How Quality Saved Cadillac

These days, as he reviews ten-day sales reports, John Grettenberger can afford to smile. In fact, he fairly beams as he reads reviews of Cadillac products in car enthusiast magazines.

These days, as he reviews ten-day sales reports, John Grettenberger can afford to smile. In fact, he fairly beams as he reads reviews of Cadillac products in car enthusiast magazines.And why not? Sales are up. Dealer profits are climbing. Magazine reviews are glowing. Grettenberger’s office in Detroit is filling up with awards-from the Malcolm Baldrige National Quality Award to the Motor Trend Car of the Year award.

Finally, after nine years at Cadillac’s helm, an unusually long time for an auto executive to remain in one post, Grettenberger is enjoying the fruits of his-and his team’s-labors. But the picture wasn’t always so rosy.

Almost immediately after taking over as general manager of Cadillac in January 1984, Grettenberger smelled trouble.

He took Cadillac’s future cars on a test drive and vividly remembers thinking the upcoming 1985 DeVille and Fleetwood and the 1986 Eldorado and Seville were too small and underpowered for what he remembered of traditional Cadillac cars. Cadillac, after all, had built a heritage of quality, power and engineering excellence.

“I thought maybe I’d been out of the country too long to know what people wanted,” Grettenberger recalls, but his gut feelings on that first test drive later proved correct. The cars indeed were too small and anemic for the American luxury car driver. They looked too much like their Oldsmobile and Buick counterparts. And they weren’t selling. Analysts estimate that the drop in sales in the Seville and Eldorado alone cost General Motors $500 million in gross profits annually.

“One year after the 1986 Eldorado and Seville were introduced, neither were accepted in the market,” says Grettenberger. “And it didn’t take us long to find that out.”

TROUBLE ALREADY BREWING

Wrong predictions by General Motors’ experts and the failure of Cadillac’s new cars only compounded problems already brewing at Cadillac before Grettenberger’s arrival.

Cadillac had been founded by Henry M. Leland, who was religiously fastidious about accuracy and quality. Now Cadillac, the first company ever to win the coveted Dewar Trophy twice for technical achievement, and the developer of the highly acclaimed V-16 engine, suffered from power train ailments. Cadillac, in fact, was overwhelmed with quality and technical problems.

General Motors’ troublesome diesel engines triggered class action lawsuits that would last for years. Another engine which ran on four, six or eight cylinders proved unreliable. Likewise, it resulted in numerous lawsuits.

Quality and technical problems were compounded by the opening of a spanking new plant in Detroit, known as the Detroit-Hamtramck plant. Built as a technological showcase, the plant was a high-tech nightmare. Unproven gadgetry didn’t work and had to be taken out. The plant was down more often than it was in operation. An independent study in 1989 rated it dead last among 40 North American plants in productivity. Quality was abominable.

More important, Cadillac seemed to have lost its way. It appeared that the company built on quality had forgotten what had made it great in the first place.

For example, an entry-level Cimarron, introduced in 1982, was viewed as nothing more than a fancy Chevrolet. General Motors’ efforts at economies of scale resulted in cars that looked alike — from Buick to Oldsmobile to Cadillac.

LUXURY CARS BOOM, CADILLAC SLUMPS

While Cadillac struggled, the U.S. luxury car market exploded, nearly doubling in size during the 1980s.

Cadillac’s sales and market share slumped below 1983 levels. Its share of the luxury car market, which 20 years earlier had been 60 percent, plummeted from 40 percent in 1980 to 27 percent in 1990, according to Ward’s Automotive Reports.

Meanwhile European imports were enjoying their best days ever in the United States. Ford Motor Co.’s Lincoln division benefited from Cadillac’s decline. In 1983, Lincoln sold only one-third as many cars as Cadillac. By 1989, Lincoln sold three cars to every four sold by Cadillac.

To rub salt in the wound, Lincoln took shots at Cadillac in its advertising. An ad forever engraved in Grettenberger’s memory featured a wealthy couple asking a valet to fetch their Cadillac. The valet, instead, drove up a Buick, then an Oldsmobile and finally a Cadillac. In the meantime, a second couple quickly received their distinctive Lincoln.

CADILLAC PULLS OUT THE STOPS

The decline of Cadillac prompted General Motors, which was suffering huge financial losses from Cadillac’s poor showing, to pull out all of the stops.

In those darkest moments in 1987, Grettenberger, who must be credited with incredible foresight, saw the seeds of a turnaround sown.

“It’s amazing what a significant emotional experience will do for you,” he recalls. “We made a commitment then to put things in motion to change. Some of it would be very near term and done with great intensity. Other strategies were long term but would really make the difference.”

Grettenberger cites four major actions, which went hand-in-hand, that led to the turnaround: a cultural change of the entire organization; the institution of a teamwork approach in designing, engineering and building cars; constancy of purpose; and focus on the customer.

THE CULTURAL CHANGE

Senior executives realized their style of management needed to change.

“We recognized that unless we involved the whole organization in decision making, we would never get their full commitment,” recalls Grettenberger. “We were facing trouble, and we recognized we needed to change or we were going to continue to spiral downward.

“We went from a top-down management style to an open, team-based system. We started at the top and allowed it to cascade down through the organization,” says Grettenberger.

Admits the graduate of the University of Michigan and MIT Sloan School: “It was difficult. I was taught management by objectives. You set objectives and you follow up to see that everyone meets those objectives. That philosophy got us a long way. But we reached a point where suddenly we weren’t receiving the right level of input, dedication and cooperation from the work force.”

CONSTANCY OF PURPOSE

At the same time, Cadillac management adopted the teachings of W. Edwards Deming. The first of Deming’s 14 principles, outlined in his 1986 book Out of the Crisis, is “constancy of purpose toward improvement of product and service, with the aim to become competitive and to stay in business, and to provide jobs.”

“We believe in that strongly,” says Grettenberger. “You must have consistency. You can’t vacillate from your approach even under periods of stress or in times of bad news. Consistency sends the signal that this is real and it is not going away. Everyone, including the boss, supports the philosophy.”

Grettenberger pulls from his briefcase a slick brochure that lists Deming’s 14 principles. Entitled “Aligning The Arrows,” it also states Cadillac’s vision, mission, beliefs and values and business objectives, as well as strategies and who is responsible for seeing the strategies through to fruition.

“Today we get tremendous input from the plant floor to the lowest levels of the organization through this,” says Grettenberger. “Our business planning process at Cadillac is dedicated to the overall strategic objectives of the division, which have been set primarily by the senior executives but with input from the rest of the organization. Once the objectives are set, the employees develop their own goals and action plans to support them.”

DEALERS INCLUDED IN REVOLUTION

The change in culture also included Cadillac’s vast dealer network. It is often difficult for a car company to accomplish change in its retail distribution. Dealers are strong independent businessmen, who, as long as they live up to the limited requirements of the franchise agreement, can do what they want. The relationship between dealers and a car company traditionally has been adversarial.

As Cadillac experienced a significant emotional experience so, too, did its dealers. As the division saw sales and market share drop, dealers also saw sales and profits drop.

“It didn’t take much for the majority of dealers to recognize that unless they did something to turn things around at their own places of business, they would have a difficult time staying in business at all, much less managing to grow and prosper,” says Grettenberger.

“The relationship between Cadillac and its dealers changed. We grew to develop a sense of trust and mutual dependence that didn’t exist before,” says Grettenberger. “That enabled us to do things with dealers that might seem difficult to accomplish. Their willingness and participation, and in many cases, their leadership in efforts have made us go from an adversarial relationship to a collaborative effort.”

Cadillac now has a number of standing committees upon which dealers serve. Dealers help make decisions regarding marketing, advertising, merchandising and future products.

To improve quality, Cadillac established a couple of dozen “Listening Post” dealerships. The service managers of those dealerships immediately report product problems to Cadillac. A toll-free technical line, staffed with engineers, helps dealership mechanics.

FOCUS ON THE CUSTOMER

Cadillac made focus on the customer its top priority. Its very existence depended upon this focus.

Cadillac recognized it would cease to exist if it didn’t snare a new generation of luxury car owners. The median age of the Cadillac buyer hovered at 55 in 1987. Despite a drop from the past, it still remained higher than the median age of 48 for buyers of Mercedes-Benz and Toyota’s Lexus, and 40 for BMW buyers. Cadillac executives knew legions of affluent baby boomers would come of luxury-car-buying age in the 1990s.

Cadillac developed a number of concept cars to test out new ideas on auto show participants. They conducted thousands of clinics on the cars.

It did the same with the 1992 Seville and Eldorado; the Seville design was a cinch for designers. They got it on the first try. But the Eldorado was more difficult. Over the course of a year and a half, designers came up with nearly a half-dozen versions. They failed miserably in consumer clinics. Clinic participants didn’t like the design, thought they were too small and didn’t recognize them as Cadillacs.

Their failure at the clinics led Cadillac management to make the unheard of decision to postpone introduction of the cars from 1991 to 1992.

Early on, Grettenberger had issued an edict: the next-generation Eldorado and Seville would be researched thoroughly. He had studied the consumer clinic data on the 1986 versions. Customer rejection of the cars could have been predicted based on the clinic results. But no action was taken to ward off the consequences.

“We committed ourselves to never making that mistake again,” says Grettenberger. “We would fully research a new product and abide by what the research told us.”

By the time the 1992 Eldorado and Seville went on sale in fall 1991, more than 8,000 people had participated in clinics of some sort. More than 60 percent of those people said they would consider buying one of the cars, the highest purchase consideration ever obtained on a Cadillac sent to clinics and a level required by Grettenberger to move ahead.

PRODUCT REVAMPING ORDERED

As soon as it became evident that the 1986 Eldorado and Seville, along with the DeVille and Fleetwood were flops, Grettenberger ordered stopgap measures. Cash-strapped General Motors diverted the bulk of its product development funds to Cadillac.

Cadillac dug deep into its roots for what had made Cadillac great in its early years.

From Cadillac’s beginnings at the turn of the century, the cornerstone of its success was in its technical excellence. Cadillac was the first American car company to win the prestigious Dewar Trophy. Cadillac introduced numerous engineering firsts, including the electric starter, water cooled V-8 engines, interchangeable parts and sunroofs.

Its chief in the early days, Henry M. Leland, was a precision parts maker. He instituted new and innovative equipment and methods to build quality cars.

Cadillac became synonymous with power. It introduced the world’s first V-16 engine in a passenger car, still hailed as one of the most significant engineering innovations in automotive history. After World War II, Cadillac initiated the 1950s-era horsepower race.

Cadillac also became known for style. In 1910, Cadillac introduced the first closed body car to the U.S. market, providing clean, all-weather comfort. In the 1920s, Cadillac focused its attention on the styling of its body work. It lured a young stylist at a Hollywood, California, dealership named Harley Earl to Detroit to work in its design studio. Earl’s first car was the 1927 LaSalle and his second the low-slung, handsome 1927 Cadillac. Earl, who later became head of all General Motors design, introduced tail fins on Cadillacs, a Cadillac trademark.

Cadillac put some of those famous styling cues back into its 1989 DeVille and Fleetwood models, making them more distinctive from their Oldsmobile and Buick counterparts. The cars were lengthened by nine inches. Likewise, the Eldorado took on styling reminiscent of Cadillac classics.

Cadillac steadily hiked the power of its V-8 engine, the engine used in most of its products. When the Eldorado and Seville were introduced as 1986 models, the engine put out a mere 135 horsepower. By 1991, horsepower was kicked up to 200.

Recognizing it was losing affluent baby boomers to the Japanese and European imports, Cadillac introduced two families of vehicles based on models already in its line. The Eldorado Touring Coupe and Seville Touring Sedan were given more performance-oriented characteristics while the base versions remained more traditional. The sales numbers for the performance models were small but the cars boosted Cadillac’s image. The 1991 STS, particularly, received favorable reviews from automotive magazines.

ADOPTING A TEAM APPROACH

All the restyling and engineering were accomplished in record time due to the cultural revolution that was taking place and the emphasis on teamwork.

In fact, Grettenberger is uncomfortable with interviews that focus on him. “What we have accomplished has been a team effort,” he reminds interviewers repeatedly.

In the past, the design studio would design a car. The design was passed on to product engineers. They would pass on their drawings to manufacturing engineers, who would tell the assembly plant how to build the car.

The problem was that the designers and product engineers received no feedback regarding how their work impacted on the plant. A simple design change, for example, might make it easier to assemble the car, cost less and improve quality.

Cadillac instituted what is known in the auto industry as “simultaneous engineering.” Product teams are assigned to develop a specific car. All disciplines, including factory line workers, are represented on the teams. Now there is more give and take at the beginning of the development to make the product easier and more efficient to build with high quality built in.

“Before the formation of teams, employees executed orders that came from the top,” says Grettenberger. “We started to see suggestions for improving efficiencies from people who were never asked before. We let everyone know about those successes and those who initiated and executed them. They became examples to the rest of the organization.”

Grettenberger recalls one of the biggest celebrations was for the accomplishments of the team working on the underbody of the 1989 DeVille. The team significantly reduced the number of pieces needed to build the underbody. The change made the underbody easier to build, lighter yet stronger, lower in cost and higher in quality.

“We celebrated that one all over the place,” recalls Grettenberger.

TURNING POINT

The speedy development of its new products was also made possible by a reorganization of Cadillac operations. This restructuring is most often cited as the turning point.

In 1987, Cadillac re-assumed responsibility for most of its own engineering and manufacturing. Under General Motors’ corporate reorganization in 1984, Cadillac lost control of engineering and manufacturing. It became strictly a marketing division, under the same umbrella group as Buick and Oldsmobile. That structure provided Cadillac with little say in product development.

In 1987, the Detroit Product Team, which had been responsible for manufacturing and engineering most of Cadillac’s cars, was folded into Cadillac. In essence, Cadillac became a self-contained car company, responsible for engineering, manufacturing and marketing of most of its cars.

Grettenberger took the restructuring a step further. In the toughest sales job to management of his career, Grettenberger convinced General Motors management to limit the Detroit-Hamtramck plant to Cadillac products. The move out of Oldsmobiles and Buicks from the plant and the move in of Cadillac cars took place after the first of the year.

“This has great benefits to us,” says Grettenberger. “It’s a rallying cry for the people.”

HINTS OF A TURNAROUND

While Cadillac insiders could see change taking place, it took time for public perception to catch up. It began in 1989 with the introduction of the new DeVille.

“The car gained wider appeal than its predecessors,” says Grettenberger. “We were getting more younger, better educated buyers and a better mix of men and women.” Cadillac sales in the all-important but extremely difficult California market began to increase.

The car enthusiast magazines, which had ridiculed Cadillac in the 1980s, were more favorably impressed with these new products. Cadillac gave them glimpses of future products, and they liked what they saw.

“They began writing about something happening at Cadillac that readers should be aware of,” says Grettenberger.

In 1989, Cadillac sales and market edged up to their highest level since 1986. While sales dipped slightly in 1990, Cadillac’s share of the car market amounted to 2.8 percent in 1990, its highest level since 1984. The improved sales and market share came as Toyota and Nissan were introducing Lexus and Infiniti, their highly touted luxury entries.

Of all domestic makes, Cadillac has enjoyed the consistently best ratings in customer satisfaction surveys done over the past few years by J.D. Power & Associates, a market research firm in Agoura Hills, California. Those, too, have improved. In 1985, Cadillac ranked 16th in the customer satisfaction survey. In 1987, it broke into the top 10 where it has been ever since.

THE BALDRIGE AWARD

In 1989 Cadillac competed for the Malcolm Baldrige National Quality Award from the U.S. Department of Labor. Named after the late Secretary of Commerce, the award examines the quality processes a company employs. Though Cadillac made it to the point of on-site visits by examiners, it didn’t win.

“It was a highly motivational thing to go through. The organization had a banner to get behind and run with,” says Grettenberger, pulling from his desk drawer the inch-thick application Cadillac filed.

Cadillac debated about trying again. “If we had lost a second time, I was afraid it would have been a real downer to our people,” says Grettenberger.

The vote was put to the people of Cadillac and the answer was an overwhelming “go for it.”

” ‘We’re going to win,’ they told us,” Grettenberger recalls.

In 1990, Cadillac, indeed, won. Cadillac was the first car company to receive the Malcolm Baldrige National Quality Award from the U.S. Department of Commerce.

“The process of competing did as much for us as anything from the public relations and advertising side,” says Grettenberger. “It’s an amazing exercise that forces you to look at things critically that you normally wouldn’t to that degree. You have to look at the way you organize your business. You must explain to the examiners how and why you do things the way you do. It was a strong motivator for our people.”

The pride of winning is still evident today. Grettenberger says, “Our employees are proud we are the first and only auto manufacturer to win. It has had an effect on our suppliers and our dealers, who use it as a sales tool. Our win has prompted our suppliers to apply for the award, too.”

Cadillac officials spent the year and half after the Baldrige award making presentations to business, industry, educational institutions, government agencies and the military on what they did. Teams of speakers visited 500 locations. Cadillac estimates they have told their story to more than 100,000 people.

“That gave us a chance to talk about what we did, but it also gave us fresh inputs. Plus every time we made a presentation we had a chance to present our products and hopefully we made the right impression,” Grettenberger says.

THE BIG PAYOFF

Cadillac officials were sure the turnaround was just around the corner.

A prototype of the 1992 Seville was displayed at the North American International Auto Show in Detroit and at shows in other U.S. and foreign cities. It was the star of the shows. In Detroit, crowds pressed in, sometimes nine deep, to get a look at the car on the turntable.

From those shows, requests for more information, particularly from young, affluent buyers, came pouring into Cadillac. By the time the cars went on the market in the fall of 1991, Cadillac had 11,000 orders in hand.

That spring, Cadillac gave early test drives to the motoring press. The car garnered rave reviews. The car enthusiast magazines, who had written about change on the horizon, wrote that Cadillac was back. Cadillac could truly call itself The Standard of the World again.

“All of a sudden people recognized something had really happened at Cadillac,” says Grettenberger. “It suddenly was okay for people who had been driving imports and who loved them to come into the Cadillac dealership and take a test drive.

“That’s been our biggest accomplishment,” adds Grettenberger, “changing the mindset toward the division.”

Then the awards came rolling in: Motor Trend Car of the Year; Car and Driver magazine’s Top 10 cars; Automobile magazine’s best picks. In fact, the Seville won more awards than any car in history, Cadillac claims.

“It’s won so many awards,” says Grettenberger, making a sweeping gesture around his office in Detroit. “Things like this little job make it all worthwhile,” he says, holding up a Motor Trend Car of the Year trophy.

THE HITS KEEP ON COMING

The awards continue to roll in. A year ago, Cadillac unveiled its much-talked-about Northstar engine, an all-new V-8 engine featuring significant engineering innovations. The Northstar was first installed in the Allante, which served as the pace car for the Indianapolis 500. The 1993 Seville and Eldorado are now equipped with the engine.

So far, Cadillac has won nine awards, all of them technology awards including recognition from Popular Science and Popular Mechanics magazines.

WHAT’S IN STORE

Cadillac isn’t resting on its laurels. By 1995, Cadillac wants sales of 300,000 cars annually for three percent of the U.S. car market. It wants to more than double overseas sales.

Meanwhile, Grettenberger is looking ahead to the next century. He expects Cadillac to maintain its constancy of purpose. Cadillac will continue to focus on the customer, on changing its culture and on teamwork. But he knows to keep pace with the stiff competition from Mercedes, BMW, Toyota and Nissan it must do more.

Grettenberger believes Cadillac must “shape” the future: “We’ve been reactionary. We’ve been market responsive in the last seven to ten years, but we haven’t reached the point where we’re leading the market. We have to be more future oriented.”

“It is risky,” he adds. “You can try to do too much too soon and lose the base of your strength. You can’t go from traditional to futuristic vehicles overnight without considering what customers are looking for. As you lead the market, you have to come out with products that make people change their thinking of what they want and you have to have what they want.”

To accomplish this lofty goal, Cadillac has to do more customer research, remain flexible and bring products to market faster.

Cadillac, like the rest of General Motors as well as other manufacturers, is studying marketing of the future.

“Marketing will change,” says Grettenberger. “We’re re-evaluating marketing and distribution, along with the other GM divisions, to project our needs in the year 2000. We have to look at where dealers are located and where they should be located. Which dealerships should be joined; which ones separated. We’re doing all this with dealer participation.”

Also in terms of dealers, Cadillac is focusing on service and customer satisfaction. That requires substantial training, sending experts to help dealers, and conducting surveys of individual dealer’s operations.

“We have people going into dealerships to examine each area of the service operation to optimize its performance in line with customer expectations,” says Grettenberger. “The dealer’s expectations are often set without consulting the customer. Sometimes they fall short of customer expectations.”

Cadillac’s new products are luring in new customers who have never been to a Cadillac dealership. These largely younger buyers tend to be extremely demanding, more demanding than Cadillac’s traditional buyers.

“We do customer surveys on individual dealers to find out what customers like and pinpoint areas for improvement. We use that in conjunction with our own analysis of the optimal flow of work and come up with improvements for the dealer,” he adds.

Cadillac has instituted programs to help dealers reduce the high turnover of sales personnel. These programs include deferred compensation, bonuses tied to longevity, and training.

The 56-year-old, tall silver-haired Grettenberger, who has been in his post nine years, has the distinguished look of a quintessential Cadillac owner.

“There’s something to be said for having the same person in the job for a long time. It takes time to know what Cadillac is and isn’t. After time, you know the feel and smell of a Cadillac,” he says.

How long will Grettenberger stay on board the Cadillac quality train? “As long as the job is interesting,” he says, “I’ll stay.”