Tuesday, December 02, 2008

Brands and the (incredible shrinking) Big Three "Just how serious are they about shrinking their vast lineups of different brands and models to match the current harsh reality of the market?" That’s the key question asked in the New York Times t "Big Three May Need to Trim Number of Brands," 12/1/08). The article points out that Ford, GM, and Chrysler together have 112 different car and truck models using 15 brands (makes) in the US. By contrast, the big three Japanese companies (Toyota, Honda, Nissan) have only 58 models. A confusing array of reports are out on whether Ford will sell off its Volvo division, Both Ford and GM are in talks with the Swedish government, but it is clear that EU competition rules would make it hard for Sweden to just step in and "rescue" the companies. Beside, the fall in Volvo sales is even more catastrophic than that of the other failing GM brands. Who in their right mind would pay anything for these brands? GM has been trying all year with no success to sell its Hummer brands. It also has been thinking about selling both the Saab and Saturn brands. Pontiac may also be on the chopping block. But who wants them? But dropping brands is not so easy, even if you despair of selling them. In 2000, GM dropped its Oldsmobile brands, but it took four years and two billion dollars to make good with employees and dealers. Over the last few years, Ford and GM have sold off whatever they could. On Nov 17, GM sold its remaining stake in Suzuki Motors for around $200 million. Ford sold in 2007 its Jaguar, Aston Martin, and Land Rover brands. It has also sold most of its stake in Japan’s Mazda for $540 million. In 2006, GM sold off its stake in Isuzu and in Fuji Heavy Industries (Subaru) as well as its main stake in Suzuki). All the properties that these companies greedily snapped up in the 1990’s were sold off in a rush. All that cash went to slow down the burn rate, but couldn’t make the companies profitable. But there are still too many brands. GM and Ford spend fortunes trying to convince users to buy slight variations on the same model. The strategy of pseudo variety worked well when the Big Three rules the world, but now the excess variety doesn't protect market share, while flagship brands like Toyota's Corolla and Honda's Accord point to safe, well-engineering, constantly improved products that make car buying a lot easier. 7:47:42 PM

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