Why is legendary auto executive Bob Lutz so happy after placing seventh in a race he organized against journalists, bloggers and customers?
Because even though he didn't win, the winning car was the car of his choice. A former GM performance division executive who drove a Cadillac CTS-V claimed the top honors at Thursday's race at a Monticello, New York race track. The CTS-V, with a 6.2-liter, supercharged V-8 rated 556- horsepower engine, is the same model GM vehicle that Lutz drove in the competition.
In fact, seven of the top 10 cars on the track were Cadillac CTS-Vs. Of course some of the CTS-V's direct competitors in the U.S. market like Jaguar, BMW and Mercedes Benz opted out of the competition, but it was still a pretty good marketing plug for General Motors' luxury brand.
Hoping to build on an aggressive two months of marketing, struggling U.S. auto maker General Motors announced Thursday that it is extending its money-back guarantee program, which is part of the company's "May the Best Car Win" campaign. The program, which offers unsatisfied customers a refund within 31 to 60 days of purchase, was scheduled to end Nov. 30. Instead, GM is extending the offer until Jan. 4, 2010. And Lutz couldn't be happier with the campaign's early results.
"It's working and it's costing us nothing," Lutz told ABC News shortly after the race. "It's having a very very favorable effect on customer's consideration. It's a very strong statement of the confidence that we're having on our products."
General Motors, which launched the campaign as its first major marketing effort after emerging from bankruptcy, says it has sold 142,000 cars under the special offer. So far, 15 cars have been returned with another 49 cars in the process of being returned.
"When you look at the composition of the 15 cars almost all of them are customer error," Lutz says. "They bought a Camero and then figured, 'oh hell, this isn't what I needed,' and they bring it back and get something with four doors. We had the case where a guy wanted a manual-transmission Corvette, and he had a difficult commute, and it took him about two weeks to figure out he really should have bought an automatic transmission. So he brought it back and we swamped it out for him," he said.
The automaker, which has received $50 billion in taxpayer loans, is hoping to reverse its fortunes and stem the slide of its sales and market share in the United States. It will try to boost sales with a second round of advertisements in December featuring hood-to-hood comparisons with competitors. The ads will emphasize the attributes of GM cars versus the competition. "We're going to eliminate this perception gap between what people think GM vehicles are like and what they are naturally like," said Lutz.
There are signs that GM's marketing campaign is making a difference. CNW Research, an automotive marketing research firm, has said the "Best Car" program has been successful by spiking interest in GM products far beyond any recent previous efforts. Also, Edmunds.com forecasts a strong October for General Motors, saying the company will achieve its highest market share year to year at 21. 5 percent, up from 20.9 percent in September. Earlier this year, GM's market share had dropped to a record low 19 percent.
Lutz would not speculate on October sales figures, which are due out next week, but did say GM dealers have been telling him they're having a hard time meeting customer demand. "Several dealers have told me that 'I've seen something I've never seen in my whole time as a GM dealer…a list posted in my office of customers waiting for their cars to come in," he said adding, "I do consider that a highly, highly encouraging sign."
Lutz says the automaker expects the U.S. economy to recover and that Americans will begin buying cars in larger numbers. He predicted the annualized sales rate for vehicles in the U.S. will climb to more than 11 million cars in 2010 from around 10 million in 2009. He was hesitant to predict a complete gain for General Motors over its competitors in the market, but said he doesn't expect the company to suffer a share loss. Lutz said that it would be pretty remarkable for the company to maintain its current market share numbers given that under its bankruptcy the company shed four brands: Pontiac, Saturn, Saab and Hummer. "That's a lot of cars to make up in terms of share, and we think we can do that," said Lutz.
General Motors came under criticism from some auto insiders after it announced North American production next year will increase by 45 percent. Some analysts said it was a sign the new GM was acting like the old bloated GM. When an automaker builds more vehicles than consumers want, it must discount the vehicles, slashing profits. That's something experts say was damaging to the old GM.
Lutz said that when the company announced its production increase it was accounting for a strong recovery and cautioned that the 45 percent production figure is not official. "We're not going to let ourselves be dictated by production numbers that we signed up for and then we push products into the market and then the dealers have to incentive them. We're just not going to do that anymore."
Lutz admitted GM has work to do in order to prove to customers that the quality of its cars have improved. Consumer Reports recently announced in its annual car reliability survey that Ford Motor Co. was the only domestic auto maker with world-class reliability. GM, on the other hand, received mixed results in reliability, according to the survey.
"We can't rest until GM is as good as the world's best – and we are in fact doing that," said Lutz. He pointed to the company's 60-day money back guarantee and five-year 100,000 mile powertrain warranty as a sign the company is confident consumer will be satisfied with GM vehicles if they give them a shot. "I would just look anybody in the eye and say, 'hey buy our cars with confidence,"' he said.
Lutz, who is 77 years old, tried to find humor in his seventh place finish in Thursday's race. "It was pretty good for a guy my age." Lutz says he does not blame some of GM's rivals for steering clear of the competition. "If I were BMW or Mercedes with the amount of brand equity that they have I wouldn't want my cars going to an event that the competitor controls and you don't know what the rules are and you don't know whether the rules are going to be set in favor of the competitor organizing the event," Lutz joked.
A former military fighter pilot, Lutz is known for his flashy antics. He will fly a helicopter to company events and loves racing the company's new products. He described Thursday's event as modest compared to some of the company's infamously lavish media events. "It was an inexpensive lunch, no fancy catering. No gifts," he said adding, "We've got to figure out a way to do more things like this because it connects with customers in a big way."