'Slow, painful death': Troubled Isuzu cuts production, spending

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American Isuzu Motors is on the ropes.

Once a high-flying brand known for affordable, reliable vehicles and its big-budget campaign that made its "liar" character a household name, Isuzu sold 127,630 units at its 1986 peak. But Isuzu has since hit hard times. The brand missed out on the U.S. truck boom and its Axiom SUV launch last year flopped. After selling only 26,947 units in the U.S. in the first half of this year, Isuzu next year will halve production to 40,000. Ad spending has bottomed out-only $16 million in measured media was spent in the first half of 2002. Omnicom Group's Goodby, Silverstein & Partners, San Francisco is said to be considering resigning the account.

predicting death

Some are betting on Isuzu's demise in the U.S. "They have maybe 18 months to two years," said George Patterson, president of consultancy AutoPacific, noting Isuzu is a casualty of the industry's overcapacity and intense competition. Even an Isuzu dealer who asked not to be named predicted its "slow, painful death."

Isuzu itself has hopes for a comeback. Rick Balsiger, VP-marketing and product planning, admits there are no quick fixes, but said, "It's not one thing we need to complete by a certain date. It's steps we need to take every day and we're already doing that."

While improved, Isuzu's financial picture isn't rosy. Japanese parent Isuzu Motors Ltd. posted an operating profit of $126 million in the fiscal year ended March 31, after a net loss in the prior two fiscal years: $177 million in 2001 and $973 million in 2000. Last month, General Motors Corp. said it would inject $500 million into Isuzu in a plan to protect itself from more losses, cutting its 49% stake to 12%.

Isuzu's U.S. advertising has been on a roller coaster in recent years (see chart). Mr. Balsiger said the marketer is doing only regional advertising. Goodby Silverstein, creative agency of record, is handling work for about half of Isuzu's 18 regional dealer ad groups. The remaining dealers use four or five other shops.

Currently Goodby Silverstein is holding regular meetings with Isuzu for a 2003 model-year strategy, even though it may resign the account, said an executive close to the matter.

Both Jeff Goodby, co-chairman, and Colin Probert, president of Goodby Silverstein, denied that report. "We have no intention of resigning the business," said Mr. Probert, adding that the shop feels a sense of loyalty to Isuzu, Goodby's first major national client in 1991.

That loyalty is deep enough that the agency passively accepted an attack on the account in spring 2000 from Omnicom sibling the Designory, Isuzu's marketing services shop, according to several executives close to the situation. At the time, the Designory, Long Beach, Calif., got the ear of Isuzu President-CEO Yasuyuki Sudo, and, in what one executive dubbed "a land grab," unsuccessfully tried to pitch the entire account. It did manage to convince Mr. Sudo to drop most 2000 TV buys in favor of incentives.

Bob Reilly, who resigned as Isuzu chief operating officer in early 2001 after his second tour of duty, confirmed ad spending in 2000 was "very, very modest, partly because of incentives."

The Designory developed a 2000 promotion and did a print ad offering a free Gateway computer to Isuzu buyers, promising the automaker 20,000 unit sales. It also convinced Isuzu to form "The I Team" made up of internal marketing staff and Designory and Goodby, Silverstein executives. The Designory "basically took over [Isuzu's] marketing department" according to one of the executives.

Jan Thompson, president-CEO of the Designory, didn't return calls for comment. Robert Riccardi, associate partner and director of account management at Goodby, Silverstein, said a land grab by the Designory "has not been the case," adding, "We have worked with the Designory for years." An Isuzu spokesman said he wasn't aware Designory it made a pitch for the entire ad account. He said the Gateway program "didn't hit our overall sales goal," crediting it with roughly 5,000 truck sales.

`radical ideas'

Mr. Reilly, now an exec VP at consultant J.D. Power & Associates, said the Designory "brought some very radical ideas with extremely different perspectives perceived by the marketing department as naive." He said the I Team's strategy to bring back pitchman Joe Isuzu in February 2001 ads was "not the right solution." The marketer's press release announcing the move stated the Joe Isuzu campaign was created by Goodby, Silverstein "in association with" the Designory."

For now, Isuzu is busy selling down its 2002 models, offering zero financing for five years. It is readying the launch of its all-new Ascender, a version of GM's Chevrolet TrailBlazer and GMC Envoy that will replace the top-of-the-line Trooper sport utility late this year. Mr. Balsiger said the SUV's launch ads will break in early 2003 and won't necessarily be regional.

Isuzu said it has learned from last year's new-product SUV, the Axiom. Mr. Balsiger said the introduction suffered for multiple reasons: little advertising, its high price and the difficulty of entering the already-crowded segment. But he's optimistic the freshened 2003 Axiom, which will offer a more-entry level version, first-time black exterior paint and some interior changes, will broaden its appeal.

contributing: alice z. cuneo

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