And as Chrysler is widely considered the original equipment manufacturer (OEM) in most danger of imminent dissolution, only two aspects of the company are given a decent chance of surviving: its minivans and its brands. If Chrysler does go out of business, Jeep and its iconic identification with SUVs probably would survive, much as it was the crown jewel of Chrysler’s purchase of American Motors Corp. in 1987.
Even the much-damaged Chrysler brand is given some respect in discussions about what a Fiat-Chrysler combination might do with Fiat-designed or -built small cars that could be imported to the United States under their new partnership. Almost invariably, industry experts predict such vehicles would be badged “Chrysler” rather than “Fiat”—a brand that has been missing from the American market for 27 years.
“Brands in the auto business are everything,” said George Rogers, chairman of Team Detroit, the consortium of advertising agencies that handles all of Ford Motor Co.’s marketing and advertising. “And it’s a much more complex decision to either minimize or kill a brand than most people realize.”
For a variety of reasons going beyond today’s dismal marketplace exigencies—including historic loyalties, production strategies, internal politics and dealer investments—car brands possess a ton of inertia and are very difficult to kill even when there’s a clear business-school case to be made against them.
But profound challenges to Detroit’s automotive brands keep arising. They snuffed out Plymouth and Oldsmobile years ago. And today’s marketplace presents a strong apparent rationale for accelerated brand consolidation in the industry, including share shifts, segment disruption, the demands of developing new models more quickly and the huge costs of supporting a brand with marketing.
Add to that the extremely intensified imperative to cut costs that now is being shouldered by each of the Big Three.
“The rationale for decision-making now isn’t whether brands are strong or not—it’s that the business won’t support them,” said consultant John Grace, president of Brand Taxi LLC, in Greenwich, Conn. “In the environment we’re in, [brands] aren’t going to lead decision-making.”
On the surface, it sure looks as though GM will have to say goodbye to some brands. In its business plan unveiled to Congress in December, GM said that it would slash US$ 600 million in marketing spending by 2012. It will reduce its vehicle nameplates to just 40 in 2012, down from 48 this year and 63 in 2004.
And GM told Congress that it will avidly support only half of its eight brands: Chevrolet, Cadillac, Buick and GMC. Those four account for 83 percent of GM’s US vehicle sales and much more than 83 percent of its profits.
Yet in the fine print, congressmen found that GM wasn’t actually as dedicated to brand elimination as first thought. GM CEO Rick Wagoner said that Pontiac will continue as a specialty niche brand within the Buick-GMC division—essentially, what it is now. Saab may go on the sale block along with Hummer, but since most of the brand’s vehicles are sold in Europe, GM’s evaluation of Saab is being done there.
And Saturn, GM executives told Congress, will be the subject of exploration of “alternatives” to a simple termination or sale of the brand, in large part because the company has unique franchise arrangements with Saturn dealers. And as recently as this week, Mark LaNeve, GM’s North American vice president of sales, was telling reporters that GM was leaning toward streamlining rather than killing Saturn.
“Why should one of [my brands] go away?” asked LaNeve in an interview several weeks ago. “There are lots of brands that we out-sell. Why doesn’t one of them go away?
“Spreading resources thin is a fair question,” he continued. “But the issue isn’t solely, ‘Does GM have too many brands?’ There are too many brands in the market, period.”
Even for the endangered brands, LaNeve added, product pipelines are filled with exactly the kinds of higher-mileage vehicles that the market shift will demand in the near and medium-term future.