17 December 2009

GM's New Head Of North American Operations A Company Lifer

Business Week

Mark Reuss, a GM lifer who's now head of North American operations, has to figure out how to boost sales without discounts

General Motors Chairman and CEO Ed Whitacre Jr. wants to shake things up. So who did he promote to run the automaker's all-important North American business? Mark Reuss, a GM lifer who had a key role in birthing the infamously garish Pontiac Aztek SUV.

If that's not enough irony, the last time the GM board fired its CEO, Reuss' father was part of the ouster. In 1992, Lloyd Reuss was GM's president and he was dispatched along with CEO Robert Stempel.

So come again? How does promoting a company veteran, and a true-blue GM legacy to boot, change things?

For one thing, Reuss, 46, doesn't exactly fit the mold of top GM execs. As a professed gearhead and career engineer, he's a turnabout from several decades of tradition in which top management was plucked from the finance ranks of the company's New York treasurer's office. While the Aztek is on his résumé, he also ran GM's Australian Holden unit that engineered hits like the Pontiac G8 and Chevrolet Camaro. "Reuss' promotion could be a good thing for GM," says IHS Global Insight (IHS) analyst John Wolkonowicz. "Whitacre is promoting the creative people."

Growth Goals

Whitacre says Reuss is proof that there is plenty of talent inside GM. "He's a good leader and a motivator," Whitacre said in a roundtable interview with the press. "People will follow him. He knows the business inside and out."

Whitacre has given Reuss the daunting task of breaking the GM cycle of buying market share with profit-killing rebates. The tough, impatient chairman has told Reuss he has to grow sales, market share, and profits at the same time. "The way I get market share will have to be done right," Reuss said in an interview.

It will be a big job. GM's share of the U.S. market has fallen from 22% through November 2008 to 19.7% so far this year. It stabilized at around 20% in recent months thanks in part to outsize incentives of $4,300 per car in November, according to auto shopping Web site Edmunds.com. That's $1,000 more per vehicle than the nearest rival, Chrysler.

"The market share has to be profitable," Reuss says. "Ed knows that. We talked about it."

GM is still losing money in North America. In the third quarter, GM lost $651 million at home while earning $238 million in its international operations.

Success at Holden

Reuss has shown results in his recent posts. In July, he returned from a two-year run as president of Holden, which is known for turning out some of GM's most sporty cars. He was vice-president of GM's global engineering unit in the four intervening months.

At Holden, Reuss stabilized market share and got the unit back in the black last summer even as the economy continued its long slump. He even moved GM's flagship Holden Commodore sedan into the top sales spot in the Aussie market.

While Reuss ran Holden, the company developed two successful cars, the Pontiac G8 and Chevrolet Camaro. The G8 was killed off along with the Pontiac brand, but not before it became a cult hit with sports-car buffs. In its brief existence, the G8 went toe-to-toe in sales performance with sports sedans like the Lexus IS, Infiniti G35 sedan, and Acura TL. The Camaro has outsold the rival Ford Mustang, by 6,867 cars to 3,627 in November.

All of that suggests Reuss knows what he's doing. Bob Lutz, GM's vice-chairman, says Reuss speaks his mind openly and he has a real passion for cars: "I see him as more like me than anyone I have come across in my career."

Aztek Experience

Still, there is the Aztek. GM had the right idea when it planned the car. The company wanted to build an SUV with a car-like ride—a preview of today's popular "crossover" vehicles, such as Honda's CR-V. Had it not been so poorly executed, GM could have beaten the pack and had a hit.

Looking back, Reuss admits the Aztek was the result of a product development system that was dysfunctional. GM pushed its designers to take risks on half of their new models. But the company also forced them to use parts from existing models to save money. The disaster was created by committee. Before Reuss took the lead on the program, GM decided to use the minivan platform and set in place the car's design proportions. The result: GM took an aggressive design and tried to wrap it around the frame of its boxy minivan.

Designers also started the project without a brand in mind. Once the Aztek was destined for Pontiac, the styling was doomed. At the time, GM's strategy for Pontiac was to take models that other divisions sold and adorn them with plastic trim and cladding. The result was a garish bread box on wheels. The Aztek, with meager sales, was killed in 2005. "Never again," Reuss says.

In his new job, Reuss has larger problems to fix. To boost sales and market share, Reuss will have to pick up where Lutz left off in getting more consumers to look at GM brands. GM's 60-day money-back guarantee has made strides in accomplishing that, according to data from Edmunds.com. So did the "May the Best Car Win" campaign, which compared GM's newest cars to foreign nameplates sold by Honda (HMC) and Toyota (TM). Reuss says he will work closely with Lutz on future marketing.

Product Planning

He will also have a big hand in the product plan. Reuss will help figure out what cars GM should offer next, using vehicles engineered by the company's global product portfolio if needed.

Next, Reuss plans to meet with dealers, suppliers, and the UAW to build better relations. Just a week into the job he dropped in on three dealers unannounced, said David E. Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich., who is advising him.

"He's got the right attitude," Cole says. "He understands that going to somebody else's turf is very important when you're building a relationship."

Reuss will have Whitacre sitting on his shoulder. After the company offered its 60-day money-back guarantee on car purchases in September, Whitacre asked him to reach out to the nearly 200 people, at that time, who had returned their cars. Reuss and his engineering staff called them all to find out why.

On his own, Reuss started taking his engineers on so-called knothole drives, during which they drive GM cars and competing models on the rural roads west of Detroit. Wearing headsets while driving, they discuss where their cars fall short and how to leapfrog rivals.

That bodes well for future product. But as head of GM's troubled North American business, he has to win over car buyers now and prove he is the man for the job. If Reuss succeeds, it might well be a bit of redemption for his father.

About half an hour after Whitacre promoted him on Dec. 4, his father called to tell him a friend of the family had taken ill. When Reuss broke the news of his promotion to his father, "there was silence," Reuss says. "Then he said, 'I am so proud. Me and Mom are so thrilled. It will be nice that the company will have an engineer (in upper management) again.' "

Now Reuss has to make Whitacre proud, too. That means making quick work of a tough task. "We have to do it over the long view," he says. But adds, "Ed is impatient. So am I."

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