PRESIDENT REAGAN'S WHITEHOUSE KEPT RINGING THE PHONE IN A MEETING ROOM DEEP IN THE BOWELS OF GM... WARREN BROWNE

Unknown Speaker  0:00  
looked me in the eye and said Warren, Japanese don't know how to make luxury cars. And if there was anybody who knew how to evaluate the interior of a vehicle that I've run into in in my career is Bob Lutz. We know where you live. Well, you threatened her, we moved her to Budapest, don't ever do that, again, we were this small little secret group, he proceeded to stand up and point his finger at me for five minutes. I mean, we were losing our shirts, you know, those stories where you hear, you know, musicians are sitting at a bar, and they get out an envelope and they write a tune that goes platinum. Right, all those stories exist? Well, I can tell you that one of those stories exists. In the automobile business, Saab was in 123 countries, and it had basically, two cars. Look, the leadership if you can't make money in a two and a half million market, this is deep secrets revealed. Okay? The response should have been, we need to take that particular position to the UAW and have a whole different approach of negotiating what we're going to be in the United States market over time, you see the problem, you see it as clear as day. But the ability for an internal organization to come to grips with a problem and fix it is very difficult. And ultimately, external headwinds and external hurricanes come to bear. If you can't do it internally, there's just too much money by taking a standard sedan, and making a luxury vehicle out of it, you know, adding $3,000 where the cost and $10,000 worth the price, there's just too much. There's too much at stake to ignore this. What makes you so right. I'm not saying I was, but I was in the car when it happened. I'm not saying I've read every car book, some of the stuff I've told you. I've never seen

Unknown Speaker  2:07  
Jeff Sterns connected through cars. If they're bigwigs, we'll have him on the show. And yes, we'll talk about cars and everything else. Here he is now, Jeff Sterns

Jeff Sterns  2:24  
Jeff Sterns connected through cars with my dear friend, Warren Brown, came to reveal deeper secrets or more concisely, deeper secrets, revealed I'm so excited to have you back, Warren, I'm going to look at my notes. And I don't know where I want to start. But I don't know don't spend all the money on market research and then ignore it.

Unknown Speaker  2:50  
You have to go all the way back to 1984. The whole industry was facing intense fuel economy standard pressure. Man, I think that they were more nervous back then, than they were during the announcement of the Obama standards. Because this was kind of like the first time after the two energy crisis that the government was really getting serious about high fuel economy standards. And the solution, or at least the proposed solution by engineers was, you know, we were going to downsize everything and make everything smaller. That was the soup to assure at the time that the you know, engineers got a little smarter as they tried to grapple with Obama standards, but that that'll be for another day. So it was all about downsizing. And the biggest fear was that they would have to downsize Cadillacs and big Buicks and big goals, more bills, because we were making an awful lot of money then on each one. Okay. And so, I had the unique position that I was not only responsible for doing the forecast of the next generation of vehicles, but they also commissioned me to do the market research. And it was the first time General Motors had actually spent a million dollars on a piece of market research. That was a big deal back in 1984. Right to cities, we went to Dallas, Texas, and Sacramento, California. So you can imagine the logistics the cost, you know, hauling all of these future, you know, fiberglass clay models around and you know, getting getting heard of people to come in and evaluate them, which we did. And the whole thing you know, from from Dallas to Sacramento probably lasted about a month to get it all done, get it all organized. But one of the things that was very interesting at the time, is we were having people do a little bit of test drives of new engines and we had we're doing that at the Dallas airport, you could do stuff like that, at that time in 1984. And I had the opportunity to park, what was then a the new Buick Park Avenue outside of the front of the Dallas Hilton Hotel at the airport. And I just walked across the street and just watched, nobody stopped to look at the car. No one, it was just another car, sitting in front of the airport hotel. That was the first leading indicator for me. Okay. And so that was didn't cost me a million bucks to park that car in front of the Dallas airport. So we got it all done. And we brought it all back. Not to my surprise. But to the surprise of many, which I'll get into only 5% of the people that we surveyed, because we don't put badges on the vehicles. This is all done without badges without hood ornaments without anything right. So 5% of the people in the research said that was a Cadillac 5% The not too many more said that they would buy the vehicle given the specifications we gave them now, for perspective, the total amount of sales for the vehicles at that time for the Eldorado, the Seville, the Riviera, and the Toronado. It was round numbers, 175,000 units, and we made a lot of money in each unit. Okay, that paid the bills, right? Today, the pickups, pay the bills, but then those are paying the bills. And so I took the research and basically cut the forecast in half 75,000. Now fast forward, it actually turned out to be worse than that. So I brought the forecast in them into my boss. And he says, Well, you know, what is this? He says he only got 75,000 units here. And he said, What if we got to take this to management? What rationale are we going to give them for cutting the forecast in half? And I said, well, the How about the million dollars worth of murder research that we just thought have done? He says, No, this is this is this, this not gonna be good. Prepare the presentation. But you can't go. You can't give it because you'll be slaughtered. He or he already knew you'll be slaughtered if you give this, but you can come and sit in the back. Okay, so I did that. And we're in a meeting. And what I want you to imagine is a Dyess with Roger Smith and Howard Carroll and Jim McDonald and probably, oh, I don't know, whoever was the CFO at the time, right all sitting there. And my boss puts on the presentation that I wrote for him. And no one would speak before Roger spoke. So Roger said, well, Howard, what do you think of the results? And Howard said, Roger, this is the most unprofessional piece of market research I've seen in the history of General Motors. And Roger said, Are you sure you're not shooting? The messenger? said, no, no, Roger, customers will get used to the car. Okay, plus, we have plus, we have no choice.

Jeff Sterns  8:36  
You know, I don't know Roger Smith. I only know of Roger Smith and have read books by executives. And that's interesting to me that he said, Are you sure you're not shooting the messenger that he was potentially that insightful?

Unknown Speaker  8:53  
No, look, I got to understand this, this set of vehicles. They were paying the bills, he understood that. Okay. Nevertheless, they went through with the program, they didn't believe that the Japanese were ever going to make luxury cars. As a matter of fact, the head head of the program at the time, looked me in the eye and said Warren, Japanese don't know how to make luxury cars, and so we don't have to worry about them.

Jeff Sterns  9:25  
So we're pre Acura, we're pre Lexus. We're pre infinity. What was Sterling English with a Aker engine or something?

Unknown Speaker  9:35  
This was certainly before at this was certainly before accurate because deep secrets revealed I held on to actually do that program when I left General Motors anyways. So it was very it was very tense. It was very difficult, especially during the time, you know, this again is like mid 1984. The program was about a year and a half away. They knew they knew If this was going to be a disaster, okay, and unfortunately, the customer or the respondent said the research said the car was too wide, meaning it was too wide for its length that it the proportions, lots wood, lots would say it this way, the proportions were bad, it gave her the wrong impression of the proportions. Well, that being said, that wasn't going to stop Cadillac from cutting the vehicle open and making it even wider, so that they could put their VA engine which made the vehicle worse. So fast forward, sales weren't good. I think it fundamentally was one of those historical steps that put a kink in Cadillacs armor. There were many others to follow. But that was a real big kink that I observed. Close close at hand what you know, you throw the Cimarron in the same category the the Cavalier Chevrolet Cavalier that had lipstick, put on it and call the Cimarron from Cadillac, which was also a disaster, or the Dante, etc. But it was the first big kink and it ran, it really mattered. Now, that whole program, and the difficulty with that program, set in place a whole internal audit system inside General Motors, which I helped write a piece of it that had to do with the market research to at least have a higher visibility of the output of market research at a much earlier stage. Okay, because it wasn't good. Now, you know, you fast forward to 2002 and Bob Lutz came on board and basically said, you know, doing product programs, you got to do them from the gut, right? All that market research is BS, you know, car guys need to make cars. Okay? I don't necessarily agree to that. I think customers can tell you way, way in advance whether the proportions are good, and whether there's value in what it is that they see. And clearly in the research that we did, there wasn't value. Now, on the day that he retired, Howard Carroll wrote a note to the board, which still hangs in my old boss's office in Capitola, California. And that note essentially said what we did on the 1986 ek program was probably criminal, meaning we hurt the company by doing this. This was the same guy who told Roger, Roger, the customer will just get used to it. Okay, they'll just get used to it. So but what was the lesson for me? Do I believe that murder research is perfect? No. But if you're going to do it, if you're going to take the time and the effort to listen and understand what the customer says, pay attention to it.

Jeff Sterns  13:15  
So when Howard Carroll, Vice Chairman of General Motors says don't worry, they'll get used to it. This is an old General Motors. Culture, really, isn't

Unknown Speaker  13:28  
it? I think that the folk like Mark Royce, Mary, that are there today. clearly understand and as matter of fact, there was a piece in the news just the other day that that the chief engineer said, you know, we're going to have to demonstrate to the customer that there really is value in electric vehicles. That's our job to explain that why it's there. No. I think that it was the yes, the old GM it was the GM that went bankrupt. You can trace the the seeds back to and I submit back to that first big kink in Cadillacs, armor, and the hubris that said Japanese don't know how to make luxury cars when we knew that they were already doing vehicles of that type and selling them in Japan. That that was hubris that was total total hubris that ultimately they paid the price for. I wasn't really clear on the research. The research not only tested the Eldorado Seville, they also tested what was then known as the C body cars, the Park Avenue the 98. So it was a whole system of luxury cars that needed to be downsized in order to meet the standards. So that that's that's why the park gap was there it was it was a simultaneous test of both of them. Now all you got to do is do a test Here are the 84 and a picture of the 86, side by side. And you'll see what I think was that the external styling and dimensions and the look and the brand character of the vehicle, they relied upon that so much that the features and performance of the vehicle almost took a backseat. I mean, there was nothing that dramatically new in the 86 as I recall it that was in the 84. So here are you weren't offering anything on the interior that was maybe offsetting some of the exterior shrinkage that you had to do to make those cars successful in terms of CAFE standards, it hurt. And so you know, this morning I went back and looked at the sales just to be sure that that because I because I did a small piece for awards back about six or seven years ago on this and sure enough, the the sales were cut in half because this horrible and I said internally at the time after I had gone overseas, etc. The press will never know this. This is why it's deep secrets revealed. But this would make the Edsel pale by comparison.

Jeff Sterns  16:22  
But I don't remember you know, riding in those cars narrow and a few of those cars, Cadillac, Buick Oldsmobile, they didn't I was amazed by how similar in size the interior felt. So I think part of it was just an engineering problem putting the package together with what they had at the time. When you say the CTS and x t, cars now would seem smaller than that car. Also, the what is it ek

Unknown Speaker  16:58  
in 1986. It was called the EK platform today, it's got a whole new series of acronym. Yeah,

Jeff Sterns  17:06  
okay. But the Cadillac got smaller in the late 80s. When these GM cars got smaller in the late 80s. They were competing with the prior size. Now, Cadillac, for example, their targets BMW,

Unknown Speaker  17:23  
and therefore the package has to be tighter, the performance has to be better. The features have to be interesting, especially as we're moving into electric vehicles. You know, I saw the key Evie six last night on the Emmy Awards and love you. You saw that phenomenal looking car looks. It's an eye grabber, and I had an opportunity to test drive, Pollstar sedan, which they delivered to my house to test drive. It's a rocket ship. But the features and the look, you know, I I had an opportunity, a great opportunity to be at a couple of events with lots. And if there was anybody who knew how to evaluate the interior of a vehicle that I've run into in in my career is Bob Lutz. Okay, he could sit in the car, turn the dials, do the switches point out the different the nine different ugly black, those he's sworn See, this car has nine different blacks on the inside. It's never gonna it's never gonna work with luxury customers. It's not sophisticated enough. He says turn this dial and I'll turn that dial, see how that one feels. You know, one was like turning one of the old Sansui tuners on on a stereo system. The other was, you know, clunk, clunk, clunk. So the whole sophistication of the vehicle in that segment has changed and size is important. But but only to the interiors only to the people sitting in the vehicle, right? There's no longer the prestige of I've got the longest car on the block, just not there. And so I think you're right, from 84 to 86. That perception of what made brand equity then hurt Cadillac wouldn't matter today.

Jeff Sterns  19:34  
So looking at your notes, here's something that you'd notice some of the share of the Detroit to the decline was unavoidable competitive proliferation alone and desire imports would have taken away at least half of it anyway. But the balance of the decline was management's responsibility,

Unknown Speaker  19:53  
the the proliferation that was done by Acura Infiniti, Lexus and the proliferation that was done by the Germans a real real proliferated lineup. You know, there was just too much choice out there, but they still shot themselves in the foot.

Jeff Sterns  20:13  
So, and then you'd mentioned some significant slip ups. At six front drive Eldo Seville,

Unknown Speaker  20:23  
these were the moneymakers. I mean, the Eldorado and Seville alone. Sold 100,000 units. Probably making I guess at the time, I'm not revealing any state secrets, I guess at the time, probably net 15 grand apiece. And yeah, yeah. So when you when you go from that to 50,000. And you probably had to give some of those units away just to sell what it was meaning you were no longer making the margin event that double whammy, I submit to you was the beginning of the seeds of destruction

Jeff Sterns  21:06  
and then Simran Alon Tei front Dr. Fleetwood. according your notes contributed to that now it's when you mentioned a latte. It reminds me of a recording I have with Malcolm Bricklin. Do you know that a latte killed his Fiat. Malcolm was taking care of Fiat X one nine and Spyder they were fizzling in the United States and he got approached to take care of it and he revitalized them and new paint jobs and dealer body and all that business and selling like gang buster. And eventually, Pininfarina said that listen, I can't cancel my contract with you because that's illegal. You can hold me to it but I can it is legal for me to cease production. Cadillac has contracted me to build the Alon Tae, but not if my name is also on the side of a $12,000 car. So I'm going to cease production so that I can build the Elan thing. When I saw a light day, I couldn't help remembering that story. I happen to like that car.

Unknown Speaker  22:19  
No Cadillac promised, promised and probably to to Bricklin promised 15,000 units delivered for Okay,

Jeff Sterns  22:32  
well no Bricklin got you know, Brooklyn got nailed he got you know, he lost Fiat fighter, Nick. Oh, so

Unknown Speaker  22:37  
he pray they promise Pina Farina the 15,000.

Jeff Sterns  22:42  
Right. So he says I'm going to kill your Viet business. Way too important. Of course, this was what building the bodies in Italy and flying in the United States to

Unknown Speaker  22:51  
hand polished by ELLs at Cadillac. Yes, that was that was the game plan. And and I think you know, if I can extrapolate on that, that has been a little bit Cadillacs problem. If you go back, again, I think that I'm at least above average on the strategy end of the business, you know, you start with a longtail, you drop it, you start with what the XLR which had the Corvette engine in it, then you drop it, you you add the x Ts and you drop it. Whereas if you go back and look at the BMW or Mercedes portfolio, while they have proliferated the heck out of their portfolio. They've kept those core models in place. You know, I mean, one could argue that they're over proliferated, and I believe that they are but but, you know, they don't they don't drop stuff. And And anyways, that's my impression.

Jeff Sterns  23:59  
How about Porsche? 911? Yeah, well, I

Unknown Speaker  24:02  
mean, you know, the, there's some core core stuff, but I don't I don't think that that that comes anywhere close. And if you just think about it, the engineering workload, the capital workload, to put a vehicle into place is enormous. And, you know, the whole point of the lesson learned was, if you go out and the customers are telling you something, you better take a deep breath and listen twice. And General Motors didn't.

Jeff Sterns  24:32  
Well, if you're gonna do the research anyway. Well, I

Unknown Speaker  24:35  
again, there was a there was a time in the 2000s especially when Bob was there. Were research researchers for girls. Okay, real men do cars from the gut. That is not always true, right? I mean, I can point you five or six vehicles that were started under lots that no longer CES today, Chevrolet, Buick, etc. So it's, I'm not saying it's it's one versus the other. We need quote car guys. I think Mark, Mark Royce is a great car guy. But you got to also go and find out before you spend all that capital and do all of that engineering. What does the customer think about this? And if you're getting negative feedback, you got to adjust. We didn't, we didn't adjust. We couldn't take those errors and internalize them.

Jeff Sterns  25:42  
The advantages of zero policy and zero tolerance policy. Yeah,

Unknown Speaker  25:47  
that's awesome. I think it's a great lesson. I think that there are many companies out there today that may have a zero tolerance, ethics policy, others do not. And so I want to get the lesson learned on the advantages that I had working in Russia, by having working for a company that had a zero tolerance policy on anything that had to do that was unethical. And I could give you a litany of lists. But I will give you one example that that existed for me. In Russia, the Russian government knew that I worked for zero tolerance company, that was a great advantage. I told you before that I drove the only white escalate in Moscow, because all the all the police knew don't pull that person over, because they're not going to give us any money. And and you know, throw the parts in the Baltic Sea, I'm not going to pay anybody. But this particular example is what I would call the coffee doughnuts and phone guys would come in once a quarter. You know them as tax authorities. I just knew them as the here come the coffee and donut group, just give them some coffee and doughnuts, and let them make all their overseas phone calls. While they're conceivably looking for finding tax problems. And little known fact, the managing director me never gets thrown in jail for a tax problem. It's the chief accountant that gets thrown in jail, right? And the chief accountant has to be rushing. So they would come in, and they would you know, there was their quarterly audit. And they would come in and be because General Motors, we may not have been the smartest company, but we kept our books. Okay. And they would come in and they would do their you know, their stuff ago, you know, we didn't find anything. We'll be back next week. So they're back next week had their coffee, their doughnuts and their phone calls. Okay, we're all ready for them. And they would call the chief accountant and said, we're not finding anything here. You know, we can't go back to our bosses and tell Feb that we're not finding any tax problems there. And the chief accountant said, Well, this is the way General Motors does business. And they sit and they said, How about we come back the next time and you just give us a little something that we can find. So we could take it back. And she said that that I'm telling you right now, that's not going to happen. And they said, We know where you live. She came in and told me that. And I can't tell you who it is, I will tell you that that individual is the CFO of one of the largest technology companies in the United States, I can tell you that is I call that person who happened to be the CFO of General Motors Europe at the time, and said, I've got a problem. And we moved that individual's family to Budapest. Now, we said we have a new job for you in Budapest, and we have a job for your husband. And we have schooling for your children. Are you interested in going? It was an opportunity? She's smarter one of the smartest ladies have ever worked for me? She said yes. Okay. month later, tax authorities came in and said, you know, Where's Miss x? Well, you threatened her, we moved her to Budapest, don't ever do that. Again, this is the way that General Motors operates. Don't don't come in we don't we don't do this stuff. You know, we're a zero tolerance company. And quite frankly, the the amazing thing was that the whole European management was behind that. And I don't I don't think that you could do that. If you weren't a zero tolerance company, you know, I teach cases at LTU where, you know, it's a little bit of a gray area in Russia and how do you navigate around it, etc, etc. But anybody out there who's operating globally and operating in different countries, the best thing that you can do is to institute a set of policies that every executive and every individual in the organization knows that you just don't do this. You know, I told you before, when we weren't doing this recording that you know, I told the customs official You got to understand if you if you throw those parts in the Baltic, and I tell my management that it was because I wouldn't pay a bribe, I'll get a promotion,

Unknown Speaker  30:10  
I won't get hurt, I'll just get a promotion. And that just changed the the tonality and the attitude of the way, General Motors operated in Russia. And I think, quite frankly, the respect that we got in Russia, not only for what we did, building plants, etc, but the way that we behaved. So that that's the lesson learned on you know, zero tolerance companies, I think it's if you're a global player, you have to have that standard inside. Otherwise, people get confused. When I was a mail boy, I had to deliver the Wall Street Journal in New York Times to every executive on the 14th floor. I knew him all that goal, all the characters, John DeLorean, coming back from Los Angeles with his cowboy boots, and his cowboy hat and all that stuff. And I did that. And then I had an opportunity to move to another group, I got my degree and moved on to from being a mail boy. And along the way, I became the truck expert. At the time, let's just call this circa 7619 7619 77. General Motors car company. Trucks. Yeah, okay, we make a pickup truck in a suburban, but we're a car company, trucks. Give it to Warren, let him figure it out. So I became, quote, the truck expert, which, which got me a lot of visibility. And I'm at that time, again, after the original energy crisis. General Motors was again looking to downsize vehicles and downsize trucks. And one of the proposals which ended up being a great proposal by Chevrolet engineering was to introduce a smaller blazer, okay, not the big blazer, but the little one, which, which is kind of where the blazer is today, in terms of the Chevrolet lineup, but back then it wasn't the huge thing was that was built off of a pickup truck, like the Yukon is today, right? So it was taking something from a Yukon size, and making it down to a blazer size. And in our position was that because it was four wheel drive, because it was off road. We want to be able to degenerate the same level of volume in the small one that we got in the big one, especially given the fact that you know, increases in fuel. The time we worked out at the Campbell he will building we were this small little secret group working out the Campbell he will building and Warren doing all of these crazy forecasts. And one day my boss comes in same boss, same boss, who was the messenger that was shot over the the 1980 60k program. Years later, my boss came into my office and said, Howard Carol wants to know about the small truck market. And you're the only one that that that knows it. Once you go down downtown and tell them this is you're kidding me says no, you got to be down there in an hour. Now you're got the Campbell you all with AD people, you don't wear a suit and tie. You wear blue jeans and a T shirt. Okay, so we adopted the the, the approach that ad people were doing, I literally had to borrow somebody's sport coat and tie, which was at least the size and a half too big for me and go downtown and explain to Howard Carroll, what the truck market was going to do. So I walk in, and you had to get through security. And security recognized me and said, Warren, what are you doing here? I say I have a meeting with Mr. Carroll in five minutes. Yeah, sure you do. Yeah, sure. We'll call him back. I'm bleep call back there and ask. And so Hilda Carter, who was the security at the time, the reception is called, and she hung up the phone and looked at me and said, My we've come a long way, haven't we? She remembered being for big male boy. So I got backed up. And so I sit down for a half hour in his little conference room. There's a little table in this conference room and explaining what's going on. And he said to me, Warren, the truck market's never going to come back. Obviously, you can tell my theme of Howard wasn't the world's best product guy. That the truck mark is never going to come back. And I know that you guys are going to go to the court meeting and you're going to propose this because Chevrolet's behind it and apparently you guys are behind it. And I just want you to know I'm not going to support this. Do you have anything else for me? Okay, I did my piece. I did my sales piece now. No, he didn't buy it. But I did my piece best thing I could have done is say, No, sir, I don't. Thank you for taking the time to listen, we'll see at the meeting.

Unknown Speaker  35:09  
No, no. When you work till midnight inside the advertising agency, you get a little loopy. Okay, so we had to develop the rationale. Why in heck would the market come back and unfortunately at the time, and and I really mean this in a in a human human way. At the time, there were a boat people from Cambodia, off the shores of Los Angeles, trying to get to the United States, much akin to a lot of the stuff that's going on today. And when Howard said to me, well, Warren, what else you got? Cuz you haven't convinced me yet. I told him the Cambodian boat, people story, when you sold and you're done. Stop selling. He proceeded to stand up and point his finger at me for five minutes, and lecture me that we shouldn't be making fun of underprivileged people and people that are in trouble. And this is a disgrace that any General Motors executive would ever talk like that. Jeff, when I went back to the Campbell the wall building, I figured that I'd walk in that building, and my boss would tell me, you're fired. Honest to God, the way he pointed his finger in the way he was telling me that so I went back and I told him, my boss what they'll do you told him that story for says he was fishing for other stuff. I didn't know what to say. And I so here's the lesson learned. Stop selling.

Jeff Sterns  36:41  
You don't need to unnecessarily feel the uncomfortable silence when you're done. You're done. If it's silence, leave it that sir,

Unknown Speaker  36:49  
is better said. That is better said

Jeff Sterns  36:54  
the simplest plans are normally the best.

Unknown Speaker  36:57  
This is a good one. A lot of people don't know this about Rick Wagner. He arrived in Brazil in August of 1991. On the same plane, as my wife, I got there a little earlier, I convinced my wife to go down to Brazil. And I told her it was only going to be for two years. Just let's go for two years. Well, we ended up staying for nine but that's not that's not the relevant portion of

Jeff Sterns  37:26  
the story. And didn't open with honey, I need a favor. If I recall,

Unknown Speaker  37:29  
in the month that I asked my wife to do that. Nine to five came out as a movie. Okay, and if you remember the closing scene, Dabney Coleman is told son, you're doing a great job. And I'm sending you down to Brazil. So we fix the operation down there, too. So my wife says, this is this isn't like a nine to five thing is it? And I said, No, no, no, no, no. This is a great opportunity for me. And I went, what went down there? Up. So I was down there in February fan from February to August. I think I spent a total of 30 minutes with my boss before Wagner came down. Okay. Wagner came down. At the time, we were doing a potential program with Suzuki to bring the small car into Brazil. I mean, we were losing our shirts. In Brazil, we were probably losing we were selling 100,000 cars, maybe 150,000 cars, and we were losing our shirts. Okay, which is why Wagner was sent down there. And we were doing a program with Suzuki trying to get a small car down there. And we were fairly well along. And Rick came down, said, and you know, those stories where you hear, you know, musicians are sitting at a bar and they get out an envelope and they write a tune that goes platinum. Right, all those stories exist? Well, I can tell you that one of those stories exists in the automobile business, which is a deep secret revealed, okay. I'm sitting in his office. He been there maybe about a month, and maybe I don't have the total time correct. And he pulls out this piece of paper and he said, Look, I know we're working with Suzuki on a smoker. But that's the wrong program. And I know Osama and when we cancel the program, you and I are going to go over there together and explain to Suzuki why we can't do their program. And he really took that serious, okay, because General Motors had a relationship with Suzuki and he didn't want and Jack Smith, at the time who was in charge of of overseas had a relationship and they didn't want to destroy that. But he says here's what we're going to do. He got out this piece of paper. And he said cars we're going to get from Opal. And trucks we're going to get from North America. And we're going to get current on the program. And we're going to stay current, we're going to have a small car, mid car, large car, we're going to have a full size pickup, we're going to have a suburban and we're going to have an s 10. That's it, go get it. That's your job. That was the plan. Okay, there wasn't there. There. You know, there wasn't no presentation to the board, etc. This is what we're going to do. Because in one trip that I took with him, to see Bob Stemple, who was the president of General Motors at the time, he took a Rick aside, and I was there. And he said, Rick, you're on your own. I don't have any money to give you, whatever it is that you're gonna do got to be self funding. You got to get your own investment. It's on all you guys down there. I can't help you.

Jeff Sterns  41:08  
Warren, I'm sorry. You mentioned this, I remember on our original recording, when they need to get their own investment. Does this mean find an investor? Does that mean by issue bonds, this mean another round of stock? What does that mean?

Unknown Speaker  41:23  
Look, if you if you are doing an investment program, in General Motors, you would put together the business case. And you would go to the executive committee to ask for approval, which means they were backing the risk. Right? Whether whatever Bob Stemple said or not all of our programs were, were in essence risk profile by by the Executive Committee of General Motors and the management of General Motors. No, it wasn't going out and issuing bonds. Now, I told you a little story about Turkey, or it was the case that we were looking for a private investor. Different story for a different day. But But no, this is backed by if I can be clear, the executive committee taking on the risk. What was the difference that Stemple was telling us? Don't come back with the typical General Motors program where oops, we missed. Right? That's what he was saying. Implicitly, right. Versus versus a 1986. Ek program or some other program where the business case just doesn't make sense. But we got to have something new. So make up the number. So it works. Okay. So he was telling us, you're on your own. And I think Rick, I remember he took that message back and said, we're on our own and the stuff that we're going to submit to the Corp is going to be airtight. We're going to be conservative, we're going to make this thing work. Now, I had a full head of black hair in August of 1991. That Well, that wasn't the case when I left after nine years. Okay. That simple plan was the plan. And each time we did that particular investment, whether it was for the corsia or the Astra or Vectra the Omega was the the original large car, whether it was for the s 10, or the new pickup truck, full size Silverado pickup truck. Each of those were done. And I don't think any of them didn't deliver on the revenue that was promised. And I can't tell you what the number was. I'm not sure we ever. Joe Flores, who was the CFO at the time, never really told management what the number was. But we went from losing probably $100 million a year to seven years later making almost 2 billion. But it was by saying, okay, there were there wasn't a lot of, you know, let's do 19 different strategic alternatives. What's the upside? What's the downside? It was a pretty simple plan. We're going to get our cars from Opal. And we're going to get a truck from North America. That's it, go get it. And that was simple. And all of the work was on the execution rather than on the wringing your hands over what we're going to do. And I thought that that was pretty effective. And the only other time I ever thought of that was when Chris Hill when I was in Poland and the MD of Poland Chris Hill was As the ambassador to the United States Ambassador to Poland, and he was a war buff, and he took us to Normandy. We all went for the weekend to Normandy to tour the beaches and all the stuff. And I looked in the souvenir shop, and they were selling here's Eisenhower's plan of the launch of D Day, he did it all on one page, which apparently is, I guess, urban legend in the military, that he actually drew that up on one page. And when I looked at that, I actually thought of Rick's plan for Brazil, how simple it was in terms of its execution. And so that's, that's my, make it simple. Everybody will get what you're supposed to be doing productivity lessons. When I was done with the planning job in Brazil, I moved over to after sales. And I honestly, I didn't know anything about after sales. It wasn't, you know, I didn't grow up in the after market service world. It just wasn't something that I did

Jeff Sterns  46:06  
know after sales. Isn't that a European term for parts?

Unknown Speaker  46:11  
Parts and Service? Yes. Yeah. Customer Care. Mr. Good wrench, you know, pick up General Motors term, right? After Sales. This was kind of a European thing. You're correct in terms of what was called. And Brazil, quite frankly, aligned itself more with the Europeans. Because especially because of the Opel connection on the cars than we did, necessarily aligning ourselves with North America. And plus, the head of overseas was a boss for both Europe and Brazil, right. So we use the language of, of internet International. So there were two guys that taught me a lot. One of them was Dick Bom Gardner, who was an old warehousing guy. And he told me said, Warren, here's what's all you need to know about warehousing. This probably after about four or five beers, and Germany's this is all you need to know about warehousing. If you have one guy on a job, you're going to get a certain level of productivity. If you add another guy to that job in the warehouse, your productivity is going to go down by 50%. Because they're going to end up talking to one another. And they won't get their work done. He says that's all you need to know. So when you walk through the warehouse, only thing you kind of keep your eyes open for how many people two people are standing around talking to one another rather than pulling parts and putting them into bins and getting them on trucks. If you keep your eyes open and do that, you're fine. So I said Dick. I'll remember that forever. And he said good. And the the only other Dick Baumgardner story I have is, we opened up a warehouse in Sorocaba, Brazil, brand new warehouse, parts warehouse, and I invited Dick down. And he was kind of like my functional boss, but not my boss, because he was in charge warehousing for international. And he I said, come on down, I'm inviting you down. And he walks in the warehouse, opening day of the warehouse, you know, the ribbon cutting, opening, and there's a full orchestra there.

Unknown Speaker  48:23  
And he says, he says, What are these is this, this is Brazil, we're going to have, he says your kidney. I says, No, this is what this is what we're going to do. And he says, I've never been to a warehouse opening ever, where there's been an orchestra. I said, Well, welcome to Brazil. And we got, and he still he lives in Jacksonville, Florida. And he's still a good friend of mine. But the other person was Bob aren't. And I learned a lot from Bob aren't. And here is a productivity lesson. That was never, to my knowledge implemented in General Motors. But it was the most sophisticated approach to picking parts in a warehouse that I that I ever ran into, in all the time before I left and I I'm going to do my best to explain it. Typically, in a warehouse, a person gets sent out to pick parks. And if they're good, they'll go and actually do the job that they're supposed to do. And now I'm being a little sarcastic. If they don't, they'll go away into the back of the warehouse and go to sleep. Okay. And so Bob Arndt who came from Toyota defies the system that was computerized. And it worked as follows You remember being in a car rental place where you had all the rental reservations in the back, and it looked like they had like 50 reservations, right? May I probably still have that today in car rentals. I haven't rented a car in a while. Anyways, imagine that board at the front of a warehouse and each of those tickets like you have on a car rental represent to a certain level of work for a day, or for an hour or for a half hour, okay? And then across the top or the individuals names that shift that we're going to work in the warehouse. And what this thing did was it computerized all of the work. So that the task had the our task had to be performed in 55 minutes, right, meaning you had to work, you had to, you had to do it no different than a car rolling down the assembly line. And the workers got to put the part into the car or screw the part down in a car. This was taking that kind of tack time equivalent into a warehouse. And I watched, I sat there, and I watched this was in Jacksonville, the Jacksonville warehouse in Florida, which was a trial run that the UAW wanted a trial before it was implemented fully across General Motors. And I sat there for the whole day. And watch those, watch those folks work. And he, at the end of the day, every one of the tickets at the end of the shift, because I watched two shifts, at the end of the shift, every one of the tickets was was taken. All of the stuff was loaded into bins. All the bins were loaded on the truck on time. I said, Bob, this is amazing.

Unknown Speaker  51:32  
He said, Where did you Where did you learn this? And he said, Well, we were doing some of the stuff at Toyota. And when I came to GM, I thought about it a little more. And I want to get this done. It's it's the most efficient way to pick parts. Because the supervisor who's sitting on the floor knows exactly whether the workload is half done a quarter done or two thirds done. So he knows he's going to meet that truck schedule. And to it shows the people that they have a full tasks to do, and they're going to get each one, they got to pull each one of those tickets to get done. And he said and and we program it, so they can't lollygag around, they got to do what they got to do. And the computer knows, I mean, they had the times measured from the start of the job to the part and the distance and the time it was required to walk that distance very, very sophisticated system, unfortunately. And I thought it was the equivalent to any type of lean production system that I had ever seen at Toyota. In terms of warehouse picking parts. It's a great productivity story. I don't think that system was ever implemented in General Motors ever. And I think and I'm speculating here, I think because it wasn't, I'm sensing, I sensed that the UAW didn't like it. And because it was never really implemented. Bob went to I think he's, like, you know, some senior executive at Reiter. Now, I haven't talked to him in a long, long time. But the lesson here is, you don't have to do automation like they do in an Amazon warehouse. In order to get the productivity to meet the schedule. This was a no automation solution to getting the parts, which is what you want. If the trucks going to leave at six, you got to have the parts on the docket five, they got a load on the truck and the truck goes, this was a a non high investment way to get the productivity out of the warehouse to be effective. And I thought it was phenomenal. And I'd really, I don't talk to anybody, a GM anymore. But I'd really like to know what happened to that system. Because it was it was it was effective. So I'm giving your

Jeff Sterns  54:00  
Why do you think the you said the UAW didn't like it? Or you thought that maybe it was because the UAW didn't like it?

Unknown Speaker  54:07  
Okay, this is deep secrets revealed deeper yet, because Bob felt that even though there was eight hours of work on the cards, he could get that down to if you organize the parts more effectively in the warehouse, meaning the travel times were less, right, that he could get eight hours worth of work down to six hours. And the UAW was smart enough to figure that out in terms of what it meant for labor. Look, it's, you know, he said, Warren, what you're seeing today is the only the prototype of the system. There is stuff that we can do to get the work out of this place. And if we implemented it in every General Motors warehouse across the globe, we would be the leaders in efficiency, guaranteed But I don't think it was ever implemented. And for for the reasons that I've described, the one that pains me a lot. I got to give you some background on. So this is no the portfolio limitations of the company that you're buying before you buy it. So that's kind of pedantic, right? I mean, in terms of Yes. Okay, so, the Wallenberg family who owned sub, never made a Nikola, as best as I can tell from urban legend in the financial community. Five years before General Motors bought, Wallenberg family didn't make any money. But we were hell bent on buying. Because we were General Motors. And we could turn that baby around because of our sophisticated management techniques and our sophisticated manufacturing techniques. And we did we bought 50% of them. Okay. After we bought 50% of them, Jack Smith came in to me and said, I want you to do market study on shops, market potential around the globe. I thought it was kind of funny at the time, like, well, we bought them. Right. And so I did. And there's a there's a, there's a there's also a lesson learned there and never never pass down an assignment to an underling that the executive vice president gives you and ask you to do it directly. Cuz you can only get yourself into trouble. And I did, but we will. We won't go into that. So I went off. And what I learned was Saab was in 123 countries. And it had basically two cars

Jeff Sterns  56:57  
with a car and a van right or did the van come later

Unknown Speaker  56:59  
later. They had two cars, they had a 900 and a 9000. And the 9000 was basically an engineering amalgamation that was combination of fiets car and was Viet and Renault I think it was a it was a he wasn't even all there's, you know, the Saab, the Saab heart. Okay. So I did. And I used I used Volvo as a proxy of the work that I did, and, and I won't go into the technical details, and I went through it all, and basically said, you know, what, what would in some of these countries where we don't belong, you know, if Saab did 25% of what Valvo did 25% Because the two biggest markets for sob at the time, was the United States and the UK, EU, the Brits love sub. Okay, they had a right hand drive, the whole thing worked. And, and if you were in a college town, you bought us up in the United States. Okay, I mean, the, the income level of a Saab owner was higher than a Mercedes owner. Okay. And in terms of income approach, etc. So I went off and I did it, you know, and I came back to a jack and I said, You got three problems. You're In too many countries. Too many countries for your your volumes, peanuts, you're wasting your your effort in peanut countries, too. Your main country of profit is the United States. And here come the Japanese Jack. They are not going to survive. When these Japanese luxury manufacturers get cranked up. That's not going to happen. And three, they got two vehicles. It was like it was it was like the only other time I've seen that mismanagement was in Saturn. When Saturn was expected to survive on two cars. Good luck. The best distribution network in the system. Two cars, that's all they had. Okay, stop two cars. So I came back and I said, Jack, on a good day. They could sell 100,000 globally. That's it.

Jeff Sterns  59:33  
And that was your forecasts from the analytics department.

Unknown Speaker  59:38  
He said you have to send this this report to stop because I thought that was kind of funny. Like you mean jack. You're not gonna send them the report? No, because he was the one that got convinced by them. You have to send this report to stop. So I did. And you know what they did with it. They put In the wastebasket, time went on. This is deeper Secrets Revealed. Time went on. I mean, I went off to do Brazil. Okay. This is this, this is ProShow. This is must have been 1988 8989. I went off to Brazil, and I've never looked back to find out what the heck happened. This is what I do know, shod continued to lose bunny, they never really got the portfolio that came close to competing with Falvo, let alone BMW. And we bought the other half of them. Because once we had them all, and we owned 100% of them, there was no holding us back, then we could really, we could really fix them.

Jeff Sterns  1:00:50  
You could dominate the world at that point.

Unknown Speaker  1:00:52  
It didn't happen. Sod doesn't exist today. I don't think sob ever made money in the whole time. Don't don't hold me to that. But I will bet a steak dinner that they didn't make money a to the 10 years that we owned them. And that's horrible. It's like, it's it's plain as it's just plain as day. How can you think about making money when you only have two vehicles? And the rest of the world, especially in Europe, I mean, you're competing against Land Rover and Jaguar in the UK. You're competing against BMW and Mercedes in in Germany, and you're competing against Volvo, who was a global player wasn't doing that well, either. And, and we we didn't we didn't do well. We could have done better. And ultimately, the bankruptcy you know, bankruptcy, fix a lot of that stuff. So that's the know what you're buying before you buy it. It's pretty simple.

Jeff Sterns  1:02:01  
But to buy it and then say now tell us what you think it'll do. And that called due diligence. Normally, if

Unknown Speaker  1:02:07  
I didn't say, I didn't say that's what the business case said. Jack Smith asked me what you think they're going to do. Okay. And because I was in charge of overseas forecasting at the time, and I finally got my head on right as to who was supposed to do the job and that it wasn't supposed to be delegated, because he knew the political friction that existed. Okay. He asked me what he thought that I didn't say that was the business case. When you'll want something bad enough, you jockey the numbers. And it all works, except it's kind of work in the market, not on paper. So you know, I can be a little bit of a Monday morning quarterback on a lot of this stuff. And I'm sure to your audience. I'm sounding a little bit like that. But I was in the car when it happened. And this is my view of of what I think the reality is.

Jeff Sterns  1:03:07  
It may be catty, it doesn't sound catty to me, You're revealing deep secrets in General Motors,

Unknown Speaker  1:03:15  
and I stand behind them. So you want to do to caddies?

Jeff Sterns  1:03:20  
Definitely. But like I don't get access to you all the time. I mean, this is a big deal.

Unknown Speaker  1:03:27  
Okay, I was in Brazil for nine years. And bless his heart, Dick neurod, who ran the region for the whole time that I was there. And quite frankly, did look after me. But there was a joke inside of Brazil and in Latin America, that Brazil was like Hotel California, you can check out but you could never leave. And all the people that went down there stayed for a heck of a lot longer. But even though that's a caddy story that the week behind his back, we said Dick was running Hotel California, behind his back. Right. But to his credit, and the lesson learned, he had a continuity of people there that were there for quite some time. And knew the system, knew the language, knew the culture knew how to navigate. And I'm talking about in Colombia, in Peru, in Argentina, Chile, some very, very difficult markets. He had a team that was there for a while. And I think that that was one of the things that made General Motors, Latin American operations, six. I mean, he loved to say it and he was right. He said, Warren, I've never had an operation that lost money. And I've never had a Latin American operation, the last money and whole time I've been here. I don't know what those guys and he would say, you know, when you were in the bar, he'd say, I don't know what those guys in Europe. North America are doing but we ain't losing any money here. So I'm a little pained today, when I see stories about Ford leaving Brazil, that's their business. And General Motors is making you know, every once in a while you see little blurbs in the paper about leaving. And so the Brazilian press called me one day when I was down in Florida, but not at your place. And they call me so we'd like to do an interview with you. And I said, Okay, so, you know, this is how I close the interview, a lot of people are leaving. But Brazil is a two and a half to 3 million unit market. And if you can't make money in a two and a half to 3 million unit market, look around the globe, how many of those markets exist? Not a lot. If you can't make money in a 2.5 million unit market, you better look to the leadership that's running the company. Don't complain about the duties, and the corruption, and all of that stuff. Look at the leadership of the people that are running the company. That's the source of your problem, because you can't you can't find a lot of 2.5 million unit markets in the world. Mexico isn't 2.5 million. It's 1.6. Now they survive a lot on exports to the US. But just talking about you look around the globe, you can say oh, well, Europe, Europe's a 15 million market. Yeah, that's true. But inside of Europe, there's only four markets that are bigger than 2.5 million. And then you have, you have Japan, and then you have the elephant, China, and you have Canada in the US. But it's not like a big club. And so when I hear the wine, you know, given I think that I think I am an expert on Brazil. And given I knew how much money we were making down there. I get a little pained when I hear well, we had to leave Brazil because we couldn't make any money. This is okay, well, Toyota, Honda, and Peugeot are still down there, just leave it to them. They're more than happy to and feel it, they're more than happy to take your business. And there's a caddy sector that turned into a lesson learn. Look to leadership if you can't make money in a two and a half million market,

Jeff Sterns  1:07:11  
right? I mean, in a two and a half million market, there shouldn't be an excuse. Just a bad choice. It doesn't it doesn't necessarily mean bad management. It just means a bad decision was made own it. That's it.

Unknown Speaker  1:07:26  
Leadership is ultimately responsible. Jeff, you know that so

Jeff Sterns  1:07:29  
they're responsible. But mistakes are also made that anyone could make, for example, when you cut the forecasts in half, for the new late 80s, inbound Cadillac vehicles. I mean, you put a number out, you put your number on it, and you're still not right.

Unknown Speaker  1:07:51  
Correct. I mean, I once told Jim McDonald, that we were going to be a 36% company. And he looked up from the table and said to me, Warren, you guys in central office can carry down General Motors after after I leave. But not while I'm here. You know, what the response should have been? This is deep secrets revealed. Okay? The response should have been, we need to take that particular position to the UAW and have a whole different approach of negotiating what we're going to be and how we're going to operate and how we're going to navigate in the United States market over time. But no, that's not what we did. We said, we're a 40% company, no matter what happens. And you know what, Jeff, we were wrong, not just me. We were wrong. Because we weren't a 36% company. By the time we were done. We were a 25% company heading to 15.

Jeff Sterns  1:08:47  
General Motors was once a 50%. Company, or more. I mean, what was Chevrolet at its peak? 25. Yeah, okay. But the

Unknown Speaker  1:08:56  
point is, you see the problem, you see it as clear as day but the ability for an internal organization to come to grips with a problem and fix it is very difficult. And ultimately, external headwinds and external hurricanes come to bear if you can't do it internally. Ultimately, that's what happens and and that's what happened to General Motors. Okay. rear wheel drive minivans.

Jeff Sterns  1:09:24  
This is caddy. Is this the finale of cattiness? No, I

Unknown Speaker  1:09:28  
got lots of caddy, but but.

Jeff Sterns  1:09:32  
Okay, we did

Unknown Speaker  1:09:33  
all the research. We did all the research on the new GM Astro Safari that was going to come out. Okay. And we did it in Chicago, and we did it in Fort Worth. I think we went back again to Dallas, tested it. And basically there were two camps. There was the camp that came from cars. station wagons and sedans that were more acclimated to going to a front wheel drive type of entry. Uh, we had a Chrysler proxy as a choice that you could make inside of the study. And then we had the Astro rear wheel drive General Motors. We didn't call it Astro. I mean, you don't put brands or anything on the vehicles when you test them, and found that that particular type of vehicle was more acclimated to regular van customers and regular pickup customers. Right? So you had two camps, those that seem to gravitate towards a rear wheel drive, and those that seem to gravitate towards the front wheel drive. In here we have got I'm gonna sound like I'm picking on him. Here we have another presentation in front of our Carol. I was in the car. I was in the car when it happened. Okay. And we give them he says, you know, I'm very nervous about about diversions. That's what we call them diversions coming from passenger cars. Whoa, it seems a whole lot. It seems a lot of risk. Chrysler had not launched yet. Okay. No, they had not launched yet. This was a the design staff built, you know, they had suspicions of what Chrysler was doing. And they had built literally, it was pretty close to the Chrysler prototype Chrysler minivan that we went and tested. He says, you know, fell all that stuff that you're showing me that the volume would come from station wagons and cars. That seems like awful high risk. To me, it's a lot easier to understand how big van buyers and big pickup buyers may go to the Astro and the Safari. Plus, I'm going to have her I want real drive. Because my daughter likes for wheel drive. And the meeting, General Motors did the rear wheel drive. And the rest is history we got slaughtered.

Jeff Sterns  1:12:22  
And when did you get slaughtered because of the driving characteristics of rear versus front or because of the cost difference of needing to go to rear

Unknown Speaker  1:12:31  
a attractiveness of the product. We had less diversions from station wagon and sedan buyers, the volume was less. Right. So it was all about what's the potential. We ultimately built the plant in Wilmington, Delaware. And the only smart thing that we did is we capped it at, I think 175,000 units. And Chrysler went on to sell upwards of 303 50 375,000 units. Because the sedan as as the research indicated, the sedan and station wagon owners were more acclimated to that driving configuration. Remember, there was a movement towards front wheel drive cars at the time, right? Not just from General Motors from everybody, the Germans,

Jeff Sterns  1:13:23  
I always saw that as a negative. So I mean, I thought that was a movement that the manufacturers went to so they could put the whole running gear the whole power train in is one unit. For example, in that era. You know, let's talk about late 80s, early 90s I liked Crown Vic Grand Marquis Lincoln towncar rear drive. I didn't like when Lincoln Continental went to front Dr. Horace was okay. In the General Motors, cars and Chrysler were going to front drive I thought that it just felt like cost cutting to me, was I wrong?

Unknown Speaker  1:13:57  
Well, cost cutting. The ability to downsize was easier. The leg room was better, although we stuck a council in the middle of it. So we we mitigated most of the leg room advantage of the front wheel drive by putting a huge Council between between the two seats. You did not and we did not? We did not. So it was cost fuel economy downsizing was easier, etc. You could be an apologist and say that most of the decisions were in response to the cafe standards. And you would be right. But execution is everything and recognition. Every senior planner in General Motors knew that the Japanese were coming with luxury vehicles. This was not a shock.

Jeff Sterns  1:14:55  
This is a common theme throughout today's session that we're having Japanese were coming with these cars.

Unknown Speaker  1:15:02  
The theme is I mean, we one of the guys even traced it from this. They started out with motorcycles, then they made these little cars. And then they made a, you know, a Honda Civic, then they made a Honda Accord. And then they made a Honda Accord bigger. Now let's just connect all those dots and see where they're heading. They said that they're going to come and there were there was a thing called a Nissan leopard. And a Toyota crown, I think, was the name of the vehicle that were kind of like upmarket vehicles in in Japan. And the conclusion of the study was, there's just too much money by taking a standard sedan, and making a luxury vehicle out of it, you know, adding $3,000, where the cost and $10,000 were the price, there's just too much, there's just too much at stake to ignore this. And and, you know, the guys that did that that original study, were correct. I saw it firsthand when I left General General Motors and went to consult for Honda. And Honda was a different company than all the others. All the others would give you their product plan and say, tell us what the volumes ought to be. This is circa 1985, Los Angeles, California, Honda would come in and say, here's a blank piece of paper. Tell us what our upmarket vehicles should be. Tell us what the price is, and come back in a month. At the time. I didn't know that they were asking us about Acura. That's what they were asking us about. So we went off and we did our study, drastically. undershot the volume, drastic. Okay, came back. And here's how to tell you how to operate or a Honda operated. We gave our presentation. We gave it the rationale. And they said, thank you very much. You can leave now. So we never got to hear what they were thinking. But they gave us a check on the way out. Little little different than how the others paid. Right. So anyways, it was it was shortly after that when I started. I realized when I look back, that by God, those initial people in general motors who did that initial study that the luxuries are coming from the Japanese. They were right. And now I realize what Honda was asking us to work on. That was going on, I'm sure that was going on at Toyota. Toyota wasn't a customer of mine, I'm sure a Nissan was I'm sure that that was going on at Toyota and Nissan at the same time. It's the ignoring of some strategic things and the ability to react to them. That that I think is is it was missed. That's

Jeff Sterns  1:17:55  
it. Maybe I'm off track here. They knew accurate was coming. Why do you think they named it accurate? Or gave it a different division in the United States, but not in Japan?

Unknown Speaker  1:18:07  
I can only speculate. And that was because they read Alfred Sloan's book my years with General Motors. And basically he laid out the strategic plan for all automotive companies to come to the United States which was trying to get a car for every person purpose. And the best thing that you can do is to go up market and get more profit. Pontiac, Buick Oldsmobile Cadillac rather than the rather than trying to make some type of uptrend of your mainstream model. That's why I think that they came out with Acura and Infiniti and Lexus. I mean, truth Truth be told when General Motors had an Astra in Europe and they made a Vectra off of the same quote platform. They had the same cost structure in the upmarket car, as they had in the in the Astra. Only the vector costs $4,000 more. Right? So it's all of the the approach to how do we strategize our portfolio to ensure that it's recognized as a different brand with different brand characteristics that we can charge a premium for?

Jeff Sterns  1:19:32  
I was just thinking that in Japan, pay attention to American culture, you know, they like Levi's jeans and Marlboro cigarettes and MTV. And they're they're class conscious for sure. Gucci Louis Vuitton the whole Yeah, and I'm just it's just interesting to me that they don't put a luxury brand label on for the same reasons in Japan they would do here I didn't know if you had if you know

Unknown Speaker  1:19:59  
I I speculated there are some lessons here irrespective of of the management, irrespective of the company. There's some lessons here. And the only thing that I will close with that, well, Warren, what, what what makes you so right? I'm not saying I was, but I was in the car when it happened. But honestly, I'm not saying I've read every car book, some of the stuff that I've told you. I've never seen

Jeff Sterns  1:20:26  
in the biographies or the towels, or the whatever,

Unknown Speaker  1:20:30  
in the Alex Taylor books on, you know, 60 to zero, and, you know, the bankruptcy books, etc. Well, you know why? Cuz No, one, nobody wants to talk about it to its history. That's why I like the lessons learned here. In three, there was a select group in the car when it happened. And I just haven't had luck, be lucky to be one of them. I want to tell you that dip Wirthlin story. It is, I'm going to get this right. It's 1986. And Bob O'Connell was the head of planning at the time. And, and O'Connor was actually the guy who brought me back actually, the guy who brought me back to General Motors after I'd quit, and Dick Wirthlin was in town to explain to O'Connell and the rest of the planning community instead of General Motors, how to do target marketing, at a political level, meaning at a very, very local level. Okay? And, and, and use that methodology to understand how you would do ad campaigns, how you would do, dealer promotional activities, etc. So he was taking the realm of what he knew in politics, and trying to give us some examples of what to do for running the vehicle business. It's, it's about, it's about one o'clock in the afternoon. We're in a conference room, buried in the bowels of the General Motors Building somewhere. And the phone's ringing and it's continuing to ring. We didn't have cell phones then. Okay, spoiler alert. You know, Connell said with somebody pick up the damn phone. And I remember it was hanging on a wall. So one of the minions got up, wasn't me. He was a minion, got up, picked up the phone and said, Mr. Wirthlin, it's the White House. got on the phone. Remember, who was the president at the time? Ronald Reagan, the White House? Yes, sir. Yes, sir. I understand, sir. I'll be there at six o'clock. The space shuttle had just blown up. And Reagan called Wirthlin to write the speech that he gave that night on the way back on the airplane. I remember it. This phone's ringing in O'Connell, you know, who is no shy individual is Goddamnit was somebody answer that phone. It's the White House. And so he was on a plane back to Washington and that night when you sat in front of your TV set, and watched Reagan deliver that speech that speech was written by Dec worthless. And that was like being that was like being a part of history.

Unknown Speaker  1:23:43  
This has been Jeff Sterns connected through cars

Transcribed by https://otter.ai