U.S. automakers are seeking long-term success in a new economic landscape
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For the American auto industry, the now successfully completed bankruptcy filings may seem like child's play compared with the gargantuan task of mapping out the future of individual brands.
Those brands will face an obstacle course of consumers more skeptical than ever that domestics are worth bothering with. And many are still furious that General Motors and Chrysler took taxpayer-backed loans to keep from closing their doors forever.
Meanwhile, Toyota, Honda and Nissan may suffer from falling sales, too, but they are not exactly rolling over and playing dead. Each has a slew of new models coming that will make life difficult for domestic brands.
So how should domestic car companies respond?
It will be a long process that will have to be done one vehicle at a time, said Gary Dilts, senior vice president of global automotive operations at J.D. Power and Associates.
"They have to build a vehicle that is bulletproof and delivers world-class miles per gallon in the process," Mr. Dilts said.
An automaker that's been doing it right long-term has been Honda, he said, praising the Japanese automaker's new vehicle launches. "As a consumer, you didn't see them suddenly offering $10,000 incentives on a car that you just paid full price for."
In addition, he said, the domestics need to build the market. Several Japanese carmakers regularly produce just under whatever demand calls for. BMW used the same model for its Mini Cooper, so there are fewer around than people actually want to buy.
That business model can work for Detroit, Mr. Dilts said.
"I think we will see Detroit makers hold volumes down and keep incentives low. All the instability that overproduction created, such as driving down residual [values], and driving up incentives, will have to change."
Building the market has another important element: anticipating new market openings.
All three domestic carmakers are chronically behind Toyota, Honda, Nissan and others, and as a result, Ford, Chrysler and GM "get there" last when market segments open up, analysts say.
Clearly, the Big Three will have to emphasize quality and design. They seem to be on their way, at least in the cases of GM and Ford, which now build cars and trucks considered to be at least the equal of Japanese brands.
Chrysler has the biggest problems, Mr. Dilts said.
"Chrysler has virtually an empty product pipeline. It has some quality problems. And it's got a management void," he said. The hope is that Fiat, which bought into the company earlier this year, can inject new products, especially in compact and midsize cars.
While Chrysler has strong Jeep and Dodge brands, its namesake line has a muddy, "neither here, nor there" identity. Even the 300, its most successful model, falls short of a true luxury car, yet it isn't particularly seen as a family car, analysts say.
"Their product portfolio is all over the map," said Tom Libby, independent auto industry analyst based in Detroit. "They have to decide what their message, their buying proposition will be."
Some suggest Chrysler drop luxury minivans and jettison Sebring, the intermediate sedan. Other ideas include high-performance entry-level luxury sedans to add luster to the brand's image and bringing back the Imperial, an "evergreen" luxury car that has come and gone several times.
Meanwhile, Jeep is an iconic brand that has become part of the American culture, even language, and there's no need to rebrand it or do much else, analysts say.
"Jeep has some very strong adherents," said Jack Nerad, editorial director of Kelley Blue Book. "For a lot of people, there is no substitute for Jeep."
The brand's biggest issue is that beyond the Grand Cherokee and the Wrangler, other products have not been as successful, Mr. Nerad said. But there's potential in offering different size models than those on the market now.
Dodge has a clearer brand identity than Chrysler, but not quite as strong as Jeep. "Dodge has a solidly blue-collar image, although I don't know if blue-collar people aspire to be blue-collar," Mr. Nerad said.
Still, he said, Dodge is a broad-based brand that needs to emphasize its performance image to excite and retain younger consumers. Also, "There's a lot of opportunity to field a small Dodge, because they haven't done well in the small-car segment."
GM is generally regarded as doing well in terms of its product offerings, and its Chevrolet and Cadillac lines are strong.
"General Motors has shed some brands and come out of this with a completely different cost structure that can survive in a 10 million unit year. It also has a relatively rich product pipeline, so I do see GM with a significant upside," Mr. Dilts said.
The Chevrolet line has a lot going for it with such products as the Malibu and Chevy Silverado, Mr. Nerad said. "The Traverse is a great product, too. And their brand awareness is among the best in the nation. If there's holes in Chevy's portfolio, I certainly don't know about it."
Other analysts think Chevy's lineup could use some help, particularly in the small-car segment. The Cobalt is now being surpassed by the competition, and the Chevy Cruze that will replace it is long overdue, analysts say.
Buick poses GM's biggest challenge.
"They've now adopted that strategy of style and neo-luxury, and I think it has some viability. But they will have to continue to have superior styling that is eye-catching and sexy, and they will have to stick with this strategy and be patient for it to work," Mr. Libby said.
As to rumors that Buick will soon have some smaller models, Mr. Nerad cautioned that the brand will have to be careful. Past attempts brought short-term sales but long-term image issues.
Cadillac is getting traction with its efforts to reclaim some glamorous luster. "Among GM brands, they have done the best job of being able to make the transition in people's mind, especially some import buyers," Mr. Nerad said.
At Ford, the new 2010 Taurus sedan has given a boost that, at least for now, should keep the brand in the spotlight. The redone Fusion line is a strong seller, and the hybrid version gives brands such as Toyota a run for their money, analysts say.
Ford also has arguably the best quality control of the Big Three, and the biggest sales momentum. "Ford has a good product stream in the pipeline. It kept all of its product programs in place, and that's paying off. But Ford is not on a par with the Toyota and Honda brands, especially in the compact car segment," Mr. Libby said.
Ford has other issues, too. Its Ranger compact truck is outdated, and should be replaced or dropped. Its Mercury brand's future is as cloudy as ever, despite the announcement a year or so ago that it eventually will get a small European car to sell.
All of the surviving brands have their work cut out for them, but there is hope, Mr. Dilts said. "If you can take all of the weight off General Motors and make it profitable in a 10 million unit sales year, what happens when sales return to 14 or 15 million?" he said.
If the rest of the world's auto market grows, that could add up.
"Consider that in the U.S. alone, the drop from 17 million units to 10 million has caused a drop of $200 billion in net revenue annually," Mr. Dilts said. "If the market runs up 10 or 20 percent and you have your costs in line, you can make money fast in the auto industry. Wouldn't that be fun for a change?"
First Published August 25, 2009 12:00 am
