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

formatting link
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 (

formatting link
). 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."

Reply to
Mike
Loading thread data ...

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?

Reply to
MoPar Man

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

Reply to
Ted Mittelstaedt

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')

Reply to
Bill Putney

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

Reply to
Dori A Schmetterling

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.

Reply to
Spam Hater

snip

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.

Reply to
Joe

MotorsForum website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.