Destroying brand value … and the company

Rich Karlgaard, Publisher of Forbes, had an interesting commentary in the December 22, 2008 issue (reprinted from his blog). He opined that Detroit’s US automakers had made a fatal brand positioning mistake many years ago (and I say one of many such mistakes) by selling so many “stripped down” cars to the major rental car companies.

 

His suggestion, with which I agree, is that by selling these stripped down cars to rental car fleets, the automakers allowed too many people’s image of an American car to be a stripped down, gutless vehicle. So, when car buying time came around, they would not consider a US car because their experience with them, via the rental car fleets, was poor. He contrasts this with Toyota’s (and by implication other foreign brands) cars in rental car fleets which are no where near as stripped down.

 

He makes a valid point; and just where did this short-sightedness come from you might ask? The same place that the untenable UAW contracts came from: senior management focused on making this year’s numbers and not worrying about the future. Those UAW contracts were agreed to by managers who are not at the Big 3 now that their disastrous results have come home to roost. But, they did make their numbers the years they were in power. Too bad for the current management.

 

And how does that tie to selling stripped down cars to rental car fleets? Simple … volume. The Big 3 need sales to rental car fleets to make their numbers. How to do that? Sell lower priced cars to the fleets and make the numbers. The fact that these sub-standard versions of their brands are what lots of influential car buyers experience is, apparently, not connected.

 

Greed and short term mentality is killing this country and the businesses in it. Whether that greed and mentality is from politicians looking to make a killing and move on; from so called financiers like Madoff, or from greedy business executives, the result is a destruction of a fundamentally good system of capitalism and democracy that has to be put right. Perhaps we will get some leadership to make that happen.

 

Time will tell.

 

Mitch

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One Response to Destroying brand value … and the company

  1. David Jung says:

    Of course the other short-sighted part was the fact those cars hitting the used market depressed resale prices, making new GM cars more expensive to buy for regular consumers.

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