On March 19th, the Automotive and Transportation Club and the Turnaround Club hosted two of the most distinguished speakers that have set foot on campus this year: Rick Wagoner, CEO and Chairman of General Motors (HBS ’77), and John Smith, Group Vice President of Global Product Planning (HBS ’76).
Several other guests from General Motors, also HBS grads, joined Rick and John in their trip from Detroit to meet current HBS students and talk about the automotive industry in the U.S., the challenges facing GM and other automakers, and the strides that have been made in making American consumers believe that U.S. automakers deserve a prominent place in the global automotive industry.
Rick Wagoner obtained his MBA from HBS in 1977, and he is a section B alum. He also holds a Bachelor’s degree in economics from Duke University, where he graduated in 1975. After graduating from HBS, he joined GM starting as an analyst in the Treasurer’s office in NYC. During his career at GM, he has held numerous positions including managing director of General Motors do Brasil (GMB), chief financial officer, president of North American Operations, and chief operating officer.
John Smith graduated from the MBA program at HBS in 1976, and he is a section F alum. Prior to pursuing his MBA, he obtained his Bachelor’s degree in Engineering from Kettering University, graduating in 1973. When he left HBS, he also joined GM as an analyst in the Treasurer’s office in NYC. Throughout his career, he has held numerous positions including Group Vice President of North American Vehicle Sales, Service and Marketing; Vice President and General Manager of Cadillac, and president of Allison Transmission.
During a “Meet the Press” style interview, Professor Kent Bowen asked John and Rick several questions about GM, the automotive industry, the past and the future:
Turning around the Fortune 3 company is not an easy task. The sizable legacy costs, rising healthcare costs and a competitive market make the situation increasingly difficult, but progress has been made and GM is coming back stronger than ever thanks to a new labor agreement with the United Auto Workers and great products.
GM already was the first manufacturer to bring an “electric vehicle” to market in the mid 90s, called the EV1. GM also expects to be the first to bring to market a “Plug-in Hybrid,” using GM’s proprietary “E Flex technology.” A “Plug-in Hybrid” gets its energy either from electricity from the power grid stored in its battery (i.e., by plugging it in overnight) or from its conventional gasoline, flex fuel or diesel internal combustion engine (or in the future from an on board hydrogen fuel cell). Typically, the internal combustion engine is only used to extend the vehicle’s range beyond the electric energy stored in the batteries, i.e., beyond 40 miles. One of the key advantages to the customer is that electricity is a lot less expensive than gasoline, approximately $1 per gallon of gas equivalent. Since about 78% of Americans drive less than 40 miles per day, which is the range that the Volt can drive on a single battery charge without ever starting the gas engine, most of customers who end up buying the Volt will run on electric power most of the time, achieving fuel economy levels of more than 150 MPG!
The telematics service available to GM customers is also being improved drastically. OnStar offers services ranging from turn-by-turn navigation to assistance in the event of a crash, sending medical assistance to the exact location of the crash after receiving information directly from the car. To illustrate another benefit of OnStar, Rick explained that, if a car is reported stolen, as the car thief is driving along, he will get a message over the Onstar system that goes like this, “Power is about to be reduced to this vehicle. Pull over where it is safe to do so. Do not attempt to get out of the vehicle. Police authorities will be with you shortly.”
Meeting with President Bush
Wagoner also mentioned his meeting with President Bush and how many of the US automakers’ competitors enjoy strong support from their home market governments (e.g., Toyota in Japan, the new Chinese manufacturers in China and VW, which is partially state owned in Germany). By contrast, the US government has not been helpful to the US automakers on several key issues that have impacted the automakers and other manufacturers like unfair currency manipulation and health care cost inflation. In terms of emissions regulations, Rick believes that increasingly stringent environmental and safety standards and the societal need for alternative propulsion technology are a huge competitive opportunity for large automakers like GM.
Success in the automotive industry depends on your products, and GM now offers the best vehicles in many classes. The Chevrolet Malibu was recently named Car of the Year by Motor Trend and beats all its competitors from Toyota, Nissan and Honda. The Cadillac CTS is also at the top of its class highlighted by a 550 Horsepower version due late this year. Other products at the top of their classes are the GMC Yukon Two-Mode Hybrid, the Buick Enclave, the Pontiac G8, the Pontiac Solstice and Saturn Sky, the Saturn Aura and last but not least, the Chevrolet Corvette ZR1, which with 650 Horsepower is faster than any Ferrari or Lamborghini. It can achieve 60 miles per hour from a stand still in only 2.9 seconds.