Brand Breakdown: Too Many Models, Too Little Innovation Destroyed Detroit's Customer Loyalty

http://www.washingtonpost.com/wp-dyn/content/article/2006/03/25/AR2006032500112.html

Brand Breakdown: Too Many Models, Too Little Innovation Destroyed
Detroit's Customer Loyalty

Washington Post
Sunday, March 26, 2006; F01

As recently as a generation ago, brand loyalty meant something for U.S.
car buyers. You were a Ford man or a Plymouth family.

The first car for legions of young men was a Chevy. As Americans
increased in age and wealth, they climbed the General Motors Corp.
status ladder, up through the Pontiac, Buick, Oldsmobile and,
ultimately, Cadillac brands.

But today, consumers have a broader range of choices, as foreign
automakers have poured vehicles into the U.S. market. Further, three
decades of disappointment with the quality of U.S. vehicles has
combined with Detroit's on-again, off-again commitment to building
innovative passenger cars. The result: Brand loyalty has continued to
slip away.

With that, a run of job cuts, plant closings and model-line paring has
emanated from Detroit automakers, the most recent coming last week.

The Big Three have confused car buyers by inundating them with poorly
defined brands and too many models. And, compared with their Japanese
rivals, U.S. automakers have often shown less interest in upgrading
cars after their high-profile rollouts, analysts say.

By contrast, for instance, the Toyota Camry has gone through five
redesigns since its 1982 rollout as an economy sedan; America's
top-selling car received continuous horsepower upgrades and now has
features found on higher-priced luxury vehicles.

As the reliability and sex appeal of certain brand names have waned,
Detroit automakers have had to rely more heavily on incentive-laden
pricing to lure customers.

GM has tried hard in recent years to recoup some brand loyalty but has
had difficulty in wooing customers back. Once at more than 50 percent,
GM's market share now stands at 24 percent.

In a recent J.D. Power and Associates survey tracking owners who had
traded in their vehicle for one of the same brand, U.S. brands occupied
seven of the 10 slots that showed the greatest drop-off in brand
loyalty between 2004 and 2005. Four of the top five gainers were
Japanese; Jeep was the lone American.

This year -- as Ford and GM close all or part of 26 factories and
terminate several models -- car buyers will watch as a blur of familiar
and obscure names begin exiting the market, replaced by a raft of new
and retooled models.

All told, the world's automakers will introduce 23 new and 27
redesigned models to the United States this year. Hello to the Honda
Fit subcompact, Saturn Aura sedan, Volkswagen Eos ragtop and new SUVs
from Dodge, Mercedes-Benz and Jeep.

Goodbye to the Lincoln LS, which caught the eye of enthusiasts such as
information-technology manager Ron Browne at the end of 1999, when car
magazines began hailing the new luxury performance sedan as an
"American BMW." Motor Trend magazine named the LS Car of the Year at
its debut.

Browne, who lives in Laurel, bought a 2000 model for $33,000 -- about
$15,000 less than a comparable BMW. He bought a second one in 2002. But
Ford Motor Co., Lincoln's parent, did little to keep the car fresh as
the years passed. In January, Ford said the LS would be one of several
vehicles to be discontinued by 2008.

"They came out with a great product," Browne said, "but they let the
competition surpass them."

Goodbye to some iconic names -- the Pontiac GTO and Ford Thunderbird.
And goodbye to the Ford Taurus. In its day, the Taurus was hailed as
the great American import-fighter in the mid-size car category. Ford
sold hundreds of thousands of them before the car bottomed out,
bypassed by continually updated, glitzier foreign rivals. The Taurus
became, for a time, the quintessential American rental car.

The plants scheduled to end production include a factory that builds
GM's entire line of poor-selling minivans, including the Chevrolet
Uplander and Buick Terraza. Also on the plant hit-list are factories
that build low-volume but high-profile vehicles from Ford and Chevy,
including the Ford GT and the Chevy SSR -- a retro-styled truck that
was a favorite of GM executives.

Some plants are scheduled to close soon; others, by 2008. Automakers
assure owners of the discontinued vehicles that parts and service will
continue to be available.

Some investors and analysts have suggested that GM and Ford haven't
gone far enough -- they've questioned whether signature brands such as
Lincoln or Mercury should even exist anymore. Billionaire investor Kirk
Kerkorian, GM's largest individual shareholder, wants GM to drop the
Hummer and Saab brands it acquired in recent years.

Charles Hughes, a former president of Mazda North American Operations
and the founder of Brand Rules, based in Newport Beach, Calif., agreed
that GM and Ford have far too many brands compared with rival
automakers. Both automakers oversee eight brands. DaimlerChrysler AG
has three American brands -- Dodge, Jeep and Chrysler -- and Germany's
Mercedes-Benz.

By comparison, Toyota Motor Corp. has three brands. Honda Motor Co. and
Nissan Motor Co. each have two.

The Lincoln brand has had such trouble finding its way, for instance,
that American consumers aren't sure what Lincoln is all about, Hughes
said. The Lincoln Town Car sedan appeals to older drivers, for
instance, while the Navigator sport-utility vehicle can be seen in rap
videos and NFL player parking lots. "They haven't decided what they
want Lincoln to be when it grows up," Hughes said. "If you are going to
compete with BMW and Mercedes -- which have a very strong opinion on
how cars are supposed to be designed -- you need to have an equally
strong opinion."

In addition to Lincoln and its namesake, Ford owns the Mercury, Mazda,
Volvo, Jaguar, Land Rover and Aston Martin brands.

GM and Ford complain that health-care and pension costs for their more
than 500,000 retirees -- which they estimate add about $1,500 to the
cost of each new vehicle -- is money that could be spent on technical
innovations and new styling to better keep up with Asian competitors.

Detroit's product jumble among cars extends beyond mere brand
confusion. Basic quality issues -- which U.S. automakers have worked
hard to improve but seem unable to entirely resolve -- still drive
buyers away from U.S. offerings, even consumers who want to buy
American.

For instance, Jennie Compau, a 24-year-old homemaker from
autoworker-rich Mt. Pleasant, Mich., chose a new GM minivan, a
Chevrolet Uplander, a year ago. She thought it was hip-looking -- its
boxed-out front made it look a little more like an SUV than other
sloped-front minivans. It had a built-in car seat, something she could
appreciate with three young kids, a remote starter and built-in DVD
player that came standard. Plus, she has a GM worker in the family and
used the company discount.

Two days after driving the Uplander off the lot last October, she began
smelling gasoline -- her vehicle was leaking fuel. The gas tank was
defective and had to be replaced. Then the air conditioning broke. The
last time she went in for repairs, the dealer kept her car for 57 days.

Most troublesome of all, whenever she drove the car more than seven
miles, the headlights started dimming on their own until only the
parking lights glowed. She's hired a lawyer to win compensation from
GM.

As part of its plant cuts, GM is closing its Doraville assembly plant
outside Atlanta, where 2,800 workers build the Uplander, Buick Terraza,
Saturn Relay and Pontiac Montana SV6.

All are part of GM's lackluster line of minivans that Compau and other
drivers say are plagued by quality glitches and that most other
consumers have brushed off in favor of vans from rival automakers.

The National Highway Traffic Safety Administration has received
numerous complaints about electrical problems with GM minivans. In
Consumer Reports' recently released annual vehicle reliability report,
GM's Uplander, Terraza, Relay and Montana were rated as the least
reliable of all U.S. vehicles. A GM spokesman said the company remains
committed to building quality vehicles.

Compau, like many Americans -- including many officials in Washington
-- is generally unsympathetic to the plight of Detroit's automakers.
Americans have been shifting to foreign cars in greater numbers,
especially on the East and West Coasts. But Compau said GM has no
excuse to be losing ground in its own back yard.

"If GM can't build quality vehicles and back them up, no one is going
to buy them," she said. "I feel like GM is digging their own grave. I
feel bad about it because there are a lot of people who are losing
their jobs.

As for the soon-to-be-discontinued Lincoln LS, the sports sedan
captured a loyal following early on, including the online LS Owners
Club ( http://www.llsoc.com ). Brian Gowing of Canyon Lake, Calif.,
started the club, which grew from 30 members to 850 across the country,
and to Puerto Rico, Japan and Korea.

In 2004, members of the club drove from California to Ford's
headquarters in Dearborn, Mich. The caravan started out in Irvine,
Calif., and picked up members along the way, flying through Nebraska 30
cars deep at 100 miles per hour. Hosted by Ford in Dearborn, the club
learned about Lincoln's history of technological innovation and
stand-out styling.

Gowing said initially everyone in the group had pride in the car. They
had the feeling that the LS was a toe-to-toe competitor with the BMW 5
Series or Cadillac CTS, he said. But then other carmakers pumped up
horsepower and added new features while the LS stayed the same. Now,
Gowing says of Lincoln, "they seem to be okay at being mediocre."

 

Funny how they don't really talk about Chrysler (but yea, Chrysler did
kill Plymouth, and under Daimler control it axed quite a few car
models).

That's not new, and it's not the reason for Ford and GM's problems.

Health care and pension costs have killed big labor companies. Do you
think health-care costs are out of control in Japan? Do Americans
even know anything about Jap health care?

Incentives and rebates have eroded profit margins. Consumers are
tapped out - the net household "savings" rate is actually negative.

So the japs upgrade the same model over 5 to 8 years, while the big-3
give you 3 or 4 different models and you step your way up the model
line if you want to upgrade. The difference is that continuous
upgrading the same model means tooling re-design - tell me that's not
cheap.

Remember that the Japs had (and still have) a captive (protected)
domestic market with wierd rules about car turn-over. They could tap
that market for profit and run their US operations at a loss just to
capture market share.

And how easy is it to buy a Jeep, or PT Cruiser, or 300C, or Mustang
in Japan?

And why are US makers so reluctant to sell US-badged (if not US-made)
cars in Europe? Why do they have to resort to buying Saab or Volvo or
Jaguar just to have a European revenue stream?

I've always thought of the LS as roughly equivalent to the 300M.
Strange to see the LS go, just like the Thunderbird. The Ford 500
also seems to languish in obscurity. Anyone remember the Mercury
Marauder? Ford just can't seem to do anything right. There just
wasn't enough buzz for the LS or Thunderbird.

Put up your hand if you can remember ever seeing a TV ad for the LS.
Ford and GM are just the worst at advertizing.

What a dud that was.

Sure they should - and there should only be ONE (1) Lincoln mode, and
ONE (1) Mercury model. Not 4 different Mercury-this or Lincoln-that.

What's the status of Kerkorian's law suit against Daimer over the 1998
Chrysler take-over?

There's no talk here about GM's On-Star thing. I would think that (1)
it's quite attractive to a certain large demographic and (2) no-one
else has anything similar. How well is On-Star working for GM's
sales?

 

If people were buying GM just to get On-Star then they would be talking
about it. On-Star is kind of like moving into an apartment complex that
logistically cannot have dishes sprouting all over the building, so they
have
a deal setup with the cable company to fold the cost of the cable into your
rent if you choose. The cable still costs you extra, it's just easier to
select
that then to try to use rabbit ears on top of the set.

I'm sure OnStar is making them money, but I don't think it's significant,
and I
don't think it's a draw to get people to buy GM particularly.

Ted

 

No -instead they're hyping the airwaves with the full capability
computer options with wireless hot spot they say they'll be adding to
cars as a $3000 option so you will be able to check e-mail and surf the
net while you drive. What idiots!

Bill Putney
(To reply by e-mail, replace the last letter of the alphabet in my
address with the letter 'x')

 

That would be a curious thing to do as Saab has a distinctive identity, at
least outside NA. Especially since the top Opel/Vauxhall models ceased
production Saab has its own niche in the (non-US) GM line-up.

Maybe it is not profitable?

DAS

For direct contact replace nospam with schmetterling
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[...]

 

Funny how they don't really talk about Chrysler (but yea, Chrysler did
kill Plymouth, and under Daimler control it axed quite a few car
models).[/QUOTE]
Also killed their FWD mid sized LH cars and replaced them with the ugly,
heavy, poor visibility RWD 300 which many of us LH owners have no
desire for.

Not GM's problem? IMO it's been part of their problem for many years.
GM's current financial problems are simply the last straw result.

Do Americans know about Canada's federal universal health care?
Canada is a big competitor in the manufacture of both big 3 and "import"
cars.

If the cars were more acceptable incentives and rebates wouldn't be
necessary.

The Japanese incremental improvements to their cars give desirable
improvements to the same buyer category.
The Big 3 buyer upgrading to another model usually means to a larger car
which many buyers don't desire.

Because of Chrysler dropping their mid FWD LH models I'm long overdue in
changing my car. However as long as it is serving me well I'm trading
slightly increased maintenance for big depreciation on a newer car.
This has given me time to observe new cars on the market and I've now
concluded my next vehicle will be smaller, more fuel efficient and a
station wagon type vehicle.

 

You know, that may be completely right, but that's what GM thinks their
problem is. You agree with GM top management. That alone makes me think it
may be totally off base. You know how all 5 GM divisions made the exact
same body styles in 1948? Somehow they thought that was clever then, but now
it's not. Bob Lutz is continually saying "that's obviously our problem, we
have too many car models". When somebody's always wrong, you just get
adapted to it.

So anyway, I'm completely skeptical. If they could shut down Pontiac, Buick,
and GMC tomorrow for free, I just don't think it would help GM at all. I
can't imagine anything good coming from that.

GM could have had the best-selling truck in American overnight (ahead of
Ford) at any time in the last 20 years by shutting down GMC, forcing GMC
customers to switch to Chevy. GMC hasn't differentiated their product from
Chevy since the 60s. Somehow GM lets them continue to operate.