Lutz planning for a smaller US car market

The American new vehicle market is in freefall, with sales falling rapidly since the economic crisis began to bite half-way through 2008. But when – and at what level – will it hit the bottom?

Who better to ask than Bob Lutz, General Motors vice-chairman of product development, an industry veteran who has been though several waves of boom and slump in his long career with GM, Chrysler and Ford.

“I’m not sure we’ve issued an official projection but for planning purposes we’re assuming 09 will be no better than 08,” he says. “Frankly I don’t think you’ll find anybody who can tell you with any certainty – look how wrong we were in 2007 about 2008!”
But Lutz believes the days of a US market of 17 million-plus are now a thing of the past. Indeed, GM is planning to cut its cloth around a much lower level. “We’re going to plan on a very low industry level, and if it gets any better, it’ll take some of the pressure off,” he says.

That could be as low as 11m a year – in the short-term at least. “To dial the industry back to appoint where it’s viable at 11m is going to be hard - though we’re going to try.” He says. “But there’s a question as to whether any car company in the world can survive on an 11m market for a sustained period of time. If it continues I would imagine you’d see massive consolidation in the industry, massive plant shutdowns, massive layouts and much smaller product programmes.”

In the medium term, the optimum solution is somewhere in the middle. “A better proposal is not to get it back up to 17.5m because on a sustained basis you could argue that was an unrealistic number with a financial and housing ‘bubble’ effect,” Lutz says. “But I don’t think it’s unreasonable to expect an industry level of 13 or 14m – with the restructuring we’re undergoing, that’s going to be OK.

Will GM need more US government money in order to survive? That’s not Lutz’s game. “Talk to Rick Wagoner– I don’t do money – I do product development – I only spend it!”