International Executive travelling world negotiating deals with unions, suppliers, governments, oligarchs
He currently serves as an adjunct professor of economics at Lawrence Technological University.
JEFF STERNS CONNECTED THROUGH CARS
5:55 I wanted to be a professional pool player when I was 15. So I would sneak into the pool hall looking much older than I did. I never went to high school. I think I had the maximum number of days off that you could have in the state of Michigan, and actually passed into the next grade.
7:59 I went down to GM, in interviewed, never thinking that a guy with a D average in high school, General Motors is ever going to hire. But I went because I promised him that I'd go. Interviewed for a level one male boy position $495.50 a month
10:27 I beat Minnesota Fats12:12 I went to school at night with my wife raised two kids at the time
13:18 the president of the company, or john DeLorean, who was you know, the hot shot of the company
15:12 how would you like to be an analyst?
16:17 gaining momentum inside the company. And the chief engineer at the time was a fella by the name of Bob Stempel, who ultimately became the president of General Motors. This is night, it was 1974 or '75 biggest snowstorm in the history of Detroit 28 inches. Bob said "clear the snow." Nobody said a word and it was done with industrial snow blowers in time for a 6.30am meeting.
18:21 General Motors had about 48% of the market.
21:05 Ward's at the time, they wanted to get into the publishing business in electronics.
23:12 he said, Just do me a favor. The next time you come back to Nissan, we don't compare ourselves to Chrysler. Come back and show me a comparison versus Toyota, or Honda, because that's who we care about.
24:29 He said, I was fired.
27:29 All I'm thinking about is what I'm going to tell Janet, what am I going to tell my three kids? And he said, No, no, no, no, we want you to run the business. So you're in charge now? You mean, you're not firing me? No, no, you're in charge.
34:08 I'm not going to write a check for Brazil, you got to go down there and fix it yourself. And the only role that I played was given the latitude by Wagner
35:47 Culture was the first thing so the culture in Brazil was already there. In terms of a work ethic. You know, maybe people think that Latin America is kind of a, mañana worry about it tomorrow. That's not the culture that was there, you had to be sure that you were picking the right products for the market, you can have a turnaround strategy. And if you have the wrong product for what the customer could afford, or what the customer wanted, didn't matter, that whether you had the right culture or not.
36:19 So Wagner decided that we were going to be up to date with all the cars that came out of Opel, and we would be current with all of the trucks that came out in North America. So when I arrived, we had a Chevette a 1982 thing called a Monza, which was a Cavalier, this is 1991. By the way, I got if I want to get the right date sequence here, a 1967 full size pickup truck. And the thing called an Opel record, which was kind of like a full size car. That was the product lineup generating $110 billion dollar loss.
37:45 when I got there inflation was 30-40% a month
38:39 You guys dropped off the car for me, but it won't start. What's going on here? He said, did you pull out the choke?
44:30 on Ignacio Lopez
47:55 I went to Poland to work, it was dark Warsaw, if you draw a direct line is in the middle of Hudson Bay in Canada, you're up there.
56:00 So off to Germany.
56:49 I'm a gringo. They're making fun. And I let them go for a while. And I'm pretending like I have no idea what they're doing. And they're done. And in fluent Portuguese. I said to them...,
57:37 Wagner comes into me, he said, I need to move. I need somebody to go to Russia. And I said, Why are you talking to me? He said, Russia is complex, and I need somebody who I can trust. And that's you.
59:14 I guess we can make an exception. And it was the best job I ever had. I had a full time driver, which was fantastic. I had the only white escalate in Russia. And why did I have a white escalate? Because every one of the cops in Moscow. After two months, I knew Oh, that's the guy who's not going to pay us a bribe.
Make sure to listen to part two!!
ARREN BROWNE - PART 1 - AUDIO
Sun, 2/14 5:37PM • 59:49
general motors, gm, brazil, chevrolet, poland, supplier, big, car, manufacturing, nissan, people, called, run, business, warren, jeff, executive, meeting, sales, wagner
I wanted to be a professional pool player. When I was 15. I never went to high school. So he was working there for a month. I would go to the pool hall during the day for the whole day. But he had to work. Okay, so he wouldn't come in till six o'clock at night. And every night he'd come in to warn you got you got to get a job to you. Got you got to get a job at GE. And I said, you know, look, how much can we make there? And he says, look, Gil, I'm making 500 bucks a month. And I said, like, five days a week, john DeLorean Podesta's, the president of the company by beat Minnesota Fats once. And the chief engineer at the time was a fella by the name of Bob stump, who ultimately became the president of General Motors. They shouldn't you really did a good job here. Everybody's impressed. Blah, blah, blah. And when you get back to Detroit, I gotta tell you, we're gonna do something for you. And I said, jack, sit down. I got something to tell you. I'm resigning today, I don't think and he's, I don't think I deserve to be fired. I'm not hearing anything. He's saying, all I'm thinking about is what I'm going to tell Janet. What am I going to tell my three kids? And he said, No, no, no, no, we want you to run the business. This was real money. And it was a win or lose. And if you didn't look at it that way, we would be in trouble. And that's when when I was down in Brazil, I got the nickname Dr. Death. I guess I can say it because it's it's been a while. So I'm not telling any state secrets here. So Jeff, you're hearing this for the first time on your podcast. When I arrived, we were losing about $110 million a year, the whole approach. We went from 110 million in Brazil loss to over a billion and a half dollars of profit. I was sent down to Brazil by jack Smith, to help them improve their product program. And my car won't start. And I get on the phone. I called Carlos buechler, who was the chief engineer. I said, Carlos, you guys dropped off the car for me. But it won't start. What's going on here? He said, did you pull out the choke in December of 1999. I went to Poland to work. It was dark. Wagner comes into me. He said I need to move. I need somebody to go to Russia. I had a full time driver, which was fantastic. I had the only white escalate in Russia, because I'm in charge of all of your warranty audits. I'm doing this in Portuguese now. Yeah. Because I'm in charge of all of your warranty audits and all of your service rules. I suggest that you guys talk to me a lot nicer than you have been for the last 15 minutes.
Jeff Sterns connected through Guys, if they're big wigs, we'll have him on the show. And yes, we'll talk about cars and everything else. Here he is now, Jeff Sterns.
Jeff Sterns 03:12
I'm with Warren Brown. I'm Jeff Sterns on Jeff Sterns connected through cars. And mainly we've been talking to people that I met through the car business. But actually, I didn't meet Warren, through the car business, even though he's a stone car guy. So I mean, look in case the recording stops, and we get rid of everything else less relevant. Maybe we should just talk about how did we meet?
Yeah, because it wasn't through the car business. We decided to go down to Florida, when we stopped taking cruises. And in the initial days, we used to, you know, rent small little apartments. And then, you know, one day my wife said, you know, we're tired of renting apartments, why don't we get a house that's on the bay. We can look at the ocean, drink cocktails in the evening and enjoy ourselves. I said, Good idea. My wife is the world's research expert. So I said, Go get it. Right. But then she came back and she says, I found a great house. That's fantastic. She said, it's right on the bay. And it's in beautiful Palm Harbor that was through that that I met you Jeff. And from the moment you came upstairs and said, Okay, I'm Jeff Sterns, just tell me what you need. And so we just came to know you Jeff, and enjoyed every single year we stayed at your place. Beautiful. Well, thank
Jeff Sterns 04:39
you and you guys became family to me for sure. And so when we came up with this podcast idea, and I don't know how it is for you, but with me 35 years, plus minus in the car business, whether it be retail or now my software, and can salting I deal with dealers at dinner, the I'll call them the civilian, always wants to know, what's the cool thing that you drove or who's the cool person that you met. Of course, I got to hear a few of your stories out by the pool out by the barbecue. And you were very gracious to agree to join us here and hopefully give our guests something interesting to take home, you're with GM for a short time,
we would call it a short time. It's kind of like the half life. I spent 40 years there. I went to work for GM in 1969. On a lark, which was, you know, a lot of things in life, you're either lucky, or you have skills that help you out. And in my particular case, it was luck. I wanted to be a professional pool player when I was 15. So I would sneak into the pool hall looking much older than I did. And the owner never asked me how old I was. So I was playing pool with with guys when I was 15. wanting to be a professional. I never went to high school. I think I had the maximum number of days off that you could have in the state of Michigan, and actually passed into the next grade. So that was that was a first piece of luck. And then, you know, going through high school and then graduated, and one of my buddies who has since passed away, and he was kind of like my pool, buddy. As a matter of fact, Jeff, we went down to Cocoa Beach, Florida. On the first year, I got laid off and went on the road to play pool and Cocoa Beach, Florida, and stayed down there for a couple of weeks just living off playing pool right
Jeff Sterns 06:42
now was this like the movie the hustler with Jackie Gleason,
kind of like that. Kind of like that back the car up to the front of the door. Because when the guy pays me off, I'm gonna run out because he's got six buddies, and we're gonna get our butts kicked. So yeah, that that really happened. He got a job, his his dad knew somebody, a GM and he got a job as a driver, like to drive stuff around the city, because at the time, General Motors was, you know, gigantic and they had offices all over. So they had to shuttle stuff in between FedEx didn't exist at that time. So he was working there for a month, I would go to the pool hall during the day for the whole day. But he had to work. So he wouldn't come in till six o'clock at night. And every night he'd come in to warn you got you got to get a job to you. Because he couldn't get a job at you. And I said, Well, you know, look, how much could we make there? And he says, look, you know, I'm making 500 bucks a month. And I said, like, five days a week? And he said yes, 500 bucks a month. And I said Tom, we we make that in a week playing pool. He says you're making a big mistake. So on a lark. After pestering me for a month, I went down to GM, in interviewed, never thinking that a guy with a D average in high school, General Motors is ever going to hire. But I went because I promised him that I go interviewed for a level one male boy position $495.50 a month got nice guy, I can still remember his name Don Smith, nice guy interviewed me and said, Okay, we'll get back with you. And literally the next day, they got back with me and said, Can you start on Monday, I said, and I really took a deep breath. This is where luck plays a role in everybody's life. Okay, I'm going to do it. And I showed up on Monday morning, and started as a level one male Boy, that's how I joined. And my first job. I worked at GM photographic, and GM photographic printed the executive menu for the dining room every day. So you can imagine the executive dining room at General Motors every day, I had to deliver that menu to the 14th floor, which was like the executive suite for General Motors. And it was on one of those visits, that I said to myself, I gotta go back to school. But it turned out to be really a stroke of luck. Throughout that I came in contact with a whole host of you know, very, very interesting people. Some who helped my career, others who taught me a lot of stuff that I still talk to, to this very day. So that's how it started, whatever it was.
Jeff Sterns 09:40
So you start in the mailroom, you start almost as a challenge from your buddy like, okay, I'll go apply Exactly. You don't half heartedly hope they don't take you you really kind of hope they just say no, but you kept your deal with your buddy. They call him they say you got the gig, your stomach drops a little bit But because you said you would really no other reason you weren't thinking career. You were thinking minimum wage mentality summer job bagger at a grocery store, kind of a gig.
Yeah and and I'm glad I did because just like you know, every everybody realizes the Huskies they're not john Klug Keely everybody who plays tag football or basketball knows that they're not going to make it to professional sports, even though I beat Minnesota Fats once, you know game of April, you know, I was I was 16. And he was selling his pool tables at the time at a shopping mall, buy my house in Livonia. And so because fatz was in town and he was in he was selling his pool tables, you had to go up and see him right. I mean, I was, I was a pool player. We went to see him and and he's, you know, doing one of these things of, Hey, who in the audience wants to play, play a game of pool and show how the table works and all that stuff. And here I am, you know, I'm jumping up and down. This has been a set of facts. And he says, okay, you here, come here play, we're gonna play a ball, and you get to break. I said, Okay, I broke and I ran out, he never played, he never got to play one shot. So I broke and ran out a ball, which is you got to hit all the stripes with the solids. And I forget which was which. And then I made the eight ball. And he was left holding his cue stick on the uptake. He said, See, folks, if you're playing on my table, anybody can play pool. So he used the whole thing as a foray into a sail deck, looking back at it was very, very impressive. At the time, I was just glad that I beat him, I take that as a victory. And I wouldn't play him for $1 if we were playing for real pool, but again, luck. Luck has a way of working its way in and I was lucky.
Jeff Sterns 11:50
That is beautiful. So with General Motors now, somehow you go from mailroom to international executive, somehow you have your career, half of your 40 years you're overseas give or take,
you know, I went to school. Yeah, and I was still working. So for, you know, my both my undergrad and my graduate degree, I went to school at night with my wife raised two kids at the time, and then ultimately, three kids, it was just one of those things of you just got to do it. There's no way around it. And when I graduated from my undergrad degree, the group that I was working for at the time, I switched male boys jobs, I went from junior male boy, to senior male boy, okay, big step, or how you're going places, the ultimate place that I went as the senior male boy was the PR staff. And I guess the only thing of significance for that event that I can remember off the top of my head is every morning, first thing 730 in the morning, which was tough for me, I had to deliver the New York Times, and the Wall Street Journal, to all of the offices on the 14th floor. New all the people could walk into any of these guys offices say Warren, how's it going today? And I would literally add gold, who was the president of the company, or john DeLorean, who was you know, the hot shot of the company, walk in those offices and throw the papers on your chair and they go, Hey, what's going on what happened in the news today, and same old stuff, and they'd laugh, you know, that, that kind of stuff. But because I was I graduated, and you know, they could have gotten me a job anywhere. I think that they were just tired of having me around. Actually, I graduated with my undergrad degree, they got me a job as a key puncher in a group that was doing all of the statistical analysis and sales analysis for the company. And this group was responsible for doing all the forward forecasts and all the production scheduling, and all the economics and all that stuff. And literally, it couldn't work in the place unless you had a PhD. Really, really bright people. And so my job was to keep punch in all of the information so that these guys could do the analysis of it, whether I was collecting it from wherever I was collected. And the key was, I got to sit in on that meeting, watching these whiz kids kind of figure out what sales were going to be next month or what sales we're going to be next quarter or next year and see them the process that they went through the one day guy who changed my life, a guy by the name of Greg Bianco, who was one of the one of the head executives at the time. And he took me aside and says, you know, you're you're you seem to be pretty smart guy. How would you like to be a auto analyst? He said, You kidding me? No, no. I've seen you in the meetings, you know the data better than anybody else does. And when any of these these eggheads ask a question, you know what the answer is? Because you know what the date is? He said, how would you like to be an analyst? I said, I have, I don't know how to do any of that stuff. He said, let me worry about that. Let me worry about and I said, Okay, and that's when I, I finally removed myself from mail boy data clerk, to being an auto analyst. Well, if you remember Jeff and I, and I know that you do back in 1970, nobody cared about trucks. Other than a full size pickup truck. General Motors was a car company. They said, Here, nobody cares about trucks. Give it to Warren. Well, that was a stroke of luck, because we need to put on a presentation for Pete estus, the president of the company on the truck market, and you're the only one that knows this stuff. We did that and I kind of became the truck expert. Well, for a long, long time, the S 10 pickup truck, which was the precursor to the current Chevrolet Colorado, little a midsize pickup truck, okay.
It was gaining momentum inside the company. And the chief engineer at the time was a fella by the name of Bob stump, who ultimately became the president of General Motors. It was Greg donker. And I, the CRO s 10. People versus Bob stemple. And Chevrolet. This is night, Team 7475 biggest snowstorm in the history of Detroit 28 inches, one day, I was taking the bus into work at the time, from my house down downtown. I had to be in there early. So taking the bus at 630. We're the only ones on the road, but the bus is going and it hits the GM building. At noon, they came around and said, if you're not an essential worker, go home. And so my boss comes into the office and that's we've got a meeting at four o'clock with Pete estus. You're not going on your stay. You're helping with the presentation. You're writing all the data, we got a major controversy with Chevrolet, we have the meeting at four o'clock we get done with the presentation. Yes, this goes, Okay. This is what we need to do. This is Friday night, we need to have the final technical review of the truck in the presentation that's going on Monday. And there's one small person who not in the back of the room was but but but Pete, we just had 28 inches of snow. Pete looks up and says we'll get the people to blow open the tech center and blow all the snow away. We're having this meeting tomorrow morning at eight o'clock. Nobody said anything. The guy walked out of the room. I'm sure he had ordered like 20 snowblowers. To blow you know, I mean, like big industrial snowblowers to blow the tech center open? Well,
Jeff Sterns 18:12
I mean, people need to understand the strength of General Motors at the time. I mean, a younger listener right now. I mean, this is like President of the United States.
Yeah, General Motors had about 48% of the market.
Jeff Sterns 18:24
They had to be in the top some number of driving the United States economy.
Well, yeah, the the old deal if it's good for General Motors is good for the United States. They keep on forgetting and vice versa. It was a big deal. And when he talked, I mean, nobody said anything after that. It was they're going to have the meeting. Right? That was the first time in my life, that the day of the 28 inches of snow. That was the first time in my life that I worked the whole night. Didn't go, we're gonna have a presentation for estus at eight o'clock on Saturday morning, at the Texan we were done seven o'clock in the morning. And my boss just told me you go home, I'll give the presentation you don't need to worry about it. As this is already seen. You give the the preliminary version. So I'll just go out to the tech center and do the final version. But the I guess the key piece of the story that maybe I'm not getting well is when he said we're just going to blow open the snow in the tech center. We're having the meeting tomorrow. There was no well you know, everywhere It's Saturday, Pete me you know it's snow and 28 inches of snow in Detroit. Everybody just saluted the tech center was open with no snow at eight o'clock the next morning, before I went overseas, I actually left you I was working out a truck and bus and I worked on a thing called the world van program. The research is done in Chicago. It was going to be five city to continent research. may hit every key executive from truck and bus. At the end of the day, my boss calls me over and he says everybody at truck and bus is really, really impressive. By the way, it was the first research project General Motors had ever done. No paper, everything was done in computer, no filling out the forms and etc. You really did a good job here. Everybody's depressed, blah, blah, blah. And when you get back to Detroit, I've got to tell you, we're gonna do something for you. And I said, jack, sit down. I got something to tell you. I'm resigning today. He said, What? I don't think I heard you're right. I'm quitting today. I'm going to work for awards, automotive, I'm going to be their Vice President of Marketing Services. And tomorrow morning, at 10 o'clock, California time, I have a meeting at Nissan. I'm not going back to Detroit.
Jeff Sterns 20:53
And Warren, for the listener that doesn't necessarily know what words it this is words Detroit magazine, this
was the magazine. And the the group that owned Ward's at the time, they wanted to get into the publishing business in electronics. So they were doing their magazine and their weekly newsletter and all of the stuff that they still do today. Only they wanted to branch out and do things electronically. And the group that I went to work for was a branch of words called words research. And we were tasked with no paper, every product that you will deliver to customers, sales, analysis, whatever, we're going to deliver that through a computer through an IBM PC, single disk drive, external hard disk with a modem.
Jeff Sterns 21:52
That was really this was really forward thinking, though, because there was a lot of resistance in that industry.
Oh, sure. I mean, they, they the company that owned them published was international Thomson, a big Canadian publisher, who, you know, publishes all the medical journals, and they own the, you know, the Toronto Star, whatever the Toronto paper was, but they wanted to get out of it. So the whiz kids that I went to work for knew all about PCs, transmission data, etc. And I knew that car business. So we put those two together, I fly out to Nissan that day. And I'm giving a presentation to Jim Thomas, the Vice President of Sales for Nissan North America, about what we're going to provide to them. You know, Mr. Big Shot GM, right. At the end of the presentation, Jim Thomas, bless his heart. That to me, Warren, that's a great presentation. And you know, I think we kind of like what you can provide for us in terms of sales, sales, analysis and helping Nissan grow the business in in in the United States. He says, but can you do me a favor? He says your your presentation had, like Chrysler cars on it, and Ford cars on it, and General Motors cars on it. And he said, Just do me a favor. The next time you come back to Nissan, we don't compare ourselves to those guys. Come back and show me a comparison versus Toyota, or Honda, because that's who we care about. Jeff, I felt two inches tall. I went from Big Shot General Motors to my first real dose of outside of the cocoon, in wonder. I mean, you're swaggering, like grasing Nissan, and they're like, yeah,
Jeff Sterns 23:46
we don't really care about that stuff.
Fast forward six months, we all get called to Philadelphia, which is where the headquarters of Thompson was at the time. All of us all the whiz kids are sitting around the conference room with my boss who hired me out of GM and they knock on the door, open it and go, Bill, you need to go first. And we're wondering, are we going to get like a an early Christmas bonus? Are we going to get like a big pat on the back in a in a in a trip to South Beach for all the stuff that we've
Jeff Sterns 24:23
been doing? You're really expecting the pageantry for the unbelievable work you've been doing?
I mean, we had we had a Honda, Nissan, Mitsubishi, BMW, Chrysler, Chevrolet, which is how I got ultimately got back into GM, because Chevrolet was my client, and a bunch of suppliers borgwarner nevertheless, in a period of six months, we had signed business, so I'm expecting the horn Institute. My boss is out there for about 10 minutes. And he comes back and we said, okay, you know, where's the horns? what's what's what's happening? He said, I was fired. And you know me long enough, who's going to be the first guy to speak up in the room,
Jeff Sterns 25:08
not a shocker there. I don't even need to know who the others were, once you
get fired, and he said, cuz we're not gonna meet her budget, Big Shot GM guy who knew everything about the real world, right? What do you mean, we're not going to meet our budget? key question was for the first time bill, what's our budget? And he said, 10 million bucks. everybody else's got their head buried in their arms on the table. And I said, Bill, there's no way we're selling our product at $50,000 a pop, there's no way that we're going to make a $10 million budget this year, who in the heck gave them the $10 million? I did. Well, what did you do that for? And he looked up without batting an eye. Without a twitch in his mouth. He said, Warren, you drive a BMW company car, don't you? You should. Yeah. He said, and when we go out to California, we stay at the Beverly Wilshire hotel, don't we? I said, Yeah. And he said, and we gave you an American Express gold card, and you do all of your expenses on it. And you never have to submit an expense report, right? Because you're running your business, right? Yeah. What's the point? He said? How do you think you get all of that stuff? If you don't promise somebody you're going to deliver? Jeff, that was like Moses, parting the Red Sea for me. Because I never had to think in those terms, that General Motors,
Jeff Sterns 26:43
a slightly wasteful culture.
Next, knock at the door. Oren, your next. A quick GM after 14 years against my father in law's wishes, I got three kids. Sure. I was making the big bucks. So I'm walking down that hallway, thinking what I'm going to tell my wife, and I walk into the office and sit down. And the first thing that comes out of my mouth is, you know, I don't think and he's, I don't think I deserve to be fired. And it wasn't until you know how you like a bomb goes off, and you can't hear things for, you know, two minutes until you're until your ears clear. I'm not hearing anything. He's saying. All I'm thinking about is what I'm going to tell Janet, what am I going to tell my three kids? And he said, No, no, no, no, we want you to run the business. So you're in charge now? You mean, you're not firing me? No, no, you're in charge. Okay, we're gonna reset your budget, you're in charge. Come back next week, we'll figure out what your new budget is. And we'll, so I walked back into the comfort pick, okay, what happened to you? Well, they want me to run the business. And my boss who is hired me out of General Motors, that's that's BS. That's Bs, we should just all quit and go start our own company. Nobody said a thing, but me. And I said, Bill, these guys may want to do that. But I've got a wife and three kids. And I'm not going to leap off of a cliff because you think that it's the right thing to do for us. I'm doing this for me, right. And so everybody went off and did their own thing. I stuck around for about six months. And because I had Chevrolet as a customer, we were delivering to Chevrolet at the time, you could go on to our system 1985, you could go onto our system and comparatively equip any model that was being sold in the United States, comparative based comparative, comparable equipped and comparative popularly equipped by just picking it off of the menu. 1985 Okay,
Jeff Sterns 29:07
I can picture it.
Again, the guys that Chevrolet loved it, the guys at EDS hated me, because we were selling software, and they wanted to be in charge. And because of that, they ultimately asked me to come back to GM, and come back and work back in North America and do the research to do all the murder research and all of the analysis. Again, a little bit of a stroke of luck. But you know, that life lesson when you look and you think I jumped from General Motors, I never asked a budget question. I never asked a performance question. All I wanted to know was, how much am I going to get paid. And I think that that's a mistake,
Jeff Sterns 29:53
really quite a paradigm shift.
Oh, from living in the cocoon and then leaving the cocoon and getting started. laughed really hard. And that budget discussion, I I stored that in the back of my head for every business case that I would evaluate for General Motors over the next 15 to 20 years that we were spending real money. Not just somebody's budget account of a finance department, this was real money, and it was a winner lose. And if you didn't look at it that way, we would be in trouble. And that's when when I was down in Brazil, I got the nickname Dr. Death. I was once at a senior executive meeting in Traverse City. And I remember Mike lush getting up and saying, how is it that we're losing our shirts, and the last 11 programs that were approved by the board? We're all winners? Can somebody in the audience tell me how that happens? If you take engineering and fixed expense and investment as a given, and you figure out the volumes that's required to get the ROI up, they all look good on paper, they all look good on paper. And in Brazil, I took a different approach. Don't tell me what the investment is. Don't tell me what the engineering expenses, I never want to know the answer to that question. I'm going to tell you what the volume is. And then you tell me what you can afford. And if you need to take out investment and engineering expense to make it work. You guys have the job to do? Not me.
Jeff Sterns 31:35
So you'd back into what that expense line could be on the financial statement to make the project work based on volume.
Absolutely. In Brazil, when I was there for the nine years that I was there. first five years were unprogrammed stuff. That was the approach, Rick Wagner signed off on that approach. And after him, Mark Hogan signed off on that approach, even though he didn't necessarily like it. But the approach of we're going to sell 60,000 units of this product. And we need to have that return at 20% or more. What can we spend on engineering and what we can we spend on investment to get this done?
Jeff Sterns 32:14
So Dr. Death, I mean, this come from if something wasn't adding up, you were doing big layoffs or cutting projects, or? I mean, where did that moniker come from?
No, because the culture, the culture was one of we need to make this work. Because Big Daddy up in Detroit, they'll fund it. So we need to get what's right for us. And we just didn't take that approach. When Wagner came in. And he ran the place. We just did take that approach. He liked the idea that we're going to make money. I guess I can say it because it's been a while. So I'm not telling any state secrets here. So Jeff, you're hearing this for the first time on your podcast. When I arrived, we were losing about $110 million a year that this has mostly to do with Wagner. And Hogan who followed him and Fritz Henderson, who later became the president of the company who followed him.
Jeff Sterns 33:15
All of General Motors or just Brazil division?
Is this all at General Motors, okay. Okay. So the, the whole approach, we went from 110 million in Brazil loss to over a billion and a half dollars of profit. And this was a place that Roger Smith never wanted to put a nickel into. This was a place where I actually personally heard him say to the executive committee, would you put your money there. So General Motors isn't going to put any of their money there, either. And then one day, we were visiting stemple, who was then group vice president of overseas, in charge of Brazil, at least he called Wagner and i into his office and said, Rick, you're on your own, you don't make your money, you don't self generate your money down there, I can't help you, or not making enough money up here. I'm not going to write a check for Brazil, you got to go down there and fix it yourself. And the only role that I played was given the latitude by Wagner to say, you just tell me what the volume is. You tell me how competitive the car is, you tell me what the volume is. We'll figure out the investment in the in the engineering expense to get it done. And that's the way we're gonna operate. But we went from bleeding to a billion and a half pretty quick. And that was, I would say, a philosophy that Latin America used and unfortunately, it was not a philosophy that was used by gentlemen or zero. They just continued to believe.
Jeff Sterns 34:48
Let me ask you, please, I'm always interested in turnarounds like this and I've been involved in turnaround situations myself and much smaller scale dealerships, etc. Would this be a type of Iron Fist man Management, where it's just proving or turning down programs and decisions, or did you do invest in the people from a culture standpoint, or all the eyes, on your team are looking at it for waste for profitability opportunities, etc,
it was a combination of three things of the Brazilian culture at the manufacturing and sales level is a very, very can do culture. If the direction is we're going to make this work, don't make it work. If the direction was no, we're going to make money. They are the most dedicated industrious group that I could work with. That was the first thing so the culture was already there. In terms of a work ethic. You know, maybe people think that Latin America is kind of a, you know, manyana worry about it tomorrow. That's not the culture that was there, you had to be sure that you were picking the right products for the market, you can have a turnaround strategy. And if you have the wrong product for what the customer could afford, or what the customer wanted, didn't matter, that whether you had the right culture or not. So Wagner decided that we were going to be up to date with all the cars that came out of Opel, and we would be current with all of the trucks that came out in North America. So when I arrived, we had a Chevette a 1982 thing called a Monza, which was a Cavalier, this is 1991. By the way, I got if I want to get the right date sequence here, a 1967 full size pickup truck. And the thing called an Opel record, which was kind of like a full size car. That was the product lineup generating $110 billion dollar loss.
Jeff Sterns 37:06
And Warren, we're all the opals. European imports are rebuilding those also in Brazil,
all locally built the manufacturing. People in Brazil have jack Smith once called Stephen Bogart, the most comprehensive manufacturing executive he'd ever met. Because they all had to do it all themselves. They all had to learn all by themselves. And nobody was coming down from central office to help them so they had to do and learn a lot. So the level of competency that was in that's what I taught culture and competency in the Brazilian organization was pretty deep. But they were just all old products that they were locally manufactured. Remember, when I got there inflation was 40% a month
Jeff Sterns 37:48
impossible to understand if you didn't live there and experience it, I'm sure
30% a month. So the the the the idea of you know, getting modern or whatever was in comprehensible. The first day I arrived because it was a big shot then, okay, now, now I'm into the Big Shot range. So I had my car delivered to the house when I arrived so that I could drive it into work the next day, until I get up the next morning. This is Opel record. Nice, big, huge car. I get out in the morning, and I start my car, and it won't start. I was sent down to Brazil by jack Smith to help them improve their product program. And my car won't start and I get on the phone I called Carlos buechler who was the chief engineer Carlos and he was he was a friend of mine. You guys dropped off the car for me, but it won't start. What's going on here? He said, did you pull out the choke? What? He says Oh, yeah, all of our cars have chokes on them. I went back out. Needless to say, pull out that joke. Pump the gas a couple of times and boy that V six turned right over. So we converted in a period of five years to an Opel corsia Vectra Opel omega Opel Astra new full size pickup, an S 10. An s 10 with a crew cab, which they didn't have in the United States. New blazer, I was a busy cowboy. That's where my hair literally just a picture that I have in 1991 when I got my company ID going down there. This is what this was a all hands on deck. Finally, the philosophy of Wagner was, once we get current, we're going to stay current and we're going to drive Volkswagen to the sea. And ultimately we did, we became the number one seller. We went from selling 100,000 cars to 420,000 cars, but the philosophy of Wagner's was no We're going to pick a volume that makes sense, then we're going to determine what engineering and investment we can do. And if it doesn't work, we will not approve it. Because we're on our own. It was literally an all hands on deck to make that make that happen. Culture and competency, the right program and the right leadership that really changed the way that the whole business case was looked at. That's how it turned out.
Jeff Sterns 40:35
And it's amazing. The General Motors, mothership. I mean, my God, what a difference from $100 million loss to what 1,000,000,005 winner Oh, my God, if they could have taken those lessons into GM, corporate and Europe, it was certainly General Motors.
Sure. They were afraid to make the tough and ruthless decisions. Maybe they felt, you know, and I listened to it all the time. But neurod, who led Latin America for over a decade, okay, really ruthless. But everybody said, Yeah, Dick, but you're running Venezuela, and you're running Colombia and Brazil and Argentina. Those are all easy markets. You just don't have that tough one, like Europe, and Germany, and all the labor laws. And you know what Dick's response was? You guys just want to lose, you want to win. You put me over there. When Don't tell me how tough it is. You just have to make the right calls. The one that really, really got it. Ultimately, too late, was Fritz. Fritz got what was needed to be done and understood it, had a plan for it and was prepared to execute it. Because Henderson learned under narrowed, and as president he was prepared to execute. This is published information. The board blinked. He wanted to sell Opel to the Russians. He was prepared to do that. He was prepared to make Chevrolet the brand in Europe. that's a that's a big story in and of itself. The board ultimately blinked and said, No, opal is too valuable an engineering source. We're going to keep it around. And that bleeding continued until Mary Farah closed the operation. Right? It was Mary, and everybody in between all the Whitaker's and all of these other people that took over from the bankruptcy, never had the guts, I give Mary credit that she said, we're not making any money. We're done. Now, she didn't have a plan B. But she was she she said, we're done. We're selling it. We're Gone. That's it. And that should have been done. 2000 Well, if
Jeff Sterns 43:03
it wasn't gonna be made profitable
division, I sat in executive meetings, senior executive meetings, of which then I was a senior executive, and therefore, I take responsibility for it that said, 4567 years in a row, guys, this year, we gotta make money, no excuses. How can you say that for seven years in a row and have a management team believe that to be true, that you really meant it?
Jeff Sterns 43:29
Right. And it's also a matter of, you're swimming around in your own room. So a lot of these guys are swimming around in their own aquarium water. They can tell they are they they can't see anything other than what they're used to the line in the sand moves in into the time and all of a sudden, seven years goes by it felt like unlimited. I'm sure to a lot of these people. They didn't all have the philosophy that you learned early on about hitting this budget. And I want to ask you a question. Did you ever work with Ignacio Lopez
with no but understood his philosophy
Jeff Sterns 44:01
when you said Dr. Death I you know I remember reading automotive news and other publications at the time when he was just beating these suppliers mercilessly to bid to be a GM supplier and then they'd be in and then bid again.
No, that was look like I think it was a little bit of an Achilles heel for jack Smith because in the early days when jack was trying to turn around North America, you know when they broomed out the old management team and jack was put in charge in North America Lopez produced results if you now look back at the history of it those results came with a cost trust that as long as we were winning, didn't matter whether the supplier is one or not.
Jeff Sterns 44:46
I mean these poor guys I mean when your General Motors supplier I mean for the audience in case you're not you know from the car business or manufacturing does. When you get a GM contract or you get a manufacturer contract, you buy or rent buildings you hire staff because you're To make steering wheels or make hinges or do whatever you're going to do glass and admit to curious expenditure, investment expenditure, right. And it's a business plan. I mean, it's the very often the GM or manufacturer or supplier, or even dealership supplier, the whole is built around that agreement.
I think that the idea that you are going to have a purchasing process that enforces that you're going to have multiple bidders, and you are going to test the market not only for the specs that are going to be delivered, but the price that it's going to be delivered at that process still exists in General Motors today. It's not a bad process. It forces the market to respond. But some of the funny business stuff that was going on, meaning you got the low bid, and you may not have liked the supplier, or the process, so you sent that and rebid it out after the suppliers devolved all the information. And I think that there was probably some problems that were going on, then No, I did not work with him. I will tell you this, though, his right hand person was excommunicated from Europe. In the early days, Volker used to tell the story that he and Lopez couldn't be in the same room together, and one of us had to go. And so Volker Barth, who is who is this close to Lopez is anybody in the early days, maybe when he was Lopez was doing some of his best work was excommunicated to Brazil. And so the purchasing manager that was part of that three part process that I talked to you about was Volker parth. He knew all the Lopez's stuff, only, he didn't do the other stuff. So the goal for Brazil, remember, Brazil isn't necessarily at the top of the transparency, international ethics scores. And so when Barth came, he really one of the major things that he did was convert the purchasing process of General Motors to Brazil into the doughboys, we're going to have three or four bids, they're all going to submit their specs are going to have envelopes on the desk. And everybody's going to sit around the table and make the decision about what supplier that we're going to pick. He changed that dramatically. So know, the Lopez process was actually brought to Brazil as part of the culture and competence change that I
Jeff Sterns 47:42
talked about earlier. Moving from Brazil, is you are of course, the most interesting man in the world from Brazil, you are off to Poland, in December of 1999.
I went to Poland to work, it was dark Warsaw, if you draw a direct line is in the middle of Hudson Bay in Canada, you're up there.
Jeff Sterns 48:07
So from a latitude standpoint, right? Okay, exactly.
Three o'clock in the afternoon, it is pitch black. It's dark for 18 hours.
Jeff Sterns 48:18
So your mood is just wonderful. Yeah,
there's snow. Okay, had to buy a winter coat and all that stuff. Anyways, you know, I I guess I would consider myself a sales analysis and forecasting expert. Okay, I'll give myself that. And pat myself on the back. The thing that I learned in Poland, who was manufacturing, because my boss was actually the manufacturing executive of all of Europe, and because I was in charge of the plant, the new plant that was being built, I was had to report to manufacturing, they don't let clerks who are running $5 billion facilities mat report to manufacturing, that was a that was for me, that was a great experience, because it was the first time you know, I did a lot of go back to Brazil. Culture competence, programs, leadership, we approved probably 12 programs in a row at the board level when we were there. With that process that I just described, we still had to go to Big Daddy to get approval, right. It was the first time that I had actually not done an analysis of a program or built a product program up is I had to screw it together in an assembly process. That was an eye opener for me. You know, I think I've told you this story. The car has 3000 parts. How many cars can you make if you got 2990 parts? It's a trick question. Right? Right. 00 I learned what it took. And the discipline did I had no idea of of what it takes for those manufacturer. I know why manufacturing people are the way they are the requirement to take those 3000 parts, weld them paint Put the trim on, put the interior in, get it out the door. I've respect anybody today that's doing that. It is a such a disciplined process. And so we we launched a brand new vehicle for Europe in that plant, and I met some of the most dedicated individuals. One of the guys I met by the name of john Burton, who was a manufacturing guide that they stole from Nissan in the UK, and he became the manufacturing manager at the plant. He taught me Nissan's version of Kaizen. His whole mind was Kaizen,
Jeff Sterns 50:40
which is every Japanese continual improvement, continuous improvement,
right? His his whole mindset was continuous improvement. Um, you know, he would even tell me, you know, Warren, I actually do Kaizen when I'm getting ready in the morning, meaning how much waste Can I take out of, can I brush my teeth and shave at the same time, because that that takes time out of my preparation before I can get to the plant. That was his mindset, right. And he was a great guy to teach me that. And the great thing is the we had what we call the boys 51, the HR manager at the plant, the plant manager, the manufacturing manager, and myself, were all born in 1951. And so we called ourselves the four boys of 51. We're still friends to this day. But the thing that I remember most about Poland other than the experience of the expat culture in Warsaw at that time, 2000 was phenomenal. Because Poland was changing, Poland was growing, the market was growing, the time that we spent at the Marriott at Warsaw, for a for all of the parties in the xpad stuff. And we have friends for life that came out of there. Still, to this day, friends for life, other than my introduction to vodka. It was the manufacturing piece that probably solidified my ultimate work that I did in Russia, in terms of going to Russia and running the place.
Jeff Sterns 52:11
That was before Germany.
I went to Brazil, Poland, Germany, Russia, Switzerland,
Jeff Sterns 52:18
any before we leave Poland, any story for us, lesson learn, thing you wouldn't do again.
When I went to Poland when I was in Brazil, I was like the planning guy and the after sales guy, right? I wasn't executive. But I wasn't the guy yet. So going to Poland, was when I got my second nickname, the group executive of Europe was looking for somebody to go to Poland. And so he called Dick nerada. Who was my boss? And so I'm looking for somebody to go to Poland. Do you got anybody? Because I got a list of people. I don't necessarily like the list of people that's on the list. Do you have anybody that says, Well, I got a guy that you may be interested in. He's a little bit of a street fighter. That means I was obnoxious. Okay. And had been through enough to, I think, be self aware of both my limits, but not enough to keep my mouth shut. I got in most of my trouble when I when I couldn't keep my mouth shut. He said he's a little bit of a street fighter. And so he says, Well, good. I want to talk to him. And we talked and in 10 minutes, he said, Can you go to Poland? So you know, you know, Janet, my wife who cried the day I told her we were moving to Brazil cried harder. On the day. I told her we were leaving, but has been a trooper. So every time I said Jan, I need a favor. She knew she knew we were moving.
Jeff Sterns 53:50
Well, in my own conversations with Janet, you could tell how fun she is of Brazil, when she talks about
he had the best of both worlds. She had a husband and a man who had actually paid attention to her. So we when we were there, we had we had a gardener and a you know, an all around handyman guy for her for the the estate. Right? It was such an estate that I never let my boss come out there in the whole nine years I was there. Um,
Jeff Sterns 54:22
but this one I think was really about what you could rent for that kind of money if I recall right or wrong?
Well, if we kind of lived outside, there was an expat community for for some strange reason. We ended up living way out in the country. So my commute was an hour and a half one way every day. The personal story that I can say because I was the head guy, you know, I got to deal with the embassy and the ambassador and the charge the affairs and the Marines. You know Marines had hot dogs and a and W root beer in the basement of the embassy for Monday Night Football. So you know, you run around with a bunch of amcham muckety. mucks, right. Because you were the you were the head guy. But I developed a friendship with Chris Hill, who was the US ambassador to Poland, who was a car nut. So anytime I invited Chris down to the plant to go into the plant, he was just a real Karna. And what I didn't know was that he was a world war two buff. So one day, we got together, and he said, how would you like to go to Khan, which is the little city by Omaha Beach, and all of the places where D day landing was, we spent two days walking the beaches during the graveyard, which is an immaculate place. So we spent two days in France. And I would say that that was because I was with the ambassador right we were we were taking care of it was a marvelous trip. That's the one that I can't remember off the top of my head that was personal. So off to Germany. So I went from managing director of GM Poland to executive sounds nice executive director of after sales in Germany, where I was responsible for engineering and purchasing, and and service and the where all the parts warehouses that when you get you know, dealer gets parts from warehouse, whatever, I was in charge of all those. But here is a great cultural story sitting in a dealer leadership meeting. I'm talking about the top 20 dealers in Brazil, volume, guys, right from all over the country. And they don't know that I speak. I've gone full tilt on learning Portuguese, and they're making fun of me in the meeting.
Jeff Sterns 56:47
They're talking about you.
Because I'm a gringo. They're making fun. And I let them go for a while. And I'm pretending like I have no idea what they're doing. No, no, mouth flinches. No. Nothing. And they're done in fluent Portuguese. I said to them, I think, because I'm in charge of all of your warranty audits. I'm doing this in Portuguese now. Yeah. Because I'm in charge of all of your warranty audits and all of your service rules. I suggest that you guys talk to me a lot nicer than you have been for the last 15 minutes. And the whole room busted out laughing. And then one day, Wagner comes into me, he said, I need to move. I need somebody to go to Russia. And I said, Why are you talking to me? He said, Russia is complex, and I need somebody who I can trust. And that's you.
Well, that says a lot about you.
So I went home one more time. Jan, I need a favor. Here's what we're gonna do more, you're going to move to Russia. And here's what you're going to ask him for. We keep the house in Germany, we go to Moscow, and we rent you a great apartment. And then we can travel back and forth. But I'm not moving to Russia. Is that all you need? Well, no, but I'm not moving. I want to keep this house in Germany. I have friends in Germany, a British friends in Germany. I ain't moving again. So I went to Wagner. Keeping the house in Germany. Oh, first I went to HR. Here's a life lesson. You do a deal with the boss, don't go to HR, because they're not going to support you. Here's what we're gonna do. We're going to keep the house in Germany. We're going to get an apartment in Moscow. And then you're going to give me an allowance to fly back and forth all the time. Oh, well, wait a minute here. Oh, we don't do that. That's not HR policy. Who told you you could do this? Do you really want to know? I mean, I'm coming in here telling you this. This is a done deal. Who told you? You could do this? Rick Wagner. Why don't we get him on the phone? Oh, Rick told you that?
I guess we can make an exception. And it was the best job I ever had. I had a full time driver, which was fantastic. I had the only white escalate in Russia. And why did I have a white escalate? Because every one of the cops in Moscow. After two months, I knew Oh, that's the guy who's not going to pay us a bribe.
Jeff Sterns 59:36
And apart one, make sure to listen to part two.
This has been Jeff Sterns connected through cars.
Pool hustler, junior mail boy, senior mail boy, analyst, international exec, consultant, adjunct prof of economics at Lawrence
Warren is first a husband and father. Currently learning how to fly a jet and looking to get into tournament bridge, he figures it's safer than skiing the Swiss Alps where he almost spilled his brains! Warren went from pool hall to mail room to international executive level which took him to places like Brazil, Poland, Germany, Russia and Switzerland. Warren retired from GM only mos before bankruptcy took 75% of his pension and nearly his entire (GM stock) nest-egg. Warren runs a successful consultancy to the industry now.
He currently serves as an adjunct professor of economics at Lawrence Technological University.
-Business experience provides clients with insights and analysis to grow their business profitably:
-Sales and Distribution growth strategies.
-One-day forecast seminar with case studies.
-Target Product asessment for automotive suppliers. Majority of work covers consulting suppliers that need to respond to RFQs (volume related) and submissions to banks for due diligence.
-Assesment of industry demand for Emerging Markets
Specialties: Business Analysis, Multi-Cultural, Large-Deal Negotiations,
Market Assessment and Forecasting,