GM Looks to Reassure Buyers: What Would Iacocca Do?

[Perian]

Link: wsj.com Page B1 01/16/06

From The Wall Street Journal

DETROIT -- On Mark LaNeve's desk inside General Motors Corp.'s world headquarters here sits a well-thumbed copy of Lee Iacocca's autobiography. Near the top of page 223, Mr. LaNeve has underlined a sentence from an ad that Mr. Iacocca ran while leading Chrysler back from the brink of bankruptcy: "Would America be better off without Chrysler?"

Mr. LaNeve, GMs vice president of North American marketing and sales, wonders if his company should ask the public a similar question about itself today.

Even as the world's largest auto maker insists it has no plans to file for bankruptcy protection, a loss of nearly $4 billion in the first nine months of 2005 has fueled rumors to the contrary. Cognizant that a recent study shows that almost 75% of Americans wouldn't buy a car from a bankrupt company, Mr. LaNeve envisions salespeople at Nissan and Ford dealerships telling customers they'd be crazy to consider a GM vehicle because the company might not be able to honor its warranty.

"As much as I hate to do this, we're probably going to have to do something proactively on the marketing side just to address that issue," he says. "How you do that, I don't know. It's a tough thing because you really don't want to go there."

In the midst of the seemingly never-ending bad news about his company, Mr. LaNeve says he doesn't want to trumpet a defensive message that is the equivalent of "GM isn't dead yet," but he is struggling to come up with something that will "get America rooting for us again."

One man intimately familiar with the problem is Mr. Iacocca. When he was Chrysler chairman, Mr. Iacocca was the front man for a blunt 1979 advertising campaign that asked a series of questions, such as "Doesn't Chrysler have more problems than anyone can solve?" "Is Chrysler management strong enough to turn the company around?" "Does Chrysler have a future?"

Mr. Iacocca, who now spends his time raising money for the Join Lee Now initiative to find a cure for diabetes, says that during that period, customers were wondering where they could get parts for vehicles if Chrysler went under.

"We had nowhere else to go, and when you are in doubt, you drop to your knees and pray," he says. "Our ad agency told me, you can't hide in a bunker. So we went out and asked the public to trust us."

Mr. Iacocca appeared in television spots, saying, "If you can find a better car, buy it." He signed his name at the end of newspaper ads answering those tough questions about Chrysler's future. And he mobilized dealers to make the company's case in 4,000 towns across the country. Touting cars "born in America," Chrysler also increased its warranty to seven years or 70,000 miles to increase consumer confidence and came out with a successful line of new products, like the K-car series, which became the platform for Chrysler's popular minivans.

After two years of what Mr. Iacocca describes as "slugging and praying," the strategy worked. He got mail from customers telling him to "hang in there." More importantly, Chrysler got a $1.2 billion loan from the federal government, which it was able to pay back seven years early in 1983.

Mr. Iacocca says GM needs to have a similar conversation with America and make sure that everyone, from the top executives to dealers to unionized workers, knows they will have to sacrifice.

"GM is a strong company, and I believe it will be stronger," Mr. Iacocca says. "But now, they all have to agree that they are in one hell of a crisis, and if you don't want to suffer the pain, then get out. And they have to level with the customer."

Mr. LaNeve says GM is considering a communications plan to "get the facts out and push back on some of the misperceptions." GM has yet to decide the details of the plan. Mr. LaNeve's frustration is particularly acute because he and other GM executives feel they have an improving story to tell, if they could get anyone to listen.

While GM has been portrayed as a company churning out gas guzzlers, they say, it has 20 vehicles that get at least 30 miles per gallon and its SUVs have the best fuel economy in their class. While critics say GM doesn't sell cars people want, it is the top-selling auto maker in the U.S. and has some hits, such as the retro Chevrolet HHR and the sporty Pontiac Solstice.

"I've always been pretty sanguine about press coverage because I believe you get what you deserve," Mr. LaNeve says. "But when analysts say our problem is we have cars nobody wants, it drives me out of my mind. Do they realize how bad that hurts us?"

GM is still fighting ghosts of products past. The company lost many customers in the 1980s because of quality problems, and they have not returned despite recent improvements. In the 2005 J.D. Power and Associates Vehicle Dependability Study, several GM vehicles were at the top of their segments, such as the Chevy Malibu outranking the Hyundai Sonata and the Buick Century beating the Toyota Avalon.

John Brown, a 31-year-old Los Angeles resident, is one of those consumers that GM is trying to win over. He grew up part of a "GM family," working on Chevys and Pontiacs with his dad. But when he bought a car, he decided to go with a Honda Civic because he didn't want to worry about reliability. He says GM isn't building cars he wants to buy and says the talk of a 50% chance GM could go bankrupt this year isn't helping change his mind. He's so passionate about the topic that he started his own Web log last year called "GM Can Do Better."

"It's a sad sign," says Mr. Brown, who remains skeptical about the company's quality claims. "GM has so much potential but they aren't fulfilling that potential, and now they could go under."

While GM grapples with the bankruptcy rumors, the company is pursuing several new efforts to get its message out. Last week, GM announced it was cutting sticker prices on nearly 80% of its models. "If we need to make further moves on pricing to get that message out," Mr. LaNeve says, "we're going to do that."

GM will also make sure its eight brands aren't advertising in the same place at the same time. For example, ads for GMC and Chevrolet used to run during the same National Football League broadcast, but this year GMC will buy ads during Monday night games while Chevrolet and Cadillac will target Sunday night.

GM will also try to better tailor its advertising to its target customers. Saturn ads have primarily appeared in prime time, even though many of its buyers are women. Now, it will focus more on daytime television, such as the "Oprah" and "Ellen" talk shows. But there will also be less focus on television and more efforts put into online advertising, which made up 12% of the advertising budget in 2005 and will be "somewhat higher" this year, Mr. LaNeve said.

The company is also focusing marketing efforts on trend-setting areas like Southern California. Although GM's SUVs and trucks sell well in California, it has a 10% market share for passenger cars there, slightly below its national share.

To meet the challenge, GM has been focusing on obtaining endorsements from tastemakers, such as a stylist, a record company executive or a celebrity. Every year GM hosts the Ten fashion show in Los Angeles, featuring 10 celebrities, 10 GM vehicles and 10 fashion designers. The company is also setting up more events that allow consumers to see and drive the cars, such as opportunities to try out GM vehicles and their competitors' and letting customers check out cars during sports events. The strategy has worked for Cadillac, but GM's other brands are struggling.

"We're not going to turn around California overnight," says Mike Jackson, GM's regional manager in charge of the western U.S. "But ultimately, we think we can get things turned around."

Ultimately, Mr. LaNeve says people need to realize that because of fierce global competition no car company will ever have the luxury of controlling more than half of the market, as GM did in the early 1960s. Even 30% seems out of reach. Still, Mr. LaNeve hopes GM can expand its retail share beyond the 26% it garnered last year.

Article Continues @ Link

[Perian]

Originally Posted by Perian

GM will also try to better tailor its advertising to its target customers. Saturn ads have primarily appeared in prime time, even though many of its buyers are women. Now, it will focus more on daytime television, such as the "Oprah" and "Ellen" talk shows.

Need a new Saturn Sky or Aura?

I willing to bet that the 256 lucky people at Oprah's first show of the season in September may be wondering the same thing...

[asim]

Well GM better start something soon.

[GMCtruck]

Perhaps GM should stop talking and start listening. I've talked to dealer service managers and service advisor's until I'm blue in the face about GM's warranty policies and service issues, but it does no good. Corporate GM seems to be high in the sky out of reach from customers.

GM execs need to get their butts out of their luxury office chairs and go out in the field and start listening to what their customers are saying. GM will never figure out what they're doing wrong if they don't ask their customers.

You can't satisfy your customers or earn new customers if you don't know what they want and expect from your company. GM needs to do more listening and much less talking.

It's a tough job, but it's not rocket science.

[01cavalier]

I remember those ads from Chrysler when I was younger. Never thought about facing it so head-on, but maybe it would go a long way if they got the guts to go for it. I think then they may actually get some good attention from the media.

[Globalist]

Mr. LaNeve says GM is considering a communications plan to "get the facts out and push back on some of the misperceptions." GM has yet to decide the details of the plan. Mr. LaNeve's frustration is particularly acute because he and other GM executives feel they have an improving story to tell, if they could get anyone to listen.

GM should have a plan targeting 3 categories of past/present/future customers. The first category: Promoters--Those loyal customers who spread the good word and bring other customers.

The second category: Detractors--Those who never come back and do more damage to the category Neutrals.

A good marketing plan (ads) could be a series of TV ads featuring dialogs between a Promoter and a Detractor while a Neutral is listening--For example, a Promoter talking to his friend (a Detractor) in a bar, while a Neutral is nearby. Different locations/places could be chosen for this dialog to target different audiences for different vehicles.

The goal is to reach a high NPS (Net Promoter Score = Promoters - Detractors)

[Globalist]

The company is also focusing marketing efforts on trend-setting areas like Southern California. Although GM's SUVs and trucks sell well in California, it has a 10% market share for passenger cars there, slightly below its national share.

That's true. I live in L.A. and GM is doing very well truck-wise. However, you rarely see GM cars (except mine ). Toyota, Honda, Nissan and VW dominate the car market, especially with Asians. I havn't seen an Asian in an American car yet.

[GMCtruck]

Originally Posted by Perian

Link: wsj.com Page B1 01/16/06



From The Wall Street Journal



Mr. LaNeve's frustration is particularly acute because he and other GM executives feel they have an improving story to tell, if they could get anyone to listen.



"I've always been pretty sanguine about press coverage because I believe you get what you deserve," Mr. LaNeve says. "But when analysts say our problem is we have cars nobody wants, it drives me out of my mind. Do they realize how bad that hurts us?"

Perhaps Mr LaNeve is now feeling the same pain and frustration that GM customers have felt for years trying to get GM to listen to us. Now the shoe is on the other foot and he wonders why no one wants to listen to GM.

</IMG>

[mobyss]

Honesty and openness? From GM? Good luck.

GM will never "stoop" to such levels as Chrysler did in the 1980s - GM still doesn't understand the reality of its position. Only 15% of the US retail market is interested in GM products - the other 8% to 12% of GM's share is fleet buyers - and they would switch to Ford, Nissan, or Chrysler in a heartbeat.

LaNeve - the idiot - talks about lowering prices "again" - did you really lower them at all, Mark? Really - which ones? I see that the invoices are mostly higher and rebates are lower - which means final transaction prices are going to be higher. Duh! You just lost that many more customers who know how to use Edmunds-dot-com! You ***** fool!

How about a 7/70,000 warranty like Chrysler did? Ooops - I forgot that GM dealers LIVE on the repair and service work from GM products - after 36,000 miles those not-yet-paid-for GM cars are a golden goose to dealers: "I'm sorry Mr. Jones - your 2002 Suburban needs a new A/C compressor - that will cost $890". And Mr Jones thinks about the 2 years left on his GMAC loan...

I just got a piece of mail yesterday from a Chevy dealer saying that if I "didn't bring my vehicle in for the 18,000 mile service, my warranty may not be honored!!!!" Really - should I check with GM on this? An oil change and tire rotation? OH, you mean YOUR 18,000 mile service package - which includes radiator flush (what happened to 100,000 mile Dexcool?), "brake inspection" (push pedal - see if brakes clamp), and other useless crap - all for $169.95? Complete and utter bull**************** - and they've lost my business from now on - Brown and Brown Chevrolet in Mesa, AZ.

GM dealers are scum, and most people (over 75% of the car buying market) do not deal with them anymore because they buy non-GM vehicles. But GM will never be able to break the dealer-service stranglehold - they need GM to keep a short warranty for all those repair dollars to keep flowing in.

Between the UAW and the dealers GM is screwed.

[Arizona Slim]

Originally Posted by mobyss

I just got a piece of mail yesterday from a Chevy dealer saying that if I "didn't bring my vehicle in for the 18,000 mile service, my warranty may not be honored!!!!" Really - should I check with GM on this? An oil change and tire rotation? OH, you mean YOUR 18,000 mile service package - which includes radiator flush (what happened to 100,000 mile Dexcool?), "brake inspection" (push pedal - see if brakes clamp), and other useless crap - all for $169.95? Complete and utter bull**************** - and they've lost my business from now on - Brown and Brown Chevrolet in Mesa, AZ.

Henry Brown B-P-G, also in Mesa, tried that same crap with me on my Sierra. I brought it in for an oil change at about 15,000 miles and they go "you want the 15,000 mile service?" Which includes all that same stuff you listed. And what's weird is Brown and Brown Nissan is a remarkably well-run dealership from top to bottom.

[mobyss]

Originally Posted by Arizona Slim

Henry Brown B-P-G, also in Mesa, tried that same crap with me on my Sierra. I brought it in for an oil change at about 15,000 miles and they go "you want the 15,000 mile service?" Which includes all that same stuff you listed. And what's weird is Brown and Brown Nissan is a remarkably well-run dealership from top to bottom.

I didn't know that dealer on Main was a "Brown" dealer now. They were always scumbags - I once looked at a 2002 Trans-Am there that had over 1300 miles on it that they were trying to sell as "new". It had some paperwork from an auction house on Van Buren street in the glovebox! Probably stolen, recovered, fixed, auctioned, and somehow back at a dealership. I offered them $20,000 for it (sticker was over $30,000 at the time) and they balked. I think the thing sat there for 9 months.

Anyway, it really is too bad the GM dealers are such A-holes. They are the public face of GM, and they are costing GM lots of customers. You say Brown and Brown Nissan is a good place? I may have to check out a Titan there.

[D C]

The #1 thing in that article that GM should follow:

Chrysler also increased its warranty to seven years or 70,000 miles to increase consumer confidence

[D C]

Originally Posted by mobyss

GM dealers are scum, and most people (over 75% of the car buying market) do not deal with them anymore because they buy non-GM vehicles. But GM will never be able to break the dealer-service stranglehold - they need GM to keep a short warranty for all those repair dollars to keep flowing in.

Between the UAW and the dealers GM is screwed.

Interesting then that GM dealers rank higher in independent surveys than do Toyota dealers.

[DuSpinnst]

Originally Posted by D C

Interesting then that GM dealers rank higher in independent surveys than do Toyota dealers.

Ok, is that sarcasm or truth?

[SweetHemi1]

Originally Posted by D C

Interesting then that GM dealers rank higher in independent surveys than do Toyota dealers.

How about some proof?