and the other Detroit Three automakers ignored internal research indicating that consumers value fuel economy, a new University of Michigan study charges.
Yet today, increasing fuel economy by 30% to 50% would increase the three companies' profits by roughly $3 billion per year and increase sales by the equivalent of two large assembly plants, the study concludes, based on domestic 2016 vehicle sales of 15.3 million.
Rapid turnarounds are necessary, but fortunately for GM, "Chapter 11 offers a great window of opportunity for major change," says study co-author Rob Kleinbaum, an industry consultant who worked13 years at GM. Chapter 11 enables companies "to compress the pain and take advantage of the fact that in a crisis you can do things not possible in normal times," he says. A GM spokesman says the company has already moved to take advantage of consumer interest in fuel efficient vehicles.
Both Kleinbaum and co-author Walter McManus, director of automotive analysis at the UM Michigan Transportation Center, have first-hand experience with the effort to ignore information at GM, where the former was director of consumer research in the 1980s and the latter spent nine years as an economist.
Kleinbaum says studies showing that consumers valued fuel economy "were systematically fought and discounted and ignored -- I saw that very directly." Adds McManus: "It was standard practice to discount the market research. I personally did it. I was part of the group that thought that we knew better, that the economists knew better than the customers." That approach was "widespread" in the domestic industry, says McManus, who was a J.D. Power analyst after leaving GM.
In the study, the authors write that "there is a widespread consensus in Detroit, both within the industry andthe media, that the industry is being forced to build more fuel-efficient vehicles by a government thatplaces more importance on ideology than the market."
In reality, "GM conducted internal research for decades that found customers value fuel economy far more than the company's financial calculations assumed," they write. Such research was typically discounted in sales estimates, so that " if the research said the sales gain (from fuel efficiencies) would be 10%, the number used to do financial calculations was 3% ... The belief that fuel economy was not "worth it" became ingrained into the culture of the company (and) institutionalized in decision making."
GM spokesman Tom Wilkinson says today's GM is far different than the one described in the UM study.
"The kind of culture change the authors advocate has already happened, and this seems to have escaped their notice," he says. "A look at the EPA Fuel Economy Web site shows that, by segment, GM vehicles are now as fuel efficient, and often more fuel efficient, than those from other foreign or domestic competitors."
GM continues to move ahead with energy-saving technologies, including extended-range electric vehicles like the Chevy Volt, and the company supports new national fuel economy standards, Wilkinson says.
Meanwhile, although successful turnarounds typically require major management changes, Kleinbaum stopped short of saying that GM CEO Fritz Henderson must go. "Fritz could well be the right guy," he says. "(But) if he keeps himself surrounded with the same people he's always kept himself surrounded with, they're not going to make it."
He calls for changes in the top 50 to 100 people in GM North America, and suggests that new leadership could come from three places: lower middle management, where "you will find shockingly intelligent and gutsy people;" from GM operations in Asia Pacific and Latin America, where managers are "very results oriented (and) fast to make decisions," and from outside the company.
When Alan Mullaly joined
as CEO in 2006, "he made significant changes, at least at the top: we think the changes need to go deeper," Kleinbaum says. At
, he says, new CEO Sergio Marchionne is making changes not just in top management but also in middle management.