Low confidence in American brands
“When I see foreign companies coming to America to make vehicles that tells me we have the best ability and the best people.”
Jay Leno, 2006 LA Auto Show
The big news is supposed to be that for the first time since 1986 Chevy beat Ford in sales. Yeah, so. They both lost marketshare, so why are they still posturing like the Hatfields and the McCoys? Because when a consumer is shopping a Ford product the vehicle they are most likely to cross-shop is General Motors or Chrysler.
Mark Fields, Ford Motor Corps President of the Americas, said at the Los Angeles Auto Show Wednesday that “Ford doesn’t decide what the vehicle of the year is, the customer does”, in response to General Motors proclaiming 2006 as the Year of the Truck. Chrysler didn’t have a response. They are silently trying to distance themselves from the Big 2, as they are the only pseudo-American brand that gained marketshare in 2005.
Both Fields and Mark LaNeve, GM North America vice president of vehicle sales, understand that they need to differentiate their product and build cars that are cross-shopped by the Big 6: General Motors, Ford, Daimler Chrysler, Toyota, Honda, BMW, and Renault-Nissan. Both Fields and LaNeve came out talking about the passion they have for automobiles and how much they “lost touch with their customers”. The problem is, they both sounded like they had the same scriptwriters.
Both Fields and LaNeve have to stay up nights wondering, not only how to differentiate themselves in their advertising, but how to rebuild confidence in the American people for American brands. The ironic part of this equation is that they don’t have to rebuild confidence in American-made products. Americans are buying every Toyota that Toyota makes in the United States. The same goes for Nissan, BMW, and Mercedes.
I don’t think every product that Toyota makes is better than the competitive product of a Ford or a Chevy. I think General Motors has as much knowledge about hybrids and is certainly one of the leaders in hydrogen fuel cell vehicles in the automotive sector. LaNeve even said in his speech at the Los Angeles Auto show that GM had more vehicles that got over 30mpg than any other automotive company.
Both LaNeve and Fields understands that fuel economy issues are here to stay. Pickup sales for GM hit 1,000,000, the best since 1978. According to LaNeve, sales this year should be respectable, in the range of 700,000, and GM intends to keep it’s dominating 60% of the segment, he said. Fields said Ford F-series trucks sold over 901,000, the best 3rd year in history.
A couple of weeks ago Toyota announced that its production was going to top 9.06 million and the newspapers went wild with stories of Toyota being the king of production. Toyota produced less product than General Motors in the first nine months of 2005, Toyota sold less product in the first nine months of 2005. Toyota made over $7 billion in profits globally in the first nine months of 2005, while General Motors lost $3.8 billion globally in the same time period.
This is not about production, this is about profit. This is making sure that Ford and General Motors are lean, mean profit machines in every aspect of their company. The way to do that, according to Charlie Hughes, former CEO of Mazda of America and Landrover and co-author of Branding Iron, is “to concentrate on what actions you need to take to win over customers, to win in the marketplace. This is not about manipulating numbers. When you add more value in the marketplace you get rewarded. The actions are the independent variable and the outcomes are the dependent variable. ”
Fields said that he expects Ford to be “size appropriate”, meaning that he expects Ford to stay somewhere around 16-18% of the marketshare. LaNeve said GM wasn’t looking for share gain, so they are looking to cut costs. GM would also like to decrease their major metro market dealer base overtime. That would help cut costs, but both corporations need to look at how they can sell so many products and still lose the amount of money they have. GM says they will cut 30,000 jobs and close seven plants and save $7 billion. If they were able to save that $7 billion in the first nine months, General Motors would still be $3.8 billion in the back of Toyota on profits for the first nine months of 2005.
GM and Ford both have to renegotiate their UAW contracts. UAW President, Ron Gettelfinger, already has dissidents challenging the latest health-care cut for Ford that narrowly passed at 51%-49%. It isn’t going to get any easier for Gettelfinger and his group. He has to appease the job bank employees, the retired workers and the active workers, all of which vote on whether he stays in office, many of which are stockholders in their corporation. This turnaround is not going to be easy for anyone, but if it doesn’t happen, and happen soon, more confidence will be lost.
Both men are right – they are in the process of cutting costs, now they have to sell a product. The good brands will gain share. They both seem to understand that there is less a sense of entitlement and that they are going to have to nail sales THIS year. And while both seem to now that this is not an instant pudding strategy, they both need to realize they don’t have time to make an expensive creme brulee. What they need is a good old-fashioned oatmeal raisin cookie that sells at a very competitive price.