4.13.2009

Why Customer Value is Critical: The Lesson of the Chevy Malibu

Why does lean focus on creating value for the customer? One reason is that failing to create such value can damage the relationship with the customer. And once that relationship is damaged, rebuilding it is incredibly difficult.

That point is made extremely clear in an insightful article in The Wall Street Journal focusing on the Chevy Malibu.

The Malibu was a popular car, stylish and powerful, from the mid-1960s until it was phased out in 1983. It was brought back in 1997, but the new version was mediocre.

After Bob Lutz joined GM as vice chairman in 2001, he made redesigning the mid-size Malibu a personal project, and brought together a team of designers, engineers and marketers to handle it.


Leaders of the team say Mr. Lutz made clear that the goal wasn't to improve upon the existing Malibu but to beat the competition. Their assignment was to create a car with a base price starting just above $20,000 but with the look and feel of a luxury sedan.

They spent weeks studying the Camry and Accord looking for weakness to potentially exploit. They studied the low-end products that fashion designers were crafting for Target Corp. discount stores, in search of secrets to a luxurious look at non-luxury prices.


The team did its job and produced a high-quality vehicle that won awards and was even recommended by the independent publication Consumer Reports.

So the car was a winner, right? Nope. It’s selling better than previous versions of the Malibu. But last year, the Camry outsold the Malibu 437,000 to 177,000.

The problem is, no one trusts GM. The article provides several examples of buyers whose past history of quality problems makes them unwilling to buy a GM car, despite widespread acknowledgement of the Malibu’s quality.

"A perception of inferior quality is the most serious problem facing GM," aside from its financial predicament, says David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich

"It takes a long time to break through," says GM spokesman Dee Allen. "We have trouble getting people to even give the Malibu a try."

The article also quotes a Toyota spokesman as saying that, although the Malibu beat the Camry in J.D. Power’s initial-quality survey last year, "Quality is a marathon, not a sprint."

By the way, if you’d like additional insights into what people think of GM today, browse through the more than 100 comments posted on the WSJ article.

GM hopes to continue impressing people with its vehicles as, this year, it introduces a redesigned Camaro, the new Cruze and the electric-powered Volt.

Will that be enough to repair the damage to its relationship with its customers? Maybe. But I wouldn’t bet the farm on it.

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