GM's Mounting Brand Muddle--Sayonara Chrysler?

Posted by: David Kiley on October 29, 2008

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General Motors desired acquisition of Chrysler will muddle GM’s brand portfolio even more. And I didn’t think that was possible.

GM right now has Cadillac, Saab, Buick, Pontiac, GMC , Saturn, Chevrolet and Hummer. That’s on top of Opel, Vauxhall and Holden, which it markets overseas.

In buying Chrysler, it will absorb Chrysler, Dodge and Jeep.

The deal would give GM about one-third of the U.S. market, but spread across eleven brands. Yipes. GM CEO G. Richard Wagoner Jr. has said many times that he does not think GM has too many brands. It is worth noting, though, that Wagoner doesn’t have the slightest background in marketing or brand management. That’s not a criticism, just an observation of fact. How about now Rick? Too many brands now?

Talking to a few dealers, this is what they expect GM to do. Wind down the Chrysler brand. Then, compel as many of Chrysler’s roughly 2,000 dealers to merge and marry to create a Dodge and Jeep dual showroom. The dealerships that house all three brands now will simply wind down the Chrysler brand. All they care about is the number of vehicles they sell. They don’t especially care if it’s three brands or two. If they are selling 200 cars a month today, they still want to sell 200 or better. It’s that simple. As the number of total Chrysler dealers declines through bankruptcies and buyouts, total vehicles sold per dealer should go up or stabilize even after eliminating Chrysler as a brand.

GM wants to keep the Jeep brand, as well as Chrysler’s minivan business. But to keep remaining Dodge-Jeep dealers properly fed and happy, it might well need to give them some badge-engineered Chevys and Pontiacs. Oh joy! More badge engineering on the market. A Pontiac G8 with Dodge horns on it. Oooooh. Baby. I’m all a twitter.

GM is hoping that the number of dealer bankruptcies worsens as the Recession drags on. They have to whittle down the number of their own dealers, as Chrysler has been doing with its stores. They are not going to pay dealers to go out of business as they did with Oldsmobile.

One of the scenarios gathering steam is that Nissan will buy the Dodge pickup truck business from GM. That would preserve its plan cut with Chrysler to supply the Dodge product in Nissan dealerships as the next Nissan Titan. GM would benefit in the short-term from the cash it can get from Nissan. So, Dodge-Jeep dealers who have been working with Chrysler for years, will find themselves likely dealing with GM and Nissan…and potentially both manufacturers supplying product for one brand—-Dodge.

Of course, this is all what some dealers are prognosticating. What actually happens will be up to GM.

Reader Comments

david goodfellow

October 29, 2008 11:05 PM

WHAT ABOUT GIVING GMC THE AXE AND REPLACING IT WITH THE GM TURBO JET POWERED DODGE. THE NEW/OLD HEMI SCREEMS GAS GUZZLER. WHAT ABOUT SIRIUS?. SOUNDS VERY COMPLICATING BUT IT WILL WORK OVER TIME. I HOPE!

Chris

October 30, 2008 5:18 AM

Just thinking, but it would be interesting if GM sold the hummer name with a contract for the buyer to use the factories for a few years, and the models, but also re-badge the old hummer models under the Jeep brand. Also, I would fade out Chrysler along with Saab and Dodge. Chrysler/Dodge Minivans could both go to Chevy and Saturn. Chrysler 300 could go to Buick. Dodge Challenger and Charger could go to Pontiac. They could sell the Dodge Pickups and SUV's to Nissan. They could also sell the crossfire and viper models to a luxury car maker or private equity. That would leave the leave GM with 7 brands again. GMC the Truck play, Jeep the SUV play, Saturn the Family play, Pontiac the Sports Car, Hip, Cool play, Buick the Refined Luxury play, Cadillac the Modern Luxury play, Chevy the Everybody play. It would give everyone a target, and 3 of the 7 brand would be vehicle type specific so there would be less re-badgings. If 7 brands were too much, I could see GMC merging into Jeep with GMC trucks becoming Jeep trucks. that could get you too 6, with 3 strong brands, Chevy, Cadillac, and Jeep, and three ok brands Pontiac, Buick, Saturn.

Commie Stooge

October 30, 2008 7:53 AM

GM already has too many brands & dealers.
So why are they buying more?
Someone sould tell Rick Wagoner this was tried before with Packard & Studebaker.
They merged in 1954. Packard stopped producing cars in 1957; Studebaker hung on till 1964.
This will be history repeating itself.

mjw149

October 30, 2008 7:57 AM

What a mess. If this isn't a ploy to get money from the government, then it's time to fire everyone. How is combining the Titanic with the Hindenburg going to save anyone?

Brian

October 30, 2008 9:05 AM

David, you forgot one--GM still sells Daewoo as a brand in Korea.

Schmeltz

October 30, 2008 11:37 AM

This saga continually makes my head spin, David! It's like a train wreck in that you know it is going to be ugly, but you can't keep from watching.

I think your speculation about GM eventually dissolving the "Chrysler" brand, and maintaining the Dodge/Jeep duo will probably be the way this pans out. The mentioning of Nissan buying the Dodge Ram Trucks, to supply their own lots, as well supplying back to Dodge, (a.k.a. GM) is an interesting twist.

If I were to play the "King of Car Companies" for a day, I guess I would see the following played out under my rule: The U.S. gov't would suspend dealerships from being able to sue the Auto Companies for killing brands, (does this happen in any other industry?) Next, GM would clean its own house. Saab would be sold because it probably is their only sellable brand. Hummer, Buick (U.S. only, not China), Pontiac, and GMC trucks would all be eliminated. Your probably thinking--Wow, that's a heck of a lot of vehicle sales potential. In actuality, those brands represent roughly 25% of GM's total U.S. sales collectively. That leaves Chevrolet, Cadillac, and Saturn. Those align beautifully with Toyota, Lexus, and Scion. GM would have 3 brands with very little overlapping product that would position well in today's market. The new GM would be a much leaner and meaner entity. Dodge and Jeep would survive together being sold as their own brand as suggested in your article. I realize Dodge Rams would compete for sales against Chevy Silverados, however, this redundancy already exists in current reality between Chevy and GMC. Hence the motivation to eliminate GMC.

The sad reality to all of this is that many dealerships will go out of business, and many workers will lose their jobs. Unforunately, if there is to be a U.S. Auto industry in the future, I think these measures above have to be carried out.

brian

October 30, 2008 5:19 PM

Frankly, if GM takes over Chrysler and then kills off Chrysler, and Dodge, then what is the point of the merger - just to get Jeep and the minvans and RAM pickups?

The brand that should be killed off is Buick. Hummer could effectively be killed off, with its vehicles being rebranded as model of Jeep. The Dodge branded cars, except for the new Challenger and the Charger, are doomed - those 2 could be rebranded as Chrsylers. GMC trucks might be rebranded as Dodge trucks.

Staurn might also be toast - but while it is easy to make assumptions, it costs money to badge-engineer cars and change the dealerships over to new brands - and the big problem could be agreements with dealerships that limit GMs ability to change dealerships and to offer the same vehicles close to existing dealerships - Ford had this problem when it killed of the Mercury brand in Canada, for example, and Chrysler itself had problems when it killed of Plymouth.

Part of the reason for taking over a competitor isn't just to get more dealerships and a couple of vehicle platforms, but the customer loyalty to those brands.

Packard/Stuibaker isn't an apt comparison - those companies couldn't survive even when the economy was booming - in large part because at the time, GM had nearly 50% of the market and a huge advantage in economies of scale and its brand heirarchy. This is more like the 30s.

brian g

October 30, 2008 5:26 PM

To explain a little more - The reason to keep Chrysler brand cars and dealers, and use the Dodge brand only on trucks, is that Dodge cars mostly compete against Chev and Pontiac - keeping the Chysler name lets you kill off Buick have a brand to position just under Cadillac - the 300 series cars (and other LX cars)are a good fit there.

GM has been pretty clueless about the structuring and positioning of its brands - Buick is the weakest - declining sales and the average age of buyers is very high - not even Tiger Woods could make it a hip brand.

brian g

October 30, 2008 5:32 PM

Let me suggest the following:

Pre-Merger:

Hummer
GMC
Chevy Trucks

Jeep
Dodge Trucks

Cadillac
Buick
Pontiac
Chevrolet
Saturn

Chrysler
Dodge


Post Merger:

Jeep (Hummer)
Dodge Trucks
Chevy Trucks

Cadillac
Chrysler
Pontiac
Chevrolet
(Saturn?)

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News, opinions, inflammatory meanderings and occasional ravings about the world of advertising, marketing and media. By marketing editor Burt Helm, Innovation Editor Helen Walters, and senior correspondent Michael Arndt.

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