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2002 Management Briefing Seminars
Jim Queen
(Opening video) Never in the history of the motorized vehicle have customers been able to choose from so many good products and technologies. And while there is an abundant of product for the consumer to choose from, the landscape for the manufacturers has changed dramatically. First, let's take a brief look at the state of the industry. Prior to 1996, price retention was attainable - we added up our costs, tacked on a certain percent of profit margin and that determined the price of the vehicle. That changed as competition increased, and incentives became an important tool for retaining market share. The industry has gotten much tougher to compete in, and we are no longer able to retain pricing. This has put pressure on net margin, which affects our ability to invest in new products and provides a return to our shareholders. Net margin is calculated by subtracting total cost from revenue, then dividing by revenue. The only way to improve net margin is to improve revenue (which we have not been able to because of pricing pressures) or reducing cost. This is why there has been - and will continue to be - such pressure on reducing cost. The sweet spot of balancing success between cost, pricing and investment used to be a lot larger. As we have seen in recent years that sweet spot has shrunk considerably and it doesn't take long to be in a negative position. Here it is in a nutshell . . .the financial folks hate when I simplify this. Without getting the cost side of the business under control and understanding the competitive landscape you'll never hit that sweet spot. Net margin is important because it determines how much money we have to invest in new products, facilities and equipment. As pressure mounts on revenue, the only way to attain desirable margin is to reduce cost. That's why we have been - and will continue to be - focused on reducing cost. This pressure will not go away. Either we continue to reduce cost as we go, or we will be forced into step function cost reductions. That is much more painful. Under Rick Wagoner's leadership we have been very focused on improving the cost structure and at the same time improving the "basics of the business"... Our quality, productivity and the desirability of our products An all hands on deck effort by the entire company and our supplier partners have started some terrific trends... J.D. Power: GM had 12 top-three performing vehicles, including four that were ranked highest in their segments, and three GM assembly plants were named best in initial quality for North America, according to the J.D. Power and Associates 2002 Initial Quality StudySM The industry is continuing to improve. Our trend over the last five years is proof of our ability to get it done right. Harbour: GM outpaced all manufacturers with an overall productivity improvement of 4.5 percent, (ad lib: engineering productivity) GM's assembly operations were the most improved among multi-plant automakers with a 6.8 percent improvement between 2000 and 2001. and the Oshawa 1 car plant in Ontario, Canada, led all North American assembly plants in productivity, according to "The Harbour Report North America 2002." While these basic, but critical measures of our business are showing improvement, in order to increase revenues, you need three things: Product . . .Product . . .Product This business is fueled by great product. As an engineer I love being hands on with the product, and I want to build products that people just "gotta have." But as a businessman, I understand the importance of the cost side of the business. I've had over 28 sessions reaching all of our engineering team members. We have hammered the basics of the business at every opportunity, consistently driving the point home and helping employees understand the position and constant external pressures that drive the business. On the revenue side, we need product that people "gotta have" Product is fun... and boy do we have a ton of fun coming! In fact GM will turn over approximately 43% of its portfolio for 2003 model year impacting 22 vehicle line assembly plants I don't have time to review all of the new products and significant product changes, but to name just a few we have: Major changes to the award winning full-size truck program including new electrical architecture, interior and exterior appearances and features Significant changes to the Cavalier and Sunfire including the addition of the Ecotec 2.2-liter which you will see in the future in a variety of vehicles with a variety of power levels. . . The Corvette celebrates 50 years of an American Sports car with a special edition that includes the fastest active handling suspension in the industry. We're bringing back the famed GTO name with a truly exceptional car that evokes all the passion the GTO originally brought to enthusiasts in a modern interpretation. Some other exciting products going to hit showrooms in the near future include: All-New Saturn ION Sedan and Quad Coupe, Designed to Re-Energize Small-Car Segment. Blending innovative thinking, segment-leading features and unprecedented personalization opportunities, the 2003 Saturn ION sedan and quad coupe deliver excitement and value uniquely tuned to the needs of small-car buyers. The bold new era of Cadillac continues with a new luxury roadster: XLR, this two-seat, retractable hardtop convertible, brings a fresh perspective to the upper echelon of luxury roadsters. This newest addition to the Cadillac family, the SRX, will demonstrate that we‚re unafraid to lead in styling, performance and functionality. The SRX will be another boldly designed Cadillac featuring unique product innovations that will attract new customers. In order to maintain truck leadership. The revolutionary GMC Envoy XUV has dramatically raised the bar of sport utility functionality with the with the next generation midgate system with power back window, unique power-operated roof panel, and 2 way tail-gate. Buick Rainier will be the newest addition to GM's family of successful midsize SUVs, establishing Buick as a force in the important midsize truck segment. Rainier will come with GM's award-winning Vortec 4200 4.2L I6. In addition, it will be the only short-wheelbase GM midsize SUV to offer the aluminum-block Vortec 5300 5.3L V8. The production-intent design for the Chevy SSR mirrors the theme set forth by the concept vehicle - a celebration of Chevy heritage... American, uniquely nostalgic yet contemporary, expressed in a roadster featuring pickup truck-style versatility. The mid-size truck segment is extremely important and highly competitive, the Chevrolet Colorado and GMC Canyon will dramatically enhance our competitiveness in this important segment. We will be bringing some additional excitement via our newly formed Performance Division, look to SEMA this year for us to start to tip our hand! (ad lib here) We will continue to exercise our global portfolio to bring the right products to market with the right business case, like the GTO. We have built a strong foundation of functional, flexible architectures: Trucks Full Size Trucks - Widest range of products off common architecture Range from light-duty pickup to heavy-duty pickup, Full-size utilities, Avalanche and HUMMER H2 and from commercial to luxury Mid Size Trucks - New models coming off highly successful mid size architecture (Extended version of TrailBlazer/Envoy) Saturn Vue Aztek, Rendevous Small truck-- Just announced Chevy Colorado and GMC Canyon Cars Sigma architecture: CTS, SRX Delta architecture: Saturn Ion Epsilon architecture: Future Malibu, Grand Am Turning the portfolio also allows us to introduce the other side of the fun house . . .new technologies. Because capital is so precious it is imperative that we focus on bringing relevant, functional and flexible technologies that improve peoples lives. Chassis Systems. We are continuing the development and sales of intelligent chassis controls in cars and trucks. For 2003 we are spreading these advanced technologies throughout the portfolio including: The rollout of Vehicle Stability Enhancement Systems (VSES) into full size utilities. Extending four wheel steering to other Full Size Truck pickups and Full-size Utilities Extending Magnetic Ride to Corvette Developed at GM Research labs and done in conjunction w/Delphi, magnetic ride control is a complete, stand alone suspension control system that uses magneto-rheological fluid based actuators, four wheel-to-body displacement sensors, and an onboard computer to provide real-time (1 millisecond) continuous control of vehicle suspensions damping. 2002 Cadillac STS - first with this system Will be standard on 50th anniversary Corvette (2003 model year) Optional on other Corvette models Telematics / Electronics We're changing the way the driver and the vehicle interact and improving the driving experience XM satellite radio, one of the fastest technology rollouts ever at GM. Less than a year ago, In November of last year - the same time that XM Satellite Radio completed its national launch - GM became the first auto manufacturer to offer XM as a factory-installed option. This fall, 25 GM cars, trucks and crossovers will offer XM when the 2003 model year begins. With OnStar, we will begin adding an advanced automatic crash notification (AACN) system. Currently, OnStar is automatically notified within seconds when a subscriber's air bag deploys. The next-generation GM automatic crash notification system linked with OnStar will assist even more customers by taking this potentially life-saving service beyond air bag deployments. Using a collection of sensors, the system will automatically call for help if the vehicle is involved in a moderate to severe frontal, rear or side-impact crash, regardless of air bag deployment. Also, the new system provides crash severity information, to quickly determine the appropriate combination of emergency personnel, equipment and medical facilities needed. With this new technology, we have a tremendous opportunity to save more lives. We introduced entertainment systems, first with our midsize vans and now we offer a DVD entertainment system in our new midsize utilities. We will continue to expand this so that more and more kids don't need to ask "are we there yet?!" The best products start with the best processes Hydroforming: Over the last decade, GM has invested in this new technology, and has earned some 25 hydroforming patents. Today, other automakers, and even a motorcycle manufacturer, is following suit. Depending on the application, hydroforming can save weight, improve fuel economy, minimize waste and result in stronger, stiffer components that require less welding, and provides a vast improvement in dimensional accuracy. GM was the first OEM with hydroformed frame rails for cars, trucks, and SUVs - and we have the most applications on road today. Math-based Tools The use of math-based tools allows us to be more innovative, increase quality and reduce development time HUMMER H2 - developed under 17 months Chevy SSR TrailBlazer / Envoy / Bravada In order to succeed at bringing to market products people gotta have, they have to look great . . .both inside and out We have been working hard to bring as many of these concept to reality . . .and keep the design that captures the imaginations of audiences world-wide. Interiors, however, is one area we understand needs work. We have been successful at getting at the "hard parts" of the business with manufacturing quality, etc., but we are getting after the softer side of the quality business with equal gusto Working with our key suppliers and having better alignment between design and engineering, we have already started to see improvements in perceived quality, and we know customers are going to appreciate them. GM has got a lot of product hitting the showroom... and as I said before, product is what makes this business great Hitting the sweet spot of success I mentioned earlier is becoming increasingly more difficult . . .You cannot take your eye off of it for a fraction of a second. GM has been working hard to control costs, focus on the right products and mix and bring product gotta have to the showroom . . We are ready to light the afterburner and get this ship moving! Faster and Better Thank you. |