A Detroit "Orderly Bankruptcy" Would Require Monumental Marketing Effort To Work

Posted by: David Kiley on December 18, 2008

Public relations done well is as much a key ingredient to marketing and brand management as advertising. And often, it is a greater, more important ingredient than the ad plan. At least it should be. But it often isn’t seen that way by people I will call “the honchos.”

Today, The Bush White House floated the idea of an “orderly bankruptcy” for General Motors and Chrysler. The “B” word. Yikes. The concept is a little fuzzy. But most experts think it would involve GM and Chrysler actually going to Bankruptcy Court to file Chapter 11, with the government providing either the Debtor In Possession (DIP)financing for the companies, or guarantees on the money after Treasury Secretary Paulsen twists the arms of some banks who have gotten upwards of a trillion dollars from Treasury and the Federal Reserve to loan the companies $15 billion-plus.

The automakers have been wanting to avoid actual bankruptcy for fear that customers will bolt when given the choice between a bankrupt brand or one that isn’t bankrupt. There are a few surveys out that seem to indicate that consumers wouldn’t bolt, especially if the Feds stood behind the companies.

A survey by CNW Marketing Research, for example, found that 48% of would-be buyers would consider models made by a bankrupt carmaker. Another survey by Merrill Lunch & Co. found 90% of the 500 respondents would consider a bankrupt company’s cars on their list if the company was “backed by U.S. government funding.”

Frankly, I think this kind of research is useless. But let’s take the CNW survey. Fifty-two percent of respondents said they would not consider buying a vehicle from a bankrupt car company. Today, the potential universe is 100%, and the Big Three have about 45% of the market. I don’t want to see how low their market share drops within year-one if the universe of buyers is cut in half. The drop in revenue would be too fast and drastic.

I don’t trust surveys of people when the question is seeking to get the consumer to say what they will, would or might do when its time to buy something and sign up for a four or five year loan.

I’d rather go by my instinct, which is that all but die-hard Big Three supporters will go to Ford (if it stays clear of Chap. 11) or the imports.

In order for an “orderly” bankruptcy to work, and not morph into Chapter 7 liquidation, the White House, President–elect Obama and the three companies would have to coordinate an extraordinary marketing, PR and promotion campaign designed to get the message across that the Big Three are viable and strong. It is an effort, however, that I am pretty sure is beyond the scope or creativity of the White House, Obama team and the auto companies themselves to think through properly, let alone execute.

I haven’t witnessed that kind of thoughtfulness or coordination in the last three months. These are the guys, you’ll recall, who flew three corporate jets to DC to beg for help. It seems the PR folks at the Big Three, and the Michigan Congressional delegation, neglected to tell the CEOs that there are around 60 members of the House who have to sleep in their offices and use the Capitol gym to shower because they can't afford to keep apartments in the Washington DC area. Such people don't take kindly to flying private and landing with a tin cup held out to men and women sleep on a pull-out couch most of the week.

Some of my ideas here are a little snarkey, but not by much. If you told me that 75% of the following ideas were implemented, I might give “orderly bankruptcy” a half a chance.

1. A one-hour press conference in prime time carried on all three networks plus Fox, CNN, CNBC, MSNBC and MTV: It’s a town hall with Bush, Obama, Speaker Nancy Pelosi and the Three CEOs talking about how vital the auto industry is to America, that the companies got to this place through a combination of some poor management judgments and a colossal abdication by Congress to pass healthcare and energy policy.
2. Sunday talk shows featuring Obama talking about how government helped the companies get to this bad place, and government is going to help them out just like the governments of Germany, France, Japan and China do with their auto industries.
3. Obama saying about 100 times in the first month after a plan is struck that buying cars built in North America car is not only good for the country, but cool.
4. Obama sending a personal plea to all his donors to buy a Detroit model the next time they need to buy a car, with everyone who does so entered into a lottery that will have 100 buyers picked at random stay a night in the Lincoln bedroom and get five minutes with Obama on any topic they want.
5. Double the tax on cars imported from outside the NAFTA free-trade zone.
6. $500 million in ads funded by the government and auto companies after they get the loan money explaining (in words that I will write) how the companies arrived at the financial bad place, and how they are going to get to the happy place.
7. Obama’s inauguration speech carries an actual plug for Detroit…he drives hybrids from Ford, GM and Chrysler down Pennsylvania Ave. to his swearing in…and has a Ford Fusion hybrid on the dais with him as he takes the oath.
7a. The poet laureate writes a poem about the Chevy Volt, which is read at the ceremony.
8. A $2,500 tax credit for buying a GM, Chrysler or Ford vehicle that gets over 30 mpg on highway for 2009 and 2010.
9. Require the top 100 executives at each financial institution receiving TARP funds to make their next car purchase a Detroit vehicle.
10. In exchange for Major League Baseball’s anti-trust exemption, require that every stadium use a Detroit vehicle to bring pitchers in from the bullpen, and that a block of seats are taken out of each park to showcase a different Detroit model at every home game. Every home run is “brought to you by [insert name of that game’s model].

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Reader Comments

sbk

December 18, 2008 05:49 PM

Stop calling it a Bankruptcy. It is more like a re-capitalization.

Clint

December 18, 2008 06:17 PM

Bankruptcy would actually improve my chances of buying a product from the gang of companies formerly known as the 'Big Three'.

From Kiley: Well...Mac users are known for being off-beat.

i agree

December 18, 2008 06:27 PM

interesting thought

JS

December 18, 2008 06:28 PM

I found this article discouraging. We are a culture more concerned with 'selling it' rather than real value. It's time we stopped trying to push questionable values and deals. How do you think we got here in the first place?

Dobbin

December 18, 2008 06:33 PM

This is good thinking.

Albert

December 18, 2008 06:57 PM

And that's just for starters ... big 3 would also have to make much better cars...beat the japanese and the koreans and the europeans in style

Peter

December 18, 2008 07:18 PM

"5. Double the tax on cars imported from outside the NAFTA free-trade zone."
That is a scary one. Don't give them any ideas and take this out. My friend bought a Daewoo car right before it went bankrupt. Now the car is unsellable and I consider him fortunate to be able to get parts for it. For car buyers, who needs this trouble when you can just walk across the street to a Toyota dealer?

From Kiley: It's time the U.S. exerted some of the protectionism that other countries do without getting too carried away. Make buyers of Lexus, Infiniti, Mercedes-Benz, BMW, Hyundai, Kia, etc. not built here pay more, and prices of Detroit product will be more attractive than they already are. Target the money to subidizing new battery companies to set up in the U.S.

Steve Real

December 18, 2008 07:22 PM

Is this the real Bush legacy?
How Bush Administration single handedly destroyed the American auto-industry over their (subsidized) foriegn auto makers?
Is this what the Republican party stands for? Let's help out foriegn manufacturers and the ultra rich Financial firms over American industry and American jobs?

Nice going fellas...
Why don't you just outright lobby for the foriegnors fellas?
The Republican party loves their foriegn cars and supporting those ultra rich fat cats too.
I wish it weren't true... but hey this is what they want, this is what they stand for.
They want to bankrupt American Industry over those subsidized foriegn car industries from Europe and Asia.
Are you guys some sort of sick twisted maniacs or are you just plain Anti-American?

Daniel

December 18, 2008 07:46 PM

The guy is right. Anyway, you americans are the craziest people in the world. It is obvious that the three companies must reestructure their operations, get rid of the bad deals with employees and fire a good number of their managers, but you cannot let them fail. Any other country would have understood that by now but you keep this self inflicted pain going on while the cost of putting the companies back on their feets only goes higher and higher. I really cannot understand how can you take so fast a decision to start an one trillion war and take so long to do what is necessary to avoid such a loss of jobs in this terrible moment.

Brian B

December 18, 2008 08:06 PM

The problem of a bankruptcy filing goes beyond reassuring the consumer that GM or Chrysler will warrant its products, etc.

Consumerism is in no small part based upon image, of course. Many overtly or subconsciously see the cars they drive as an extension of themselves or what they'd like to be associated with.

A car manufactured by a bankrupt maker suggests weakness and illness, not very marketable qualities.

jt

December 18, 2008 08:11 PM

How do you sell this to the taxpayer. The UAW worker gets up to 7 weeks of vacation a year. Then, they get 2 more weeks of Xmas break. Then, they get 2 more weeks of a changeover break. Then, they get hunting days, election days, personal days. So, the UAW member gets one out of four days off. They get to retire at 48 years old with a gold plated pension and health care. They get almost full pay if they are laid off ... forever. Did I mention the car companies can not install robots like Toyota and Honda do? These jobs are saved for the UAW. Then, there is the 100 Billion dollar VEBA fund UAW wants to fund with bailout money. They already have massive pension funds ( hundreds of billions ) in the bank. They want the WalMart worker to help pay for all of this. The democrats want to help the UAW because unions contributed hundreds of millions of dollars to the campaigns. THIS IS A SCANDAL.

From Kiley: some of your facts and figures are incorrect, but I get your drift.

jason

December 18, 2008 08:29 PM

Re: 8. I think fiat has already proven nationally subsidized auto companies still fail. (and do nothing for the reputation of all involved)

From Kiley: Except that Fiat has been doing very well of late.

zhaojunjie

December 18, 2008 08:41 PM

Every time ,when i recalled that the so-called CEO took three corporate jets to DC to beg for help ,i think the US government shall not rescue them

Ton

December 18, 2008 08:55 PM

I like to read your articles. Unfortunately this one is simply thoughtless and polarizing.

From Kiley: Thoughtless and polarizing? I wish you would elaborate.

a guy

December 18, 2008 09:13 PM

Meh, why save overcapacity? The easy money will not be coming back for auto financing, so autos I believe will permanently have lower demand.

What's wrong with going Ford anyways? Overall they're the strongest, the best managed.

JoeBob

December 18, 2008 09:55 PM

Daniel, we (the average American person) had NO say in the "1 trillion dollar war". Our war-lord BUSH chose to do that himself. He didn't have the support of the average American to do it. WE know the best thing to do would be for these companies to restructure, but our government doesn't care what we think, they do what they want. We are NOT a true democracy, we are a REPUBLIC. So, we can say what we want, but they don't have to listen, which with all the bail-outs, it's obvious they aren't listening to the "people". It would take another American revolution to straighten them out, but they'd just round us up and shoot us, so don't look for that to happen anytime soon.

Joe M

December 18, 2008 10:08 PM

If "orderly bankruptcy" means having GM and Chrysler restructure and re-configuring current UAW deals such that out-of-date labour costs can be properly placed towards innovative product development and change the US auto industry to become more aligned with the times then it should happen sooner than later.

Otherwise, it's like sponsoring an olympic swim team that doesn't use the most advanced training techniques and speed enhancing "speedos" and expect to stay competitive.

Rag

December 18, 2008 10:27 PM

None of the ideas will work, because patriotic Americans do not want to see America's image to be associated failed Auto companies, not to mention it will be unfair to the foreign companies with Obama campaigning for stupid companies, and Obama would never do that, be associated with loosers on a personal level, not cool

Ray

December 18, 2008 10:39 PM

I find it interesting to contemplate future US administrations negotiating deals for war munitions with the Germans and Japanese. Fortunately, almost all of those who served in WWII will be dead by then. It would kill them otherwise. Sad... Very Sad...

Paul (Vw)

December 18, 2008 10:51 PM

>>> I’d rather go by my instinct

I appreciate you clearly stating the well thought out logic behind your position.

>>> The Bush White House floated the idea...

Heh, Detroit and the unions had their chance and blew it with congress. What did they think would happen with a lame duck president who has a low approval rating already...that he'd capitulate?

Edgar

December 18, 2008 10:53 PM

If the Republicans in
the Senate had given
Detroit enough to tide them over all
this would not have
happened.

Shan

December 18, 2008 11:10 PM

I have mixed emotions about the fate of the auto-industry, but a recent visit to my local Chevy, Ford and Chysler dealership lots has put it all in perspective for me now. Ford is trying to sell a Flex for 36k and down the road the Chevy dealer is pushing their maxed out large pick-ups that fill thier lots for 35k and up. From what I have seen, prices on most cars and trucks have remained way over-priced and salesman usually find ways to make up the profit on a so-called low price car.

Craig

December 19, 2008 12:16 AM

If every countries use this plan to save any dangerous industries, the world economic would be in disaster. Let the market decide who should get out! Why ask Americans to buy the cars with bad qualities? It doesn't make sense.

Nelson Lu

December 19, 2008 01:19 AM

There were comments here about why the Big Three needs selling rather than quality improvements. Well, I don't know about Chrysler (I'll say this -- I've never driven a Chrysler vehicle, although that's not really because of the quality, and so I don't feel competent to comment there), but Ford and, to a lesser degree, GM, have good cars that don't get the images of being "cool cars" as the foreign cars. It's not their vehicles that are bad; it's that they're not considered chic, for whatever reasons.

Riight

December 19, 2008 01:42 AM

What are the numbers for people that'd like to buy from a company teetering on bankruptcy? W/o the option these guys are essentially going to be on life support for at least a few years, and either way it would end up requiring PR support to reassure consumers that life support won't be switched off any time soon.

Jibbs

December 19, 2008 01:47 AM

" How do you sell this to the taxpayer. The UAW worker gets up to 7 weeks of vacation a year. Then, they get 2 more weeks of Xmas break. Then, they get 2 more weeks of a changeover break. Then, they get hunting days, election days, personal days. So, the UAW member gets one out of four days off. They get to retire at 48 years old with a gold plated pension and health care. They get almost full pay if they are laid off ... forever. Did I mention the car companies can not install robots like Toyota and Honda do? These jobs are saved for the UAW. Then, there is the 100 Billion dollar VEBA fund UAW wants to fund with bailout money. They already have massive pension funds ( hundreds of billions ) in the bank."

better get the facts straight, none of these are even close to being true , kinda of like the american autoworker make-ing $70 dollars an hour Myth

all my chevys have been good to me , and the profits stay in the USA , it's too bad I can't buy clothes, TV's, furniture etc made here , we would have more people working and the economy would be just fine right now

outsourcing of manufaturing has bitten america in it's a$$ets

Brian B

December 19, 2008 02:34 AM

RE subsidizing Fiat: Let's not forget that Wagoner himself helped subsidize Fiat when he had GM pay Fiat $2 billion to get out of an agreement to purchase the rest of that company. This followed an ill-thought out acquisitions binge where he followed the lead set by Ford and Mercedes. Equally odd on the part of Wagoner was his purchase of Saab, whereby he then ridded the company of its engineers and made it another GM brand (further reducing differentiation by re-badging an Isuzu, Opal and Chevy a Saab) while shortly thereafter killing Oldsmobile.

Qonsortia

December 19, 2008 08:41 AM

As a Marketing Professional , I believe that this approach would do more harm than good. This tactic positions American Auto brands as inferior vs. "rallying" the American Citizens to buy. Products should be sold based upon their strengths and benefits vs. begging or demanding the country to buy products. Its like forcing a child to clean up vs. making it a game and watch them clean up without you asking. American have decided with their wallets that foreign cars are superior to US brands. American Auto Companies should continue to push the advances that they have made and engage the American public in a way that demonstrates their commitment to the things that we think are important. Trust in a product is not earned overnight and will definitely not be regained by begging and mandates.

DLT

December 19, 2008 09:11 AM

What makes buying a car from a company that is hanging by a thread and looking for a handout to survive a little longer any more attractive than one going through a restructuring in Chapter 11?
Destruction is a part of capitalism...

Ton

December 19, 2008 10:16 AM

Dear Mr. Kiley, (only Mr. Kiley)
Although I just learned that President has approved a Bailout of $17,4 billion for the automakers, I still am sending you my answer on your request, whatever it is worth now. As you will understand out of the context of it, I strongly disagree with giving the current management another chance to spoil billions of dollars. I welcome the conditions regarding debt obligations and cutting benefits of the employees in order to make their labor costs competitive.
Thanks for your request to elaborate why your article is Thoughtless and Polarizing. Point by point I will try to make this clear. I hope it can satisfy you. I don’t want to be rude or impolite. I only aim to make clear what thoughtless and polarizing thoughts can bring to a country and a world that is in need of unification and peace at all fronts, also at the economic front. In case you have any comments feel free to email me adelphia12345@hotmail.com.
Ton Jacobs
For the Comment section
On request of David Kiley I elaborate my comment of his article being Thoughtless and Polarizing point by point.
1. ‘Some poor management judgments’
Thoughtless and untrue, because year after year there were made poor management judgments by the Big Three. You, together with other BW writers, point this for instance with regard to GM correctly out in your May 9, 2006(?) article ‘Why GM’s Plan doesn’t Work’. So not ‘some’, but time and again there were poor management judgments. Americans know this by now very well. So why naively assume that they will buy an untrue statement of ‘some poor management judgments’ plus President Bush, Obama and speaker Pelosi associating with this untrue statement.

2 ‘How the government helped the companies get to this bad place’
Thoughtless incorrect: Obama as President is not going to make incorrect statements, since it is not the government that helped the Big Three to this bad place. They did it by themselves. I refer again to you article May 9, 2006(?) and numerous other articles about the failure of management and of course the boards of there companies. If you are referring to the lack of a national healthcare system, that also is culpable negligence and a strategic failure of the Big Three and the UAW. From the beginning they could and should have put in all efforts, included persuading other companies to get on board, to get a kind of National Healthcare system. They simply did not (enough). So don’t put the blame of the financial bad shape of the Big Three on the government/congress that lacked sufficient support to get a National Healthcare system in place.

3 ‘President Obama saying 100 times: Not only good for the country, but cool’
Thoughtless invitation to protectionism: It can persuade other countries and its president or prime minister to stand up and to proclaim the same for products that these countries produce. Just imagine the Head of States of the EU-countries saying 100 times: ‘It is not only good for the country, but also cool to buy European products’, like civil aircrafts (so no Boeing’s), defense systems, military aircrafts (so no F-35 JSF’s Lockheed Martin), etc. Personally, I am convinced that the latter will not happen overnight, but it can slowly and/or suddenly creep in if the US is stepping into this path since there is still some irritation for instance in Europe about the protectionist actions by the Bush administration. We should not forget that the US has lost her moral authority in the world and that her economic power faces increasingly stronger other economic power houses like China, Japan, a more and more united Europe and an upcoming India.

4 ‘President Obama’s personal plea to donors to buy a Detroit-car with a stay in the Lincoln bedroom as the big prize’
Polarizing: Over a million Americans will get a letter from the President with the plea to buy a Detroit-car, implicating not to buy other cars made in America and made by Americans. The latter will certainly view this action as making them second-class citizens who can be put out of job without problem, because Detroit has priority, thus polarizing the country instead of unifying it.

5 ‘Double tax on imported cars’
Thoughtless pushing for protectionist domino effect: Europe, Japan and other countries will retaliate with double taxing imported products out of the US, like gas turbines, medical products, computer software, aircrafts, defense-systems and so on.

6 ‘How the companies arrived at the financial bad place and how they are going to get to the happy place’
Thoughtless illusion: Going to the happy place is wishful thinking. All three was not able, year after year for more than a decade, to turn around their companies into worthwhile competitors of Mercedes, BMW, Toyota, Honda, Nissan. It is the management and boards of these companies, and the UAW for its part, that failed year after year. There is no logic, why losers should become suddenly winners. Taxpayer money does not magically transform losers into winners. It does not mean that the Big Three do not have a chance of becoming a viable competitor, but certainly not with the current layers of failed management plus boards and their plans.

7 ‘President Obama driving Detroit hybrids for the inauguration’
Polarizing and discriminating American workers in foreign owned companies in the US, especially the ones planned to manufacture the Toyota Prius in the Toyota factory in Blue Springs, Mississippi in 2010. Ignoring the pioneering courage and efforts of Toyota with the Prius and its American buyers of the Prius, who now seem to be out of grace.

8 ‘$2,500 tax credit’
Polarizing and discriminating: The $2,500 tax credit discriminates the non-Detroit American car workers against the Detroit American car workers. It is even worst, it is not only discriminating Americans working for foreign owned car companies in the USA but also those Americans who are working for American owned suppliers of those foreign owned companies. It is just polarizing workers, their families and regions and states against each other. It also is, in my opinion, ignoring anti-competition regulation.

9 ‘Require top 100 executives of each ‘TARP’ related financial institution buying a Detroit vehicle’
This is polarizing, discriminating and over stepping anti-competition regulation: See point 4 and 8 for explanation.

10 -------

Bob Wilson

December 19, 2008 05:48 PM

Obama is not 'salesman in Chief' and proposing that he replicated GW Bush's airline commercials after 9/11 is missing the point. Yes, he would be a great spokesman but his designated cabinet members have more than enough clout to handle commercials, public service or otherwise. Personally, I'd like to see Howard Dean be appointed for that roll ... folks would watch just to see if his 'head exploded.'

As for what the future holds, it looks like a reasonable company could come out of merging Chrysler and GM with the current management and board of GM 'pulling their rip cords.' They've been in place three times longer than the managers of Ford and Chrysler who have a chance. Combining GM and Chrysler would allow redundant models to be closed; cherry pick the best engineering; and see if they can't give Japan Inc. some serious competition. But as for Wagner / Lutz, they had their fun and it is time to move on. I have no faith in anything either might say today or in the future.

Bob Wilson
625k Inc., Huntsville, AL

John Doe

December 19, 2008 06:50 PM

This article is spot on (except for some humor towards the end)
;-)

Bankruptcy is not an option (and thankfully Bush saw that too ... see today's bailout).

Now someone just needs to force these unreasonable unions to scale back their demands otherwise ... the problem will be back by mid next year!

Dick Pirozzolo

December 20, 2008 07:21 AM

As a PR pro for over three decades I can tell you The auto execs committed the number 1 PR sin of all time -- Arrogance. It's not so much the corporate jet travel as the fact that they DROVE to Washington from Detroit, rather than get on a plane with, horrors, the people who actually buy their product. Maybe they would learn something.

What is more, they look out the window from their offices and see nothing but American cars in the company parking lot -- gee what a surprise.

Maybe if these guys flew on a commercial plane, mixed with the people who buy their products as well as the Toyotas, Hondas and, yes BMWs and Mercedes that are eating their lunch, they would get a first hand look at the American market desires.

And, it is unseemly to blame the workers who assemble the cars -- they are putting together components that are made all over the US -- indeed the world by other workers. What is more, your employees do NOT earn $75 per hour -- even if you add in all the benefits. In addition to arrogance you can read 6 more public relations sins here:

http://pirozzolocompanypr.typepad.com/public_relations_services/2008/12/seven-public-relations-sins-you-must-never-commit.html

windsorite

December 20, 2008 08:23 AM

So, Basically what you are saying is that it is over?........They are finished.

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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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