GM Names Design Guruto Key Post

General Motors Corp.’s new vice chairman and product czar, Robert A. Lutz, was named head of GM North America on Tuesday, signaling an attempt by the world’s largest auto maker to return product design and development to the forefront of its business.

Lutz replaces Ronald L. Zarrella, who is leaving the company after seven years to become chief executive at his old employer Bausch & Lomb Inc., the optical products maker.

Lutz, 69, was a longtime top executive at the former Chrysler Corp. who joined GM on Sept. 1 and is considered one of the industry’s leading influences on auto design; he will take on the new position of chairman of GM North America. Gary Cowger, GM’s group vice president of manufacturing and labor relations, was named president of the organization.

Analysts said the move represents a loosening of the brand management championed by Zarrella, in which brand identity and marketing were ahead of product.

“I think that having a car guy at the top of the command is the right thing,” said Lehman Bros. auto analyst Nicholas Lobaccaro. “This is a business where product is everything. I think there’s a better fit now with Lutz’s and Cowger’s background.”

Said Mike Flynn, director of the University of Michigan’s Office for the Study of Automotive Transportation: “What you have is a guy who was leading GM’s charge on brand image--that is, developing image at least somewhat independent of product--replaced with the industry’s consummate product guy. And at the same time you have a manufacturing guy working very high.”

Zarrella denied that his departure had anything to do with the arrival of Lutz, who was given far-reaching powers in product development, or with GM’s continued slide in market share.

“The reason is pretty simple: I wanted to be a CEO,” said Zarrella, 52, who worked for Bausch & Lomb from 1985 to 1994, the final two years as president and chief operating officer.

“I wasn’t going to be a CEO here at General Motors. I’ve got a boss who’s younger than I am and is good,” he said in a conference call with reporters, referring to Chief Executive G. Richard Wagoner, 48. “It was an opportunity that I’ve talked about frankly for several years, and I felt it was the right time to make the jump, primarily to have the opportunity to run my own company.”

Zarrella said he was approached about three weeks ago by Bausch & Lomb, which has been operating under an interim chief executive after Chairman William Carpenter left in the summer after disappointing earnings.

After talking with Wagoner, Zarrella went to Bausch & Lomb “with a pretty high offer of what it would take to get him, and they accepted,” said a GM source who spoke on condition of anonymity.

Zarrella had come under fire for GM’s continuing decline in U.S. market share, from about 32% in 1995 to 28.6% for the first 10 months of this year. But Lobaccaro of Lehman Bros. said the slide is not one executive’s fault.

“It’s not a matter of Zarrella being good or bad,” Lobaccaro said. “The loss of market share was a team effort over 20-some years, so he’s not responsible for it.”

In fact, Zarrella said, GM is poised to gain U.S. market share this year, the first year-over-year increase in almost three decades.

But it’s clear that the way GM hopes to continue to garner market share is changing.

“This is really back to basics in spades,” said Flynn of the University of Michigan. “It’s a real switch from a marketing-driven strategy being converted back into the traditional ‘We’re going to have the best cars and we’re going to make them better than anybody else.”’

In the past, Flynn said, “there seemed to be a feeling that product was secondary to brand image.”

Zarrella said brand management will continue at GM to a degree. But Lutz has made clear that the auto maker is unlikely to rely as heavily on consumer focus groups in its product planning.

“Ultimately, of course, we know you have to please the customer,” he said in an interview with The Times in Tokyo late last month. “But collecting all kinds of data on what customers want is no guarantee that when you assemble all that you’ve got, you get a winning product. Because the real secret is to anticipate customer wants and go way beyond what they’re expecting.”

Zarrella oversaw reorganizations at GM North America that centralized power away from the heads of each of GM’s brands and raised quality and productivity notably, as measured by leading industry surveys.

“More recently, he deserves credit for reviving industry sales after the tragic events of Sept. 11 by instituting GM’s ‘Keep America Rolling’ campaign,” Wagoner said, referring to the company’s program of interest-free and low-interest financing. On Monday, GM extended that program until Jan. 2.

Lutz worked for GM and its German subsidiary Adam Opel from 1963 to 1972; he spent three years at BMW and 12 years each at Ford Motor Co. and Chrysler Corp. until it was acquired by Daimler-Benz in 1998 to form DaimlerChrysler. He then became chief executive of battery maker Exide Technologies before rejoining GM in September.

In his new job as president of GM North America, Cowger will be responsible for day-to-day management, working on strategy.

William Waltrip, acting chief executive of Rochester, N.Y.-based Bausch & Lomb, welcomed Zarrella’s return.

“Ron’s familiarity with our base business, his global perspective and his experience managing some of the world’s best-known consumer brands will be great assets in addressing the challenges Bausch & Lomb is now facing,” he said.

GM shares rose $2.10, or 4.9%, to close at $44.99 on the New York Stock Exchange. Bausch & Lomb gained 70 cents to $32.51, also on the NYSE.