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General Motors' road gets rockier with key executive's exit

News that Bob Lutz will leave comes right before the carmaker's survival plan is due.

February 10, 2009|Ken Bensinger

If GM is going to reinvent itself, it will have to do it without its legendary car guy.

General Motors Corp. said Monday that Bob Lutz would step down this spring as vice chairman for product development to become a senior advisor and would retire by year-end.

The unexpected news comes scarcely a week before GM is due to present a plan for its long-term survival to the federal government, raising eyebrows about the timing of the announcement. Moreover, Lutz was the company's frontman for development of the ballyhooed Chevrolet Volt, the electric car that the company has said is the key to its future.

"It is a little unusual, frankly, to see this kind of a transition at this time," said Aaron Bragman, an industry analyst at IHS Global Insight.

"He had said that he wanted to stick around to see the Volt land."

The Volt is not due out until late 2010. In an e-mail exchange, as well as on a company blog, Lutz, 77, emphasized that the Volt project was still on schedule.

"It's 100% safe and on track," he said.

Still, it's the latest in a string of recent high-level departures at the troubled automaker, including two directors, and comes as the company is racing to get its financial house in order in the face of crashing sales and mounting losses.

Both GM and Chrysler are under a Feb. 17 deadline to submit updated viability plans to the Treasury Department under terms of an agreement in which the automakers received $17.4 billion in federal loans. GM received $9.4 billion, and its lending arm, GMAC, received $6 billion.

In preparation for that deadline, the Detroit company has been trying to lower its debt load, reduce labor costs, unload brands and shrink its dealer network. GM lost $23 billion through the first nine months of last year, and its U.S. sales volume declined 23% in 2008.

On Monday, several media reports indicated that General Motors was considering taking control of about 20% of its biggest supplier, Delphi, which was spun off from the automaker a decade ago and has been unable to get financing to emerge from bankruptcy for several years.

GM would not confirm the news, saying only that it "continues to work with Delphi."

Delphi's 2005 bankruptcy filing highlighted how much the automaker still depends on its suppliers. GM has spent more than $11 billion trying to help Delphi emerge from bankruptcy.

That has not been successful, as lenders continue to refuse to extend credit to the parts maker.

By taking control of the portions of Delphi that provide parts to General Motors, the company could protect its supply chain and potentially bolster its argument to the U.S. Treasury that it needs additional financing to stay afloat.

Alternatively, said Ron Harbour, auto analyst at consulting firm Oliver Wyman, a move by GM to take over part of Delphi could be used as a bargaining chip with the United Auto Workers union.

"There's a strategy in there somewhere," he said. "They're just trying to come up with some kind of package to take to Washington and convince them they deserve help."

News of Lutz's departure comes only a week after Percy Barnevik, who sat on the GM board of directors since 1997, left the company citing personal reasons. In December, at the peak of the company's crisis, another director, Ellen Kullman, who is also president of DuPont Co., resigned. And Tony Cervone, the company's second-ranking spokesman, also left last week to take a job at United Airlines.

A GM spokesman, Tom Wilkinson, said the timing of the departures was coincidental. "There's always quite a bit of turnover," he said.

Lutz will be succeeded by Thomas Stephens, currently an executive vice president. He'll have big shoes to fill.

With more than four decades in the auto industry at General Motors, Ford, BMW and Chrysler, Lutz had a hand in creating some of the most influential vehicles of the modern automotive era, including the Dodge Viper and the Ford Explorer.

He began his career at GM in the early 1960s and returned in 2001. Since then, he's worked to develop some of the company's most successful vehicles. Among them are the Cadillac CTS, Buick Enclave, Pontiac Solstice and the redesigned Chevrolet Malibu, which was one of the few GM models to show sales growth last year.

Heralded in the industry and Wall Street as one of the company's chief assets and a product visionary in a company that has been criticized as short on vision, Lutz is adored in Detroit. A former Marine fighter pilot known for flying his own helicopters, his outspoken style has also led to a few embarrassing moments, including his pronouncement last year that global warming is "a crock."

Lutz received $6.9 million in total compensation in 2007.

Although his pay package for 2008 would not be affected by terms of the federal loans the company received, as a top executive, Lutz could face significant reductions going forward.

In a blog entry headlined "You're not rid of me yet," Lutz said he remained "as confident as ever in the future of General Motors and the continued excellence of its products."

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ken.bensinger@latimes.com

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