sense.

    Having Ram trucks around makes Chevrolet build a better truck. Surely flinty-eyed businessmen used to know things like that.

    Even Jeep, the metaphorical Helen of Troy, would not justify the launching of a thousand ships.

    • 0 avatar
      PrincipalDan

      I like the “Jeep as Helen of Troy” analogy. That could roughly sum up Jeep’s history. Pursued by many suitors – ended up killing most of them.

  • avatar
    johnny ringo

    Bob Lutz is a genius-in his own mind. I just lost whatever respect I had for him.

  • avatar
    Jeff S

    A Fiat-Chrysler merger would be a mistake for GM. GM needs to focus on quality products that will sell and does not need Fiat-Chrysler. A merger with Nissan and Renault would be a better fit for Fiat-Chrysler.

  • avatar
    wmba

    ““My goodness, when isn’t former General Motors CEO Bob Lutz just the best?”

    Just about all the time, said with the same depth of research as the original statement.

    Time to re-read GM Death Watch 105 by this site’s founder rather than fawn over Lutz:

    https://www.thetruthaboutcars.com/2006/12/general-motors-death-watch-105-bob-lutz-screws-the-pooch/

    • 0 avatar
      ciscokidinsf

      What? Did you read that article again? Or no? Lutz was right and Farago was wrong, whether your opinion of either is different.

      Here’s the money quote, and Lutz is right 100%, no matter what the article’s POV was:

      “According to Maximum Bob, as long as gas costs around $2 a gallon, “people will exercise their freedom to buy the vehicle they want, V8 engine and all.” In other words, Americans are selfish bastards who will buy gas-guzzling land yachts– unless they can’t afford to. Even if you agree with this sentiment and reject my depiction of MB as a clueless blowhard whose ideas date back to the days when Detroit dismissed small (yes small) imported cars as “Jap crap,” you have to admit that he’s making all the wrong noises. ”

      And that was PROVEN TRUE a few years later from late 2008 to 2013 – back then in 2006, when this article was written yes, gas was at $2 a gallon, and it was the glory days of the large V6-V8 SUV on Frame, it was only until the economy meltdown + gas prices spiking at $4 a gallon that got the market somewhat back into smaller engines, hybrids, even diesels. And yes, Toyota, Nissan, VW were more ready than their american counterparts.

      Now in 2015, with oil prices low and still having a way to go, we see exactly what Lutz described, the market abandoning the small sedan and their Diesels into larger CUVs, SUVs, etc… at least MPG has improved thanks to the much hated EPA targets and turbo charged smaller engines, but Lutz was 100% right in saying that and Farago was plainly in the wrong here for believing Americans would not be as crass. But we are.

      So, even though the article calls Lutz crass for actually spouting the truth of what the majority of the Auto demand will follow – and it will follow larger cars when gas is cheap, and vice-versa. We already saw this, so what part is wrong?

  • avatar
    jnik

    Here’s the only logical result of a GM – FCA merger:
    Dodge : gone.
    Chrysler : kaput
    Fiat – Alfa : Europe only, maybe part of VW or PSA.
    RAM : buh – bye.
    Viper: sayonara.
    Minivans slap a Chevy badge on them and Windsor gets to live another couple of years.
    Jeep: SOLE SURVIVOR!

  • avatar
    TW5

    FCA – BMW makes sense on the product side. FCA have no high-volume luxury brand. BMW has no truck or offroad presence. BWM SUVs could move into Range Rover territory with Jeep equipment and engineers, if BMW were so inclined. Fiat and Mini would step all over each other, but they could utilize powertrain economies of scale. FCA gets the hybrid technology it needs desperately, and they get access to carbon fiber, which might allow them to leap-frog the aluminum adopters?

  • avatar
    Sgt Beavis

    “I was always in favor of GM acquiring Chrysler and I honestly think it would deserve a serious look now. You would get synergies … which would be massive,” he told the panel.

    Replace that word ‘synergies’ with ‘layoffs’ because that’s what you’re going to get and they WILL indeed be ‘massive’

    • 0 avatar
      CoreyDL

      A very good point. It would be a huge corporation. And as others have indicated, much of the Chrylser bit aside from Jeep and vans is useless to GM, and would be dumped. Many people would lose their jobs.

      I could see them using the 300 platform for a large Cadillac, perhaps.

Read all comments

Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • highdesertcat: Arthur Dailey, I understand that a new revisionist history is being taught in America these days,...
  • ToddAtlasF1: Trans Am, which translates as across America. It was a racing series for cars with back seats and also a...
  • ToddAtlasF1: @ThomasSchiffer, I have seen what you’re talking about. I used to have a commute on the I15 in...
  • ajla: “It is also imperative that you bring the car to a Mercedes-Benz dealership” As you are in Germany...
  • Dan: I’ve used a lot of these. Firestone Destination ATs. Liked these. Not great in the snow. Quiet for an AT...

New Car Research

Get a Free Dealer Quote

Staff

  • Contributors

  • Timothy Cain, Canada
  • Matthew Guy, Canada
  • Ronnie Schreiber, United States
  • Bozi Tatarevic, United States
  • Chris Tonn, United States
  • Corey Lewis, United States
  • Mark Baruth, United States