"How Detroit drove into a ditch" is the headline of an article in the Oct. 25 issue of The Wall Street Journal.
When the most respected business publication in the world writes a 2,000-word article on the problems of the U.S. automobile industry, you have to assume it knows what it's writing about. Especially since the author of the article is the Journal's former Detroit bureau chief and a man who is writing a book about America's car culture.
Nowhere in this entire article is a mention of Detroit's failure to build powerful brands. Rather the blame is placed almost totally on problems in the factories.
"Detroit failed to grasp -- or at least to address -- the fundamental nature of its Japanese competition. Japan's car companies, and more recently the Germans and Koreans, gained a competitive advantage largely by forging an alliance with American workers."
That's why Japan's car companies are successful? They forged an alliance with American workers? (It's nice to have happy, intelligent, productive employees, but to credit them with building a successful car company is stretching it a bit.)
It seems to me that the fundamental nature of Detroit's Japanese competition is its ability to build brands. Toyota stands for reliability, Scion for youth, Prius for hybrid, Lexus for luxury.
But what does Saturn stand for? Or Chevrolet? Or Pontiac? Or Buick? Or Cadillac?
It's not for lack of trying. In 2007, the U.S. automobile industry spent $4.6 billion on advertising. That's 3.3% of total U.S advertising spending and 5.9% of total U.S. network TV spending.
For all that money, you might think the U.S. automobile industry would have done a lot of brand building.
Take a recent 12-page Saturn insert with the headline "Rethink." Each of Saturn's five models encouraged automobile prospects to doing a little cogitating.
- Saturn Aura: "Rethink responsible"
- Saturn Vue: "Rethink safe"
- Saturn Outlook: "Rethink big"
- Saturn Sky: "Rethink adrenaline."
- Saturn Astra: "Rethink amusement"
Furthermore, Saturn's "rethink" words don't make much sense either. They seem to be borrowed from other brands. Volvos are "safe." Cadillacs are "big." Porsches are "adrenaline." And I have no idea what a "responsible" car is. Or an "amusement" car.
Oddly enough, if Saturn were a dominant automobile brand, this approach might make a semblance of sense. But in the first 10 months of this year, Saturn's share of the U.S. automobile market was just 1.4%, about the same as RC Cola's share of the cola market. (Just because Coca-Cola can successfully market 14 different flavors doesn't necessarily mean that RC Cola should also market 14 different flavors.)
Saturn is the least of General Motors' problems. None of the corporation's other major brands stand for much of anything either. Chevrolet is "An American revolution." Pontiac is "Action." Buick is the "beautiful" car to drive. And Cadillac is "Life. Liberty. And the pursuit."
How can you build brands around such vacuous slogans as these?
But brands, according to the Wall Street Journal article, are not really Detroit's problem. In the entire 2,000-word diatribe, there was only one reference to the word "brand." It was a repetition of the conventional wisdom that General Motors has too many (eight).
Take Gillette, which over the years has marketed seven different brands:
- Gillette blue blades
- Trac II, the two-blade razor
- Atra, the adjustable two-blade razor
- Sensor, the shock-absorbent razor
- Good News, the disposable razor
- Mach3, the three-blade razor
- Fusion, the five-blade razor
The difference between Gillette and General Motors is that each of the seven Gillette brands stands for something specific and each of the eight General Motors brands does not.
They could. Some automobile analysts divide the industry into eight separate categories:
America invented marketing. America invented branding. America invented the production line, which made the automobile affordable for the majority of the population.
Of the 100 most valuable brands in the world, according to Interbrand, 52 are owned by U.S. companies. And how many of the 52 are U.S. automobile brands?
Just one: Ford. None of General Motors' eight automobile brands made the list.
There were, however, 10 automobile brands from outside the U.S. (Toyota, Mercedes-Benz, BMW, Honda, Volkswagen, Audi, Hyundai, Porsche, Lexus and Ferrari).
There's a growing disconnect between U.S. management and U.S. marketing. Management wants to build a business. Marketing wants to build a brand. The two are often diametrically opposed. To build a business, you tend to "expand" the brand. To build a brand, you generally need to "contract" the brand.
Big doesn't equal better
General Motors already has a big business. Last year the corporation did $181.1 billion in sales, which made it the fourth-largest company in America. What General Motors doesn't have is a portfolio of profitable brands.
Then there's the conventional wisdom that General Motors has too many dealers. From the dealers' perspective that's probably true, but not from GM's point of view. Even a money-losing GM dealer will continue to sell GM vehicles to keep from losing even more money.
In the absence of brand-building efforts, it's the sales efforts of GM dealers that have helped General Motors move 2,581,385 vehicles in the U.S. in the first 10 months of the year. Cutting brands and cutting dealers would only further depress GM sales.
But the brands themselves are practically worthless. Last month, two big auto dealership chains (Group 1 and Sonic) wrote down the book value of their franchises by $51 million. Group 1 CEO Earl Hesterburg said the company has essentially written off the value of its GM, Ford and Chrysler dealerships.
With all the talk about the value of brands, you might think that top management at General Motors would be rigorously focused on building their brands. But the facts suggest otherwise. GM seems to be focused on selling, not on branding.
How else can you explain Cadillac's decision to offer a four-cylinder sedan in 2010? As John Teahen, senior editor of Automotive News, wrote recently, "A four-cylinder Cadillac is not a Cadillac. I'm not quite sure what it is, but it certainly isn't a Cadillac."
His proposed name for the new four-cylinder Cadillac: Cimarron II.
But the U.S. automotive industry is not the only industry that seems to be ignoring brands. A depressing bit of news on the branding front comes from the Association of National Advertisers. A recent survey polled 118 chief marketing officers and senior marketing executives at ANA companies. Sixty-four percent noted that brands do not influence decisions made at their organizations.
Now you know why General Motors has introduced expensive Saturns and cheap Cadillacs. Not to mention the dozens of other branding mistakes made by the corporation.
In the days ahead will there still be a General Motors in Detroit or will there be nothing but General Misery.
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In addition to his monthly AdAge.com column, Al and his daughter and partner Laura Ries host a weekly video report at RiesReport.com.