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Americans Will Need To Lower Their Expectations, Ex-GM Executive Says

Manufacturing

First Posted: 06/01/11 01:07 PM ET Updated: 08/01/11 06:12 AM ET

DETROIT (Ben Klayman) - The United States has a window of opportunity to dump its reputation as a nation of importers and get back to being a global manufacturing powerhouse, a former top General Motors Co (GM.N) executive said.

In a new book, Robert Lutz, who retired last year as GM vice chairman, criticizes the "creeping malignancy" that has seen the nation lose its way as a manufacturer.

In "Car Guys vs Bean Counters: The Battle for the Soul of American Business," which goes on sale on June 9, Lutz tells of the battles he fought after joining GM in 2001 to steer the automaker away from over-reliance on data and back to its roots making well-designed, popular cars.

More broadly, the book serves as a clarion call for all U.S. manufacturers to focus on their products rather than quarterly numerical targets.

"We are no longer the richest, most all-powerful nation in the world, where we can afford to pay each other high salaries and high wages and high benefits and import $19 DVD players from China," Lutz said in an interview.

"That is not going to work. We pay for it in IOUs called Treasury bills," he added. "Time is running out and the country is going to have to reestablish its industrial base."

Lutz, who also held executive positions at Ford Motor Co (F.N) and Chrysler during his career, said the United States now has a chance to regain its footing in the manufacturing sector because of favorable exchange rates and competitive labor rates, as well as its long history of innovation.

"With the current exchange rate, a lot of this offshoring no longer makes any sense," he said.

In his book, Lutz makes clear who the villains are: the bean counters and MBAs who only care about profit and meeting numerical targets. He makes clear that executives should focus on making their products good enough that the result is the strong sales and profits those executives want anyway.

"The drive to reduce cost, skimp a bit on service, ruthlessly pursue quarterly earnings targets no matter what the negative consequences, has hurt American business from automobiles to appliances, as well as the services industries," he says in the book. "Whatever happened to just setting a budget and figuring out how many better widgets we need?"

Lutz writes that the United States does not have to be "a nation of importers, bond traders and venture capitalists who have no interest in the long-term viability of the company."

The straight-talking, brash former executive has always been known in the auto industry as a "car guy" -- a reason some say he was never named head of any automaker.

The resetting of American expectations in the auto sector began with the 2009 bankruptcies of GM and Chrysler Group LLC (FIA.MI), which led to the United Auto Workers union agreeing to a lower wage rate at about $14 an hour, along with fewer benefits, for new hires.

"We're witnessing the restructuring of the United States, and everybody's expectations are going to have to come down a little bit," Lutz told Reuters.

That "second-tier" wage -- which is half the traditional rate most workers are paid -- will be a key focus in the talks this summer between the U.S. automakers and the union.

Lutz remains upbeat, however, saying it has been almost four decades since U.S. automakers were so competitive.

"The American car industry is definitely on the way back," he said. "This is the place to make cars now."

And other U.S. manufacturers will follow the same path.

"Some appliance manufacturer or some electric shaver manufacturer, somebody's going to run the numbers and they're going to figure out, especially as the Chinese renminbi rises, they're going to figure out that we can make this stuff here for less," Lutz said. "That's what the country needs."

(Editing by John Wallace)

Copyright 2011 Thomson Reuters. Click for Restrictions.

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Filed by James Sunshine  |