Detroit's new rules
NEW YORK (Fortune) -- In the auto business, where new cars take 36
months or more to move from a designer's inspiration to the dealer
showroom, changes can take years to reveal themselves.
At least they used to. These days, seismic events seem to rock the
industry on a daily basis. Take the impact of private equity. Now that
Cerberus has taken over Chrysler, and financiers are sharpening their
pencils for Jaguar and Land Rover, a few far-seeing analysts expect
greater innovation and faster decision-making to ripple through the rest
of the industry.
Equally big changes are shaping consumer behavior. Recent conversations
with import automakers on the West Coast, as well as some surprising
announcements by General Motors (Charts, Fortune 500), suggest that some
current business practices are rapidly becoming obsolete. Here are just
a few of the new rules.
* Toyota (Charts) is tops. Now everybody pile on.
Long ago, Toyota brand passenger cars passed the Ford (Charts, Fortune
500) and Chevy nameplates to become the number one seller. Now Toyota is
poised to become number one in car and truck sales combined. How does
"baseball, hot dogs, apple pie and Toyota" roll off your tongue?
Car companies: Congestion on the auction block
What's the price of leadership? People taking potshots at your backside.
As soon as Toyota rolled out customer cash and zero percent financing on
its new Tundra pickup, a competitor leaked the news to journalists.
Others tried a subtler approach. GM went public what it called
"full-size pickup facts" that seemed carefully selected to portray its
Chevy and GMC in the best light. So instead of talking about their sales
this year, which have improved only modestly despite the rollout of new
models, GM chose to herald big improvements from 2003 to 2007 in "Brand
image" (up 17 percent) and from 2004 to 2007 in Average Transaction
Price (up $2,600 per unit). That's like a baseball player ignoring his
lousy batting average and bragging about his sacrifice bunts.
* Automakers are radically reshaping the way they approach advertising.
Marketer Jim Farley, who recently took over as head of Lexus, made his
name at the Scion division by eschewing print and television advertising
in favor of the Internet and other less traditional methods that he
hoped would build stronger relationships with potential consumers.
No test dummies
Now General Motors confesses that it is shifting more of its ad dollars
into online advertising too. The reason, according to marketing boss
Mark LaNeve, is that the Web is more effective in combating the lagging
perceptions that continue to dog GM: poor fuel economy, bad quality and
LaNeve likes the way that digital ads can direct consumers to thousands
of pages of information about products, prices and the competition. He
sees an even bigger payoff from the potential of immediacy. Since
consumers turn to the Web when they are getting serious about buying a
new car, advertising there allows GM to get more involved in the
* The hybrid revolution gathers speed - and Toyota's Prius is way
While Honda announced that it is discontinuing the gasoline-electric
version of the Accord because of slow sales, the Toyota Prius continues
to defy gravity. Once considered a novelty, the Prius is selling more
strongly now than at any time in its seven-year history. Its volume is
running at twice the rate of a year ago and Toyota now expects that
Prius will outsell every single domestic passenger car nameplate except
for the Chevy Impala.
Why the diverging fortunes? Honda was selling added performance in the
Accord hybrid, which didn't resonate with consumers the way that better
fuel economy does. Besides, the hybrid Accord looked like every other
Accord, meaning consumers couldn't get credit for being "green" when
they parked it in front of their homes. The Prius, by comparison, can't
be confused with anything else.
* Celebrities interfere with car sales
Those with long memories can remember Dinah Shore pitching Chevrolets in
the 50s and Ricardo Montalban rhapsodizing about Corinthian leather in
the Chrysler Cordoba of the 1970s.
Now GM has decided that Tiger Woods, one of the world's best known
athletes - and best paid endorsers - is getting in the way of Buick
sales. GM is nudging Woods away from pitching Buicks and getting him to
appear in ads for OnStar, its telematic service, instead.
LaNeve says the presence of Woods "detracts from the product message."
He adds: "We don't want a celebrity at the core of any brand." He didn't
mention whether he blames Woods for the fact that that sales of Buick
cars are down 21 percent this year.
I guess that means Paris Hilton won't be inking a deal to endorse
Hummers anytime soon.