Long-time GM Consultant: Chevy Volt Won’t Save Company

Unless General Motors makes fundamental changes in its basic decision-making process, the company will be “back at the public trough again and again until the public finally grows weary and allows its demise.” That’s the view of Rob Kleinbaum, an auto industry business consultant who has worked or consulted for GM for the last 24 years.

Kleinbaum made his views known in a white paper titled “Retooling GM’s Culture,” which he published on Jan. 26 and sent to GM’s leadership. He received no response from the executives. That’s not surprising, considering that Kleinbaum calls for replacing “a significant number of people at the very top,” including members of the Board of Directors.

Kleinbaum points to GM’s culture—the company’s core attitudes and underlying assumptions—as the root cause of its predicament. He believes that no single vehicle or technology—including the much-heralded Chevrolet Volt plug-in hybrid, due out in late 2010—can save the company if the culture doesn’t change. “There’s no doubt in my mind, the Volt’s a real program and the people behind it are totally sincere,” he said, in an interview with HybridCars.com. “But they set it up to fail. The way they set it up as saving everything. There’s tremendous risk that it won’t meet expectations.” The Chevy Volt promises the ability for the typical daily commuter to drive exclusively on electricity, without using a drop of gasoline.

Back to DC

GM’s leadership—along with Chrysler executives—will return to Washington next week to present plans to restructure the company in the hope that the US Treasury will allow the companies to keep the $17.4 billion in loans already received, as well as to tap more of the $24.9 billion in loans committed by President Bush in December 2008.

Rick Wagoner, GM’s CEO, will explain how the company expects to obtain concessions from bondholders, labor unions, and others; as well as how GM will restructure to align capacity and products with market demand. Mr. Wagoner will also likely point to the Chevrolet Volt as evidence of the company’s forward-looking stance toward fuel efficiency.

Kleinbaum describes GM’s predicament and its reliance on the Volt as consistent with the company’s long-established pattern of behavior:

“GM ignores the external world, finds itself in trouble, and then reacts quickly by coming up with something they hope will save them, usually a future product, but introducing it in a way that seems poorly thought out and ill prepared. The idea is typically the brainstorm of a top guy, who ‘champions’ it through internal resistance. It is then presented to the public as the salvation that is coming shortly.”

Kleinbaum worries that by using the Volt to catch up, the company could substantially under invest in the rest of the product portfolio. He wrote, “Even if the Volt meets all its targets, GM will not survive unless the entire product line is well executed…GM has shown it can execute world-class products; they just cannot execute a broad portfolio of them.”

In the postscript of the white paper, Kleinbaum writes that going public with his views was motivated by “the deepest affection for the company.” Kleinbaum acknowledges that the white paper will probably kill his prospects for future consulting work at GM. “I’m walking away from a lot of money.” He concluded the paper with a call to action: “The people who do care about GM, and there are many, and who think a future is still possible need to stand up and try to make a difference, regardless of the short run costs.”


  • J-Bob

    Thanks for stating the obvious to those ‘outside’ GM. But as you said, highly unlikely those ‘inside’ will even listen or even act.

    GM reacts to situations now, and not in a pro-active way. The only good thing GM does well is BS and PR.. maybe they should make the move to advertising and leave the car business altogether.

  • Zero X Owner

    Well, duh, when hybrids are only 3% on market share so far after a decade but gradually gaining increasing market acceptance (think of Japanese vehicles in the 1960s), it’s not up to them to “save” one particular automaker, it’s just that electric drive is the long term end game, with or without the Big D 3.

    re: Volt – on it’s own merits, it’ll all come down to the marketing and PR. The product is an A, but on the marketing and PR, so far GM gets an F (think of GM naming San Fran, DC and NY as models for a cities with emphasis on infrastructure required in advance by cities before sales – the 3 most currently reviled cities in the US and when additional or advance infrastructure is actually not required at all, simply convenient) unless there is prize for using money inefficiently and uneffectively and putting your foot in your mouth.

  • kerry bradshaw

    I suppose it’s possible to produce an argument more lacking in specifics than Kleinbaum’s, but I’d love to see you try. GM’s predicament is no different than that of Ford, Chrysler and half a dozen other automakers. Just exactly why this fellow seems to think that GM was uniquely caught off guard is a mystery – they all were – just look at even Toyota’s horrible sales numbers. GM has been losing market shar e for the past 40 years and the reason couldn’t possibly be more obvious : too much of a burden of labor costs. Until that problem is resolved, none of the Detroit automakers are going to survive. When the Chinese enter the market in the next two years , none of the old guys, including Toyota, are going to survive. Any more than the Japanese electronics dominance survived. Automakers are going to be Chinese for the foreseeable future. No silly repositioning of attitudes on GM’s board will have the slightest effect on that immutable, cold hard fact. Face it, Polyannas : the American worker is the one who can’t compete. That has been obvious for the past 40 years. Chinese students study 10 hours a day and take four times as many tough courses than American students. American education sucks.

  • Bryce

    um….duh…..I believe it has been said and well established that the Volt is not going to even be sold at a profit initially. However, new product in the pipeline is being ignored including the Cruze that is already in production around the world, the Equinox, 2010 version, that gets 30 mpg, the Orlando MPV, the Spark city car, and several others. Then it ignores vehicles available now that have been heavily acclaimed such as the Malibu, Enclave, and CTS with Malibu sales being up 40% in one year. (and that is during the Carpocalypse, they were up 80% during the first half of the year) As said before by GM executives, Voltec is an investment into the future….not next year or the year after. The dividends it is expected to pay are some years off, so we will have to all wait and see.

    Besides, when have people on this site opposed the electrification of the automobile….lol.

  • sean t

    It looks like there’s a difference of opinions here, b/w Kleinbaum a GM consultant and Bryce, a future GM CEO. Just wait and see.

  • RandalH

    @kerry bradshaw: “Face it, Polyannas : the American worker is the one who can’t compete”

    American workers are doing just fine building Hondas, Toyotas, BMWs, etc. I think you must be specifically referring to workers from the Big Three, who aren’t competitive due to their union affiliation. And with the soon-to-be-signed “stimulus” bill funneling billions in payola to unions, that is only likely to get worse. New rules will be pushed through (such as the Orwellian named “Employee Free Choice Act” which ironically eliminates secret ballots in union voting) further hastening their decline.

    @kerry bradshaw: “American education sucks.”

    I would agree with you when it comes to primary and secondary education. I don’t think that holds true for American colleges and universities, although I think they are in decline as well.

  • Bryce

    k-12 is pretty awful, but college is generally way ahead of others around the world. People come to my school from all around the world. UAE, India, UK, Germany, Spain, South Africa and others all have students at my school. (UC Berkeley) Even with all of the budget cuts, we are doing fine.

  • Anonymous

    I’m an auto enthusiast and know lots about cars. I have to disagree with Mr Kleinbaum. GM has an is making cars and trucks that are just as good or better than the competition. I say this because what’s hurting GM is perception. With journalists constantly writing false opinions about a subject they know little about and that become the end results. GM thinks that the Volt will help change that perception by being a technological leader ……and that they can do after sleeping for the last 25 years. If GM can get past this recession, I think the public will see them again as a great company as they once were.

  • PW

    Kleinbaum described GM and gave a really accurate description when he said “GM ignores the external world, finds itself in trouble, and then reacts quickly by coming up with something they hope will save them, usually a future product, but introducing it in a way that seems poorly thought out and ill prepared. Since they have continued to shovel BS for so many years they are reaping the benefits now.

  • IMAMike

    Bryce,

    Didn’t the GM plant in Orion, MI shut down this year for an extended period because of severely flagging demand for the Malibu, just as Lordstown lost a shift due to dropping sales of the illustrious Cobalt. Where are those huge sales numbers for GM’s radiacally new and better Malibu?

  • Bryce

    exactly, everyones sales have bottomed out. Just becuase they are lowering production rates doesn’t mean that it isn’t selling well relative to everyone else, who is also lowering production. In fact, just recently, the Malibu moved into the top ten models ranking by number of cars sold.

    On a personal note, I can tell they are selling well, cuz I am actually seeing some here in the bay area….lol. Saw 3 yesterday over the span of about an hour. I was amazed.

  • Anonymous

    I think a very serious issue with GM that is that you have to wade through a lot of crap to find good models that are worth buying. They have an enormous list of models under way too many brand names. It’s literally hard to keep track of what products they offer. Small sized foreign cars actually have an identity that has been formed over decades. When someone says “Civic” you know exactly what they are talking about. It has international name recognition and everyone knows what to expect from a civic.

    What the hell is a “Cruze”, I actually had to look that up, seriously. Why does GM insist on renaming and rebadging cars to the point that they have to start all over again with marketing every time they release a new car? It’s not the medias fault that they ignore GM products, it’s GMs fault for lacking product identity. That is a very big hole for a company to be in. And they can’t to make up their mind when it comes to releasing, keeping, or canceling products. They need to cut the fat. Abandon all brand names except cadillac, chevy, and GMC. Bring opel back to the US and stop rebadging them under soulless brand names.

  • Tom

    He has a point on culture. I do root for GM and want to see American prowess return. Part of that is facing facts. GM HAS been facing a downturn for what.. 30 years?

    I do hope congress asks.. who got you here? what are being done about these people in power..since we don’t want to continuously police your business? on the advice of our consultants..we specifically want replacements for these (list) people. The list of people may be a private session, to facilitate restructuring, and discussions of whom should replace them. The underlying tone is simply “we want a better GM”. What the heck.. they’re laying off thousands.. perhaps they really need to lay off the right 5 or 10.

  • GuitarGuy305

    Die, GM, die…

  • Bryce

    The nameplate abandoning is definitely dissapointing abandoning repution and name recognition. Hopefully though, this pattern is being dropped because the Cruze will be a global product hopefully making it viable enough to be maintained. Same goes for the upcoming spark.

  • Shines

    I think now that GM is no longer #1 they will have to start building more reliable cars. (and I really don’t want to hear individuals tell be about how they have over 200K miles on their particular car.) The reason GM keeps changing nameplates is because after a few years the owners of the existing models are experienceing all kinds of mechanical problems and then complaining – which gives it a bad name. Even with the new 100000 mile warranty – that’s just on the engine and drive train. Who wants a car that starts and runs but the interior is falling apart, the AC isn’t working, the shocks are dead, the power windows no longer work etc… Hondas, Fords and Toyotas last for 8 – 10 years without problems. If GM’s reliability is only good for 5 – 7 years they can’t compete and everybody knows it. If the new Malibu which has award winning initial quality doesn’t hold up, then many folks aren’t going to risk purchasing a Volt which will need to last to make up for its initial high cost.

  • Need2Change

    I agree with the point that one new model won’t save anyone. This holds true for all manufacturers. The whole line needs revamping.

    I’ve not seen the statistics, but I know that my sons, theirs wives, and their friends all seem to love foreign cars, and hate American cars. I suspect that the average age of owners of U.S. cars is much greater than that of foreign owners. As the baby boomer generation drives less and retires, U.S. manufacturers will lose more customers.

    U.S. companies need to build cars for younger drivers.

    The baby boomers will initally buy the 2010 Camaro, but the youth won’t see the value in buying a 4,000 lbs. pony car. The Camaro should have weighed about 3,000 lbs. GM will need to sell this model for at least 5 years, and then they will want to only reduce the weight 300 lbs or so in 2015. Bold steps are needed and the next Camaro needs to lose 1,000 lbs. My 1967 Mustang only weighed 2700 lbs.

    And what does GM build in the U.S. to compete with a Honda Fit or Civic EX? And the Aveo is a crappy car, and not even built by GM. I guess GM didn’t think they could build anything better.

    I hope the U.S. Congress forces U.S. auto manufacturers to build a viable business model.

  • cindy hillendale

    Why everytime I am on this site

    ITS toyota is god

    GM is horrable.

    ITs simply not true. The people of this site are paid off by toyota to make these reports.

    The VOLT is a threat to hybrid cars because its not a hybrid really its a full electric.

    So thus this site attacks new technology that will replace old technology like the prius design.

    GM is working very hard as largest company in the world its time to give them some support and support our own manifacturing base.

    I just bought a new GM car and I have to say it in every way was much better than a toyota.

    Even my neighbors were impressed ” thats a GM”

    Its all perception not actuall fact. GM makes award winning cars period.

  • bobajoul

    When Fisker can prototype a car in half the time and a fraction of the expense, it shows how deep a problem GM has. GM needs to dump its management and it’s board now. The culture of Detroit is 30 years out of step with the rest of the US, and this is speaking as someone who visits Detroit once or twice a year. Propping up GM for more than five years will be a huge drag on the US economy. Support the automakers for five years, make GM and Chrysler break up into smaller companies, Ford will survive and the parts suppliers, who are the bigger part of the equation, will survive. When a company like GM can spend hundreds of millions making a super Corvette, while ignoring basic transportation needs for the next century tells tales about their lack of vision. Automakers are in the transportation business, not the NASCAR or internal combustion engine business. They are acting like the music industry when downloads and iTunes came out, raging against change while it overwhelms them.

  • Collin Burnell

    I think one of the fundimental issues with all auto makers is this fight for market share. When your GM and you once had a huge market share, there is no way to go but down. Why do auto makers constantly fight for market share, overproduce (almost) every product line and then ‘dump’ the overstock for little or no profit?

    It seems to me that they need to move more towards a custom order and deliver quickly (business) model. The last car I ‘custom ordered’ in 2000 took 12 weeks to deliver. If they could get that down to 6 weeks, reduce the amount of product sitting on a lot (loosing money) and increase the profit per unit…

  • Collin Burnell

    Also, why are ‘those that lean to the right’ so quick to cut union wages or blame the union for the companies woe’s? Is there something wrong with making a decent living? I don’t see ‘those that lean to the right’ screaming about upper management bonuses inside companies that are loosing money and laying off workers. That’s who I would scream at!!! Isn’t it upper management decisions that cause the success or failure of a company? And what kind of scumbag takes a million dollar bonus when that could save 100′s of jobs!!! If the wealthy think they can stay wealthy while weakening the middle class, they are sorely mistaken!

  • Bryce

    Simple, I wouldn’t use Fisker as an example to criticize GM considering that they don’t even have their own engine in it….in fact, it is a GM made Ecotec Turbocharged 4 cyl.

    As for Cindy…..you should probably substantiate some of the things you are saying……or at the very least, complete your sentences with proper grammar and spelling.

  • WompaStompa

    Volt is a joke. Next?

  • Randall Ferguson

    While I do feel that the Volt project has been one that has been spearheaded by a Mr Bob Lutz. I also feel that this car will give GM the platform with which to compete in all of it’s other markets. Toyota and Honda will not bring a plug in competitor to the volt for 2-3 years after the Volt is released. By that time GM will have Plug in Cadilacs and all sorts of other models running with this system.

    I honestly don’t understand the hatred for GM here. Sure they have made mistakes in the past and they are being penalized for those mistakes today but tomorrow they might be seen as the company that made electric vehicles mainstream. As a Prius is no electric vehicle.

    There may be some other issues at the heart of this including labor relations and the such but at the very least GM is working to be an early adopter for a change and I support it. These vehicles will be good for the environment why not support a company that is doing something good for the environment?

    Also the quality thing is more perception then reality any more. Many American made cars have as good of quality or just below that as the toyotas and hondas do. Consumer Reports and JD Power is the basis for this data.

  • Pickey McPickey

    Snore…Isn’t everyone tired of talking about this? Two of the big three WILL soon be toast and this week.

    GM and Chrysler (aka Pee Wee Herman Motors), will get their fate sealed by the bankruptcy courts soon and it’s about time.

    This new administration is sooo over the auto bailout issue. Our country has a much bigger issue at stake like bailing out the banks that are responsible for the very loans that the auto industry needs to buy their cars and creating new industry challenges and technologies…Out with the old…in with the new. Change is good.

  • chukcha14

    I think, GM needs to fire Bob Lutz and the hole gang. The whole board of directors are probably semi-retired men who don’t care about anything. If the government will give them money they will quickly find ways to spend it on them self instead of investing in the company and saving peoples jobs. They have the best accountants and lawyers. They know how to hide money. I say instead of laying off workers lay off the board of directors and 2 layers of management under them. Replace them all with younger people. Some of them can be recent grads with top marks…. GM needs young LEADERS not more managers. More enthusiasm and energy is absolutely necessary.

  • Baltimore Prius Owner

    Cindy – First, the Volt is not a threat to any car. With real world availability to take place in late 2010 (or early 2011) coupled with a price tag of over 40K along with GM’s current woes, do you honestly believe it will live up to GM’s claims?

    Second, many people supported GM over the years. The truth is, they were blind in one eye and couldn’t see out the other, thanks to Bob Lutz. I’m all for supporting the U.S. manufacturing base but frankly, the Big Three need a serious culture change. Yes, GM is working very hard…… to stay afloat. Maybe there is hope now that Tyrannasaurus Lutz is leaving.

    Did you purchase a GM hybrid? If no, why waste your time hear?

  • NC Cadillac

    Why? Can we get Cadillac back to private own and get GM hands off it. (GM) Garbage Manufacturing.

  • web prosperity team

    i guess it needs to improvise its features.

  • cooldude055

    This is a good post, thanks for sharing this one.

  • Ever been to Detroit?

    I’ve been watching the American auto industry for thirty years, and the story from Detroit has always been the same…wait until next year! Yes, all “Big 3″ have a few great autos and trucks, but they also have way too many not so good ones. It’s time for them to clean house and drop anything that is not in the top five of their class. Concentrate on your best and forget the rest.

    Take a trip to Detroit sometime, it’s bizarre. It’s the reverse of California and here in North Carolina. You see only “Big 3″ vehicles, and almost no Toyota or Honda products. I counted fewer than TEN Lexus over the course of a long weekend. I can count that many just leaving my subdivision. The executives and factory floor workers don’t even SEE the competition, they have nothing to compare themselves to.

    GM needs to consolidate all their brands/dealerships under one roof (GM Center), showing demonstrator vehicles, and selling only custom ordered vehicles (eliminating expensive dealer inventory), and opening multiple service only shops convenient to work places and population centers. Heck, just put one behind each McDonald’s, or take over the old Circuit City sites!

    Sorry guys and gals, but all salespeople should be salaried, maybe $100 commissions.

  • cash4trends

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