2. Robert Lutz1 isn’t the first entrepreneur to dream of starting a car company from
scratch. But he is the first one who plans to do it without putting a penny into building
a factory. Lutz, former Chrysler president and current CEO of Exide hopes to build and
sell the sleek Cunningham C7 – capable of speeds of up to 200 mph and selling for
about $250,000 – with a company of only twenty people. How does he plan to
accomplish his dream? By contracting with other organizations to handle everything
from engineering to final assembly and shipping. If the plan succeeds, Cunningham
Motors will be the first truly “virtual” car company.
Briggs Cunnigham – an American racecar builder who nearly beat the European car
companies at 24 Hours of Le Mans2 in the 1950s - will design the Cunningham C 7,
fashioning it after the racing sports cars of the 1950s. The racer’s son and namesake is
the cofounder of Cunningham Motors, while former Suzuki and Honda executive Jack
McCormack serves as the chief executive.
Lutz, who is often credited with Chrysler’s product resurgence in the 1990s with cars
such as the Dodge Viper and PT Cruiser thinks that there is a niche for a small volume
super-luxury American sports car to rival European prestige brands such as Ferrari and
Aston Martin. “The Cunningham is a gentleman’s or gentlewoman’s high-tech
conveyance that is different from road candy like Lamborghini or a Bugati”, says Lutz
who is out to raise up to US$ 100 million for the company from investors. Driven by the
500-plus horsepower V12 engine, the luxury Grand Tourer (GT)3 is Lutz reaction to
today’s car designs that remind him more of “trash compactors and toasters than proper
automobiles”. Lutz describes the car as combining the lush leather appointments of a
Bentley with the performance of a Ferrari. “Why should someone who wants to
purchase a truly prestigious automobile, something unique, will have to turn to an
European marquee?” asks Robert Lutz. “There is sufficient wealth – and more
importantly desire – in the world to support an American prestige marquee and
Cunningham will fill the niche. There are enough wealthy people who have all the
1
Appendix 1 provides Robert Lutz’s biography
2
Appendix 2 provides a description of Le Mans race
3
Appendix 3 provides an explanation of Grand Tourer
2
3. Mercedes- Benzes and Ferraris they will ever own. If they could have something new
that their friends don’t have, they will buy it.”
But automotive history is full of romantic dreams that crashed on the rocks of financial
reality. Lutz knows the only way they could reach their goals would be to keep start-up
costs low by creating an organization design based on partnering with other companies.
With a reasonable target of selling only about 600 cars a year, building a factory simply
doesn’t make sense. The plan is for a network of automotive suppliers4 to furnish parts
and assemble them into modules, which will then be shipped to one large partner that
will put the modules together into a finished vehicle. Internet-based collaborative
software will tie together a vast network of designers, chassis developers, parts makers,
fabricator, and manufacturers throughout the United States. Finally, boutique car
retailers will sell the super premium Cunningham C7.
Times have changed since iron ore and other raw materials went into one end of Henry
Ford’s factory in Dearborn, Michigan, and bright, shiny Model As came out the other
end. At the beginning of the twenty-first century, vertical integration has given way to
disintegration, with more and more companies farming out many of their activities to
outside contractors. “The concept of a virtual car company is something everyone is
thinking about,” says Randy Redding, manager of the Automotive Industry Group at
UGS, the partner providing collaborative software for Cunningham. Lutz and
Cunningham are turning thought into action – and, they hope, into a successful new car
company.
4
Appendix 4 & 5 provides news clippings describing some of the contractual relationships that
were set up between Cunningham Motors and its suppliers
3
4. Question for class discussion
1. Do you think Robert Lutz will succeed in realizing his dream of creating the world’s
first virtual car company? What are the advantages of the proposed business model?
What are its dangers?
2. If you were a banker, would you lend money to CMC? If you were a supplier, would
you agree to supply components to CMC? What would you expect from CMC in
return? Do you think Cunningham Motor Company can sustain itself?
3. What kind of skills would the twenty employees in CMC need to have?
Appendix 1: Biography of Robert Lutz
Robert Lutz holds a bachelor’s degree in production management and masters in
business administration from University of California, Berkley. He began his automotive
career in 1963 as a senior executive in the European operations of General Motors. In
1971, he became the Executive Vice President of Sales at BMW in Munich and was
elected to its Board of Management. In 1974, he joined Ford Motor Company and spent
the next twelve years in senior positions such as VP of Truck Operations, Chairman of
Ford Europe and Executive VP of Ford’s International operations. From 1982 to 1986,
Lutz was a member of Ford’s Board. In 1986, Lutz joined Chrysler Corporation where he
served as President and Chief Operating Officer responsible for Chrysler’s car and truck
operations worldwide that included sales, marketing, product development,
manufacturing and procurement. It was here that Lutz earned the status of first citizen
of North America’s car industry when he helped reinvigorate Chrysler with ‘cool risky’
vehicles. Even though Lutz left Chrysler in 1998 after its merger with Daimler Benz,
Chairman Jurgen E Schrempp continued to consult him on issues of integration. True to
his status, Robert Lutz likes to live large. He flies in his personal Soviet-era fighter jet
and speeds around Detroit in a Dodge Viper.
4
5. Appendix 2: 24 Hours of Le Mans
The 24 Hours of Le Mans is a famous sports car endurance race held annually since
1923 near the town of Le Mans, Sarthe, Francs. Commonly known as the Grand Prix of
Endurance, it is organized by Automobile Club de l’Ouest (ACO) and run on a circuit
containing closed public roads that are meant to test not only a car and driver’s ability to
be quick but also endurance to last over a 24-hour period.
Le Mans was envisioned to be different from Grans Prix racing. Instead of focusing on
the ability of a car company to build the fastest machines of the time, the 24 Hours of
Le Mans would concentrate on the ability of manufacturers to build sporty and reliable
cars. Since the cars race over public roads that are not of same quality as permanent
racing circuits, there is considerably greater strain on the automobile, necessiating
greater emphasis on reliability. The vehicles also needed to be fuel efficient since the
nature of endurance racing requires as little time to be spent in the pits as possible.
These technological innovations have had a trickle-down effect, with technology used at
Le Mans finding its way into production of cars, especially those of grand tourers – road
cars needing high speed, reliability and fuel efficiency.
Source: Accessed (on 26th June, 2007) and modified from Wikipedia
Appendix 3: Grand Tourer
A Grand Tourer (GT), is a high-performance automobile designed for long-distance
driving. Any such car could be considered a grand tourer, but the traditional and most
common body style is the coupé (two door) with either a two-seat or a 2+2 seat
arrangement. Grand tourers differ from typical sports cars (e.g. Porsche 911) in that
they are usually larger, heavier, and tend to make less compromise in comfort for the
sake of driving ability. For this reason, most have front-mounted engines, which leave
more space for the cabin than mid-mounted engines. They also tend to have softer
suspensions to provide good ride quality. However, grand tourers do have similarities
with sports cars, such as their predominant use of rear- or four-wheel drive and because
of their powerful engines, GTs can compete with many sports cars in top-speed and
5
6. acceleration. GTs excel at high speed, long distance travel or races and make better
daily-drivers than sports cars. Very high-performance grand tourers, such as the Ferrari
599 GTB Fiorano and the Mercedes-Benz SLR McLaren, are often considered supercars.
Source: Accessed (on 26th June, 2007) and modified from Wikipedia
Appendix 4: News Clipping A
GM Invests in Cunningham Motor Co.
General Motors Corp (NYSE:GM) and Cunningham Motors Co. today announced that GM
has acquired a minority stake in Cunningham. Cunningham intends to build and sell
about 600 C7 Grand Touring cars per year with a sticker price of $250000.
“Cunningham Motors is pleased and gratified to have GM as a investor in the company’s
efforts to develop the first true American GT since Briggs Swift Cunningham last did so
in 1953,” said Jack McCormack, CMC president and CEO.
CMC was founded by Briggs Cunningham III and Robert A. Lutz, to develop and produce
a grand touring car that would compete with Ferrari, Aston Martin and other world class
touring cars in North America and Europe. Lutz joined GM as a vice chairman of product
development last August and was recently named to the additional post of chairman of
GM North America. Under a governance framework approved by GM’s Board of
Directors, Lutz will not participate in transactions between the two companies but will
continue to be a member of the Cunningham Board of Directors. Additionally, GM will
appoint a member to the Cunningham Board.
As a virtual car company, Cunningham’s business plan calls for outside suppliers to be
responsible for the design, engineering and production of its vehicles. Roush Industries
of Livonia, Michigan, has been selected to develop and integrate the C7. Although no
official announcement has been made about a powertrain supplier McCormick told
Autoweek that the company has settled on an engine from Cadillac Cien concept car
without mentioning the supplier. The connection between Cadillac and Cunningham
begun 50 years ago when Briggs Cunningham campaigned a Coupe de Ville and a
6
7. special race bodied Cadillac in the 24 Hours race at le Mans in 1953, finishing 10th an
11th respectively.
Appendix 5: News Clipping B
CMC Selects Evans Engine Cooling for its New Cunningham C7 GT
The new Cunningham C7 automobile, introduced by Cunningham Motors Company
(CMC), of Plymouth, MI, at the N American Auto Show in Detroit will use engine cooling
technology pioneered by Evans Cooling Systems Inc, of Sharon, CT.
Cunningham traces its links to Briggs Cunningham, builder and racer of fabulous
Cunningham Cars of the 1950s. Credited with having built the first American sports car,
Briggs Cunningham produced a series of cars, the C1 through C6. The C4R was
particularly noteworthy as it nearly won the 24 hours race at Le Mans in 1952, an
amazing feat from a small American company. Nearly 50 years later, members of the
Cunningham family are principle backers of the new Cunningham Motors Company,
along with Robert Lutz, formerly President of Chrysler Corp and currently CEO of Exide
Corp.
“Cunningham Motors brings together a number of high-tech improvements heretofore
lacking in production automobiles, including our waterless NPG+ engine cooling
system”, said J W Evans, CEO of Evans Cooling System Inc. , and inventor of he cooling
system. Powered by the 500+ V12 engine, the Cunningham will have tremendous
performance capabilities that will require a cooling system that can dissipate the heat
produced by that kind of horsepower. We are pleased that our cooling system has been
selected for this remarkable automobile”.
“ The Evans cooling system will provide to Cunningham the ability to perform without
cooling system failure regardless of any ambient air temperature or operating vehicle
load parameter,” according to Jack McCormack, President and CEO of CMC. “This is one
of the many innovations that will set the Cunningham C7 apart from all other production
automobile efforts,” he added.
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