Young Car Buyers Challenge Detroit

Young Car Buyers Challenge Detroit http://tinyurl.com/myk8ej
GM, Chrysler, and Ford must convince Gen Y consumers that their quality
has risen and their new models deserve consideration
By David Kiley
As Chrysler emerges from Chapter 11 bankruptcy, and as General Motors (GM) in all likelihood heads into the same process, the toughest and most important obstacle facing those companies will be young consumers like Joseph Molinari.
Molinari, a 24-year-old recent graduate of the University of Michigan's Graduate School of Social Work, is in the heart of the so-called Generation Y, consumers between the ages of 22 and 32, whose parents are baby boomers. Armed with his degree and in a new job in Pinetop, Ariz., Molinari is driving a nine-year-old Honda Accord that he got while in college, purchased with help from his parents off a used-car lot. The car has a glitchy transmission, and the prospect of snowy mountain driving in months ahead has Molinari thinking about new wheels. But so far he is not very intrigued by the amazing deals to be had on Fords, Chevrolets, and Dodges. The car he is most interested in checking out is a Subaru Outback, because of its high marks for reliability and a tough all-wheel-drive system.
"I go with what the research tells me, and then I look at price," says Molinari. Settling for a Low Price
There's the rub for GM and Chrysler, and to a lesser extent Ford. At least two generations of Americans have grown up thinking that U.S. brands are not the preferred option for passenger cars. In any one category for the past decade or so, the best-selling cars in America have been of Japanese originToyota Camry, Honda Accord, and Nissan Altima. Ford's F Series pickup has been the best-selling vehicle overall, but truck buying is very different from car buying. Chevy has actually been the leading brand among Gen Y, according to researcher AutoPacific, but there's even bad news in that: Sales have been driven overwhelmingly by the brand's lower pricing and cheaper subcompact and compact offerings, not by preference. "They settle for Chevy, but aspire to imports mostly when they get a bit of money," says AutoPacific's Deborah Grieb.
It's well established that Detroit automakers lost ground in the 1970s and '80s with baby boomers. Rebellious and independent when they were buying their first cars, boomers did not want "their father's Oldsmobile." They flocked to Asian makes like Toyota (TM) and Honda (HMC) just as those companies began setting the industry pace for quality and reliability, which Detroit has been chasing ever since.
The bad news for Detroit is that so far, at least, children of the boomers aren't showing a similar streak of auto-brand independence. Fifty-one percent of Gen Y say they are considering Toyotas, according to AutoPacific, while Chevy scores with only 34%, Ford (F) 32%, and Chrysler 10%. It's a trend that GM, Chrysler, and Ford need to reverse if they're going to regain traction in the U.S. market.
"Gen Y is much more apt to be aligned with their parents' brand choices than those boomer parents were with theirs," says John Wolkonowicz, director of special projects at IHS Global Insight's automotive practice. American carmakers "simply must do much better with Gen Y than they did with their parents, or the comeback we keep hearing about may not happen." Rejection by Gen Y
Reliability and reputation matter a great deal to consumers, but especially those in Gen Y. In J.D. Power & Associates' "Avoider" research, which surveys car buyers on why they avoided certain brands, around 30% of boomers, Gen Xers (those aged 33-45), and Gen Yers said they were "concerned about reliability." Nineteen percent mentioned "bad reputation of manufacturer." And in both those categories of rejection, Gen Y had the highest level. For example, in the Power survey 24% of Gen Y survey takers cited "bad reputation," while just 18% of their boomer parents did.
So, it's a double whammy for Detroit. Not only is Gen Y larger than either the boomer or Gen X group, but its rejection rates are higher as well. "In areas like fuel economy, the U.S. manufacturers are doing much better and can penetrate the market with that information," says David Sargent, vice-president for research at Power. "But changing overall attitudes and perceptions about quality and reliability takes longer."
Trouble is, these younger consumers are slaves to Internet research. And when the leading third-party arbiterssuch as J.D. Power (a unit, like BusinessWeek, of The McGraw-Hill Companies) and Consumer Reportsput GM well behind the likes of Toyota, Honda, and the Europeans, it makes it tough for rational consumers with little "Buy American" sentiment to choose a U.S. brand unless they are bowled over by a particular vehicle's design or price. Consumer Reports recommends no Chrysler products this year. GM only had 19% of its vehicles on the recommended list. Meantime, Ford had more than 70% of its vehicles recommended, about the same as the Toyota brand (not including Lexus and Scion).
But there are people working to change Detroit's fortunes who see hope, especially as GM and Chrysler get rid of models and brands that have dragged down their reputations and quality scores. Eric Hirshberg, president of ad agency Deutsch/LA, which has handled advertising assignments for GM as well as its Saturn unit, says he believes GM in particular has a fresh opportunity with Gen Y. Lots of Also-Rans
"GM is at its lowest right now, and it is being forced to focus its operations on its best and core products and brands, which are quite good," says Hirshberg. He believes that if you get GM down to its 15 or 16 best products, it is a "lineup Toyota would be envious of." Chevy Malibu was a "North American Car of the Year." The Cadillac CTS luxury sedan has been widely accepted as a worthy alternative to German sedans. And Chevy Impala and HHR are both Consumer Reports recommended.
The trouble, Hirshberg notes, is that GM has maintained dozens of vehicles over the years that were past their "sell-by" date. The company stretched its resources too thin, leaving a lot of chances to score poorly on the quality surveys.
Indeed, GM is expected to whittle down its brands in the U.S. from eight to four, concentrating on Chevrolet, Cadillac, Buick, and GMC. Chrysler likely will eliminate the Chrysler brand and replace it in showrooms with Fiat (FIA.MI). The Italian automaker will own a large stake in Chrysler and run the operations as it comes out of Chapter 11 bankruptcy. "Could be that when Fiat and Fiat-inspired vehicles begin showing up in the showrooms, young people get drawn in out of curiosity," says independent marketing consultant Dennis Keene. "That's what happened when New Beetle showed up at Volkswagen storesthat car sold a lot of Jettas and Passats because the Beetle got people to the door."
Another wild card that could work in the favor of U.S. carmakers is Barack Obama. The new President has already talked more about the U.S. auto industry in three months than the last two Presidents in their collective 16 years, and he is invested heavily in the success of the restructuring of the companies.
"A year or two of Obama emphasizing the restructured GM and Chrysler, which he has staked his reputation and taxpayer money on, and you could start to see Gen Y take a lot more interest in these brands and looking at them in a new light," says Keene. Chrysler executives have already been playing that card. "President Obama thinks the new Chrysler is a good investment, and he is putting more than $4 billion into it," said Chrysler Vice-Chairman James Press when discussing the automaker's sales. Potent Cheerleader
An Obama commitment to cheerlead the industry could help not only with younger buyers but also in certain geographic regions. GM, Ford, and Chrysler have very small shares of the passenger-car market in California, the Boston-Washington corridor, and Southeastern states. Ford, for example, says its market share in California is less than 2% after subtracting Ford pickup and Mustang sales. It's comparable for Chevy and worse for Dodge. In the first quarter of this year, Detroit as a whole held but 27.6% of California, compared with 51% nationally. Japanese brands held 53.3% of California new-car sales, vs. 38.2% nationally.
In the Washington region, Ford holds around 5% of the passenger-car market. When GM conducted focus groups for perhaps its best car, the Chevy Malibu, among college-educated women in the Washington area, the results overwhelmingly showed the women scoring the car extremely high for design, styling, and features. But when they were shown it was a "Chevy Malibu," acceptance "dropped off the table," said one GM executive who saw the results.
The U.S. industry will need the President boosting its image. Brands that are already popular with Gen Y are in expansion mode. Volkswagen is ramping up a big push with a new U.S. factory. Automakers in China and India are preparing to enter the U.S. And AutoPacific's study shows that 49% of Gen Y would gladly consider a Chinese vehicle, compared with just 21% of the country as a whole. Thirty-four percent will consider cars from India, vs. just 14% of the country overall.
That's disconcerting, to say the least. If GM is going to bounce back, it is going to have to change some minds. The Chevy brand represents more than 13% of market share in the U.S., and about 65% of GM's sales today. That share will only rise after GM lops off its other brands. Chevy is going to be by far the most important brand for GMwhether it makes the company, or breaks it.
--
Civis Romanus Sum

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Unfortunately, I think I read virtually the same story for the first time in 1978.
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Jim Higgins wrote:

That's all bullshit, of course.
It's all about ego and prestige, especially for the 20-something crowd.
What they want to drive is a porche, ferrari, lamborgini, mercedes, lexus, bmw, etc. If they could afford it, they'd have one, regardless of what the "reviews" said about them.
They want a status symbol. Something exotic. Something FOREIGN.
So they go down the price ladder until they hit the most exotic, unique, foreign car they can afford.
Subaru meets that need, for the moment, like Honda and Toyota did (moreso) 5 to 15 years ago.
It's also why pickup trucks became so popular for young guys and young families for the past decade.

Exactly. It's all about ego and prestige and the perception of owning something "unique". Unique in this case means something that is made in a distant, foreign land (many 20-somethings probably don't know that their jap car or their VW wasn't made by expert german craftsmen wearing white lab coats using digital calipers).

And even when those jap cars of the 80's were crap, they bought them for the prestige status among their peers. Peer pressure is very high with the 20-something crowd.

They say they look at reliability, but that's only because they don't want to admit that they are really just trying to follow the hip crowd. Jap or european reliability isin't really a factor, and hasn't been for much of this decade.

The problem is, most good, hard data about reliability and durability isin't available unless you pay for it.
What is available for free is a lot of second hand opinions and garbage and other 20-somethings justifying why they bought their Civic or Accord or Passat.
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MoPar Man wrote:

Toyota and Honda are quality products and have been so for some time. The younger consumers have long since voted with their $$$ and they voted for Toyota, Honda, Subaru, etc. When they need/want a new car it would not ever occur to them to look at the offerings of the Detroit Duds. Detroit is reaping the rewards of screwing the consumer-Detroit loses big time, especially so with bankruptcy and big $$$ theft from the taxpayer. The failure of Detroit is their own fault.
--
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Do you have to be a full-quoter?
Jim Higgins wrote:

And at one time they also made shit.
And GM, Ford and Chrysler have also been bulding quality products for some time.

Their hormones tell them how to vote (or how to spend money).

The failure of Detroit is the result of labor laws that give manufacturers no recourse but to capitulate to union demands for higher wages and more benefits.
When a workforce decides they are not being paid enough for the work they do and they go on strike (as is their right), the employer should have the abilily to higher anyone else off the street who _will_ perform that work for the same wage.
If the wage is truely deficient for the type of work or the skill level required or if there aren't enough qualified people on the street to replace the striking workers, then market forces (supply/demand) are operating properly and the employer has no choice but to increase wages.
But when potential replacement workers exist but can't be hired, or when the rule of law breaks down and they are not allowed to physically enter the workplace, then you can't rationally blame the employers for having no choice but to cave to the irrational demands of the striking workers.
Ultimately, it's the police and law enforcement, US labor laws and the politicians that crafted them along with foreign trade agreements, that are the reason why domestic manufacturing companies became financially insolvent.
Chrysler and GM are not in trouble currently because of the quality of their products. All manufacturers (domestic and foreign) are in trouble because of demand destruction (the consumer has closed his wallet).
GM and Chrysler are in trouble because they don't have access to private-sector financial support right now (like they had in the past) that other foreign companies still have - in addition to financial support from foreign gov'ts.
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MoPar Man wrote:

Market forces - wow - imagine that. Unfortunately the people in this country who don't believe in free markets plus the people who are too stupid to know what it even means outnumber people intelligent enough to understand what it means and realize what its destruction means for our quality of life. It will be a miracle if we can reverse a fraction of the damage that has already been done and further damage that is planned to be accomplished between now and Nov. 2012.
--
Bill Putney
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MoPar Man wrote in message: "The failure of Detroit is the result of labor laws that give manufacturers no recourse but to capitulate to union demands for higher wages and more benefits."
Actually you are wrong there. For the last 8 years and when ever a Republican is in office the labor department sides with companies more then they side with unions. Even with the few years the they do side with unions in the last 35 or more years the labor laws have continue to decline in favor of the union. Biggest one is the right to work that many states passed.
Unions are not there to protect the bad worker but to make sure the company follows their own rules and that of OSHA. Apparently you have no idea how unions really work. It not all about wages. Having sat at the negotiating table, wages is not the top priority in any negotiations. If companies could not afford to pay the proposed wages, benefits, and other proposals, they have a right to say no. The union can not just call a strike anytime they like. Wildcat strikes are illegal under the present labor laws, By the way that is one that was taken away from the unions during the last 35 years.
You should thank a union worker for your safety because if it would not have been a bunch of workers unionizing and demanding safety OSHA would not be here today at least in its present form. You should thank a union worker for being part of the middle class because if it was not for your union worker you would be making a lot less will companies make all the profits and do not share any with its workers.
Proud to be union.
Sarge
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Licker wrote:

Unions are a sick joke. I will never, ever work again for a unionized company. The best was when we couldn't do some simple task, like pick up a tool, that took 30 seconds so we could finish our work--because the union rules said that the official tool mover had to do that and he was too lazy to do anything. Why should he? He gets paid anyway.
When you hear it's not about the money, it's about the money. Unions exist for two reasons, to protect the laziest, most incompetent "workers," and to make the union leaders rich. The places where I have worked were much more concerned about OSHA regulation compliance when they weren't union shops, the union shops were too busy trying to figure out how to get productivity from the workers when their wages, raises, and employment was virtually guaranteed as long as they didn't kill somebody.
How telling that unions stand for LESS rights for workers. Unions are actually against allowing workers have the right to work for a company without joining the union or paying protection money to the union. I'm proud that my work and performance is sought after (and compensated) by my employer and I don't need some BS money grubbing organization to get in the way.
It's fascinating watching GM and Chrysler flush themselves down the drain, in no small part to union rules that paid thousands not to do any work. I'll never own another GM car, although I might consider a Chrysler depending on how things go.
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Licker wrote:

It's not a matter of doing things that are for or against the union or the management. Some things are basic principles that are violated by what the unions strive for. "Right to work", when stripped of the "us versus them" politics, is a basic principle. To do otherwise would be wrong purely on principle. The fact that you see something that is confirming basic principle not as an issue on principle but as against the unions is telling. It says you, probably without even realizing it, put unions above principle or are blind to the fact that "right to work" is a basic principle when you look at it honestly.
--
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Bill Putney wrote:

Blind? How about deaf? And dumb?
How about listening to "those doing the work" as Peter Drucker recommended decades ago?
Compare that with management's frequent retort "get to work, let us manage".
And how about management's "responsibility to manage"? With real consequences if they fail. Not a 36+ month bankruptcy process with the same failed managers who destroyed billions in capital in charge throughout.
Most management teams want it both ways, big bucks and big options packages in the good times and big bucks ("to retain world class talent") and an options reset to the historic new lows when they fail.
Shareholders rarely even have "a say on pay". HR consulting firms torture the comparables to support anything numbers the managers who retain and pay them would like in a pay package.
Such irrationality is one reason collective bargaining emerges where none previously existed or was desired for industrial purposes.
It's an issue of fairness and equity, let alone rational behavior.
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News wrote:

You realize that you *just* illustrated *exactly* what I was saying:
"...'Right to work', when stripped of the 'us versus them' politics, is a basic principle...The fact that you see something that is confirming basic principle not as an issue on principle but as against the unions is telling. It says you, probably without even realizing it, put unions above principle or are blind to the fact that "right to work" is a basic principle when you look at it honestly."
Do you not see "right to work" as a fundamental principle, or are you unable to discuss it stripped of the other baggage of the "us vs. them" politics often surrounding it?
It boils down to this: All right-to-work says is that neither you nor a union cannot tell me that I can't go to work at a company on a given day if the company and I agree on the terms of my employment. Do you not agree with that, stripped of all the extraneous b.s., on principle?
--
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Bill Putney wrote:

Drop the pretense and read what I wrote.
Let me boil it down for you: Top management is frequently incompetent and wretchedly and excessively compensated for their incompetence. Shareholders have no say in stopping this cycle of incompetence and entitlement among incompetent management. Anyone working for an incompetent ought to have protection, and be considering whether to separate themselves. Even middle management and first line supervision.
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News wrote:

I don't know what pretense you are talking about.
To repeat: "Do you not see 'right to work' as a fundamental principle, or are you unable to discuss it stripped of the other baggage of the 'us vs. them' politics often surrounding it?
"It boils down to this: All right-to-work says is that neither you nor a union cannot tell me that I can't go to work at a company on a given day if the company and I agree on the terms of my employment. Do you not agree with that, stripped of all the extraneous b.s., on principle?"

They can't sell their stock? If they did sell, would that not have some impact?
< ...Anyone working for an

Hmm - I thought slavery had been outlawed. Your following statement makes no sense at all since anyone is free to quite their job at any time: "Anyone working for an incompetent ought to have protection, and be considering whether to separate themselves." The protection *is* the freedom to quit - like I said, slavery in the U.S. has been illegal for some time now.
So I'll ask once more: Do you not agree in "right to work" as a fundamental principle?
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Bill Putney wrote:

Drop the pretense and read what I wrote.
Let me boil it down for you: Top management is frequently incompetent and wretchedly and excessively compensated for their incompetence. Shareholders have no say in stopping this cycle of incompetence and entitlement among incompetent management. Anyone working for an incompetent ought to have protection, and be considering whether to separate themselves. Even middle management and first line supervision.
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In article

In the last few days a local Chrysler dealer has been flooding the radio with loud ads. The big pickups are often the subject of these ads.
I'm not impressed, because the car line which I didn't like since 2005 is still the same. Nothing on the showroom floor that I desire. So this senior who pays cash isn't going to be a buyer yet.
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