Bob Lutz is an interesting guy. I’ve interviewed him several times, and find him lively, funny, informed and caustic. In fact, as someone to talk to, the former GM vice chairman shares many qualities with another frequent interviewee, Tesla CEO Elon Musk.
The one thing Lutz hasn’t done is actually run an auto company. He was passed over—in part because of those aforementioned qualities—at GM, Chrysler and Ford, too. He's not a company guy, he's a cigar-chomping, jet-plane-piloting party of one. Lutz was the guy the CEOs picked when they wanted something done, but like John DeLorean he was such an aggressive maverick (remember the pushups he did on the Colbert Report?) that the boards looked elsewhere for the top spot.
So Musk has what Lutz always wanted—the keys to an auto company. Might there be some jealousy there? I bring all of this up because of the doomsday scenario Lutz just sketched for Tesla Motors in his Road & Track column. Tesla, he said, is “showing all the signs of a company in trouble: bleeding cash, securitized assets, and mounting inventory.” History, he said, is “filled with defunct companies with great products run by brilliant people. Unless Tesla rights its organization and products in a hurry, it'll join those ranks.”
Wait a minute, let’s go back to 2008 when Lutz was still vice chairman of GM, which was showing all the signs of a company in trouble: bleeding cash, securitized assets and mounting inventory. But since GM didn’t have a billionaire to back it up, the U.S. government stepped in instead.
It’s true Tesla has had a bad run lately. More significantly, its Model S is no longer being recommended by Consumer Reports due to an accumulation of defect reports. Musk attributes this on Twitter to a lot of early production cars in the pipeline, but it’s still a disturbing trend that sent Tesla’s stock down 10 percent. I note, however, it’s now trading at $204, when General Motors is $35 and Ford is $14.
Consumer Reports reliability survey includes a lot of early production cars. Already addressed in new cars.— Elon Musk (@elonmusk) October 21, 2015
Lutz calls Tesla’s problems “a trifecta of doom.” Since he is a production guy par excellence, I take a lot of his points as weaknesses Tesla does indeed have. I thought the analysis of what’s wrong with American automakers in his book Car Guys vs. Bean Counters to be spot on.
But a lot of what Lutz writes just seem wrong to me. The world, he says, “may be running light on buyers who will spring for a big-dollar electric vehicle that can’t make the hike from Detroit to Chicago without stopping for a long charge.” First off, Tesla drivers are routinely crossing the country on the company’s excellent—and so far free—Supercharger network. And if there were no market for big-ticket EVs, why are Audi (e-tron Concept), Porsche (Mission E), BMW (i8), Toroidion (1MW), Rimac (Concept One) and Renovo (Daytona Cobra) building them?
Mercedes-Benz is reportedly building one, too. According to Germany’s Auto Motor und Sport, Benz development head Thomas Weber, the head of development at Mercedes-Benz, said the company is working on a “concept for a highly attractive electric vehicle with a range of 400 to 500 kilometers (228 to 311 miles).”
It’s not hard to understand why all this frantic development is happening—good business demands it. It’s not about the money Tesla isn’t making now, it’s about the money it might make in the future (particularly when its mass-market Model 3 comes online). Let’s digress here a bit. This is from Gas2.org:
Professor Ferdinand Dudenhoeffer, director of the Center for Automotive Research (CAR) at the University of Duisburg-Essen, says wealthy people who have previously bought the flagship Mercedes S-Class are turning now to the Tesla Model S. In a report called ‘Tesla asserts itself in the luxury class,’ Dudenhoeffer says that even in markets like Germany and Switzerland, where there are no subsidies for electric vehicles, the Tesla Model S is grabbing sales from the likes of the Mercedes S class, BMW 7 Series, and Audi A8. ‘Tesla can boast real innovation and customers with big money are trying it,’ he says.
Lutz thinks that Musk should go into the business of cutting costs, but that’s hardly this big gambler’s style. He’s all about making the product so crazily great you just have to have it, and putting Hyundai door handles on the Model S might cut into that a bit.
Here’s Lutz’ formula for Tesla:
I would seriously consider an entry-level model with a cheaper, range-extended hybrid driveline. Something with a much smaller battery that also looks great and drives great. Something that's electric most of the time, say 50 or 60 miles, but can carry on under gasoline power past that. Would an internal-combustion engine dilute the Tesla brand? Maybe, but everyone said Porsche could never build a front-engine car, and look how that turned out.
Oh c’mon, Lutz, you are totally describing the Chevrolet Volt. Your green car at General Motors just happens to have, hmmm, 50 miles of electric range, backed up by a gas engine.
I note that in 2014, Tesla sold 17,300 Model S cars (estimated), and GM sold 18,805 Volts. Customer demand for the Volt is not exactly crushing that for the Model S.
Here are Musk and Lutz together on the Charlie Rose Show. Lutz denies that global warming is real; Musk thinks we're running an experiment with our one and only earth: