What amazes me, however, is that the media – on both the left AND the right – is confused about why Chrysler (or let’s get real: The Treasury Dept.) wants to can almost 800 loyal ChryslerCo dealers today.

First, a couple of disclaimers – my wife and I both drive Jeeps, I’m a big fan of the Wrangler, and I used to work for an agency that did ads for car dealers, exclusively.

Congressmen, pundits and TV talking heads are all up in arms about the dealer bloodletting, claiming there’s no reason to kill off dealerships, and that “fewer dealers means fewer sales.”

Balderdash.

Here’s the deal, campers: Not only does Chrysler have too many models that overlap each other, they also have way too many dealers to sell the cars that DO sell to the public. (And keep in mind, everything that’s wrong with Chrysler is 10 times worse when you talk about GM.) It’s a little concept called cannibalization, all part of the laws of supply and demand. Let’s say in your city, you can sell 10,000 cars per month. Okay. Only a certain number of those sales – lets say…um…1,700 of ‘em will be a Chrysler product. Keep in mind, there are no fixed prices in the auto industry. Every dealer competes against every other dealer. Also remember that dealers are required to buy a certain number of cars from the manufacturer per month, need ‘em or not. So you have a situation where dealers are, shall we say, highly motivated to sell every car they can. Now if you have only one or two Chrysler/Dodge/Jeep dealers in a given metro area, you will have less competition. The number of cars you can sell into that market won’t change – only a certain percentage will buy Chrylers, Dodges, or Jeeps, regardless of how many dealers exist. But fewer dealers means less competition for the dealers that sell a particular brand, and therefore improve the odds of those dealers making a profit. Too many dealers cannibalize sales, reduce profit margins, and make it that much harder for dealers to survive.

Now, none of this has ANYTHING to do with how the dealers that will be axed have been chosen. As for me, the whole Chrysler deal stinks on ice – there’s no way that bond holders should have to take 29 cents on the dollar, no way any union should end up with ANY ownership stake in a bankrupt company, and no way that our government should be calling the tune so that they can pay back political patrons. But regardless of the corruption in place that has dictated which dealers live and which die, killing off a bunch of dealerships isn’t just a good idea – it’s essential to giving whatever survives from ChryslerCo a fighting chance to prosper.

From a marketing point of view, this is pretty easy to understand – reduce competition = increased profit. But since the ObamaNation has chosen to politicize the process, I can’t really blame people for being a bit confused about why dealers are going away.

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Obama Halves Chrysler’s Planned Marketing Budget

Task Force Agrees Automaker Needs Advertising — Just Not $134 Million Worth

By Jean Halliday

Published: May 11, 2009

DETROIT (AdAge.com) — Chrysler wanted to spend $134 million in advertising over the nine weeks it’s expected to be in bankruptcy — the U.S. Treasury’s auto-industry task force gave it half that.

So if GM, which is wrestling with the possibility of a Chapter 11 filing itself, is wondering how much influence the task force will have over marketing, the answer is: plenty. However, transcripts from the U.S. Bankruptcy Court for Southern District of New York, where the Chrysler case is being heard, proved for the first time that the task force at least understands that advertising is a necessary expense — even if it doesn’t think Chrysler needs $134 million for nine weeks of car ads. (continued after link)

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So it’s come to this. Anything worth managing is worth MICROmanaging – at least in the ObamaNation. Now I may not be Presidential timber, but I am a marketing guy – and a thinker. I’m not defending Chrysler (Lord knows), but there’s only one group that I can think of that could run Chrysler further into the ground than they already are – and that would be the U.S. Government.

Here’s the problem. If you cut advertising you lose mindshare. It’s as simple as that. This is NOT the time for Chrysler to cut advertising in half. If anything, it’s time to double down on their media buy. (Of course, it would help if they got some ads that were appealing rather than appaling.) If this doesn’t make you think we’re carreeening down a path to create the U.S. version of Yugo, you’re not paying attention.

Speaking of the Chrysler ads, if I were them, I’d take a page from the playbook of Lee Iacocca, when he faced the scandal of Chrysler running back odometers head-on. My recommendation for a new ad would star Bob Nardelli, the lame-duck CEO, and it would go something like this:

Hello…I’m Bob Nardelli, CEO of the Chrysler Corporation. As you’ve heard, Chrysler faces some real challenges as we reorganize, merge, and recreate our company so we can be competitive in the future. What you may not have heard is that Chrysler has some great cars, trucks and SUVs now – and we have more on the boards for the future.

Don’t get me wrong…we realize that we’ve made some mistakes. And we are committed to fixing every one of them. But we have some outstanding vehicles that we’d like you to consider when you’re ready to buy your next vehicle.

Take our Jeep division – did you know that the award-winning Jeep Wrangler and Wrangler Unlimited have both been judged “best in class” by countless auto experts, magazines, and pundits? How about the Dodge RAM trucks? We launched a redesigned RAM for the 09 model year, and it’s been met with acolades around the nation. Or the Chrysler minivans – the original and still the market leader.

We’re committed to turning our company around. And with your help, we’ll restore the Chrysler, Dodge and Jeep brands to where they belong – at the pinnacle of the U.S. automobile industry. I invite you to stop by one of our showrooms today, and see for yourself the great vehicles we have to offer.

Now obviously, one ad’s not gonna win the hearts and minds of the public. But a little frank honesty would go a long way towards convincing the public that Chrysler management actually has a clue, and a chance of rebuilding. Unfortunately, the ObamaNation seems to think they can micromanage Chrysler better than Chrysler, and they are Hell-bent on a penny-wise/pound-foolish stratagem that will virtually insure that Chrysler is destined not for rebuilding, but for the trash heap of history.

]]> http://blog.grokmedia.com/2009/05/13/the-marketer-in-chief/feed/ 0 http://blog.grokmedia.com/2009/05/07/whither-jeep/ http://blog.grokmedia.com/2009/05/07/whither-jeep/#comments Fri, 08 May 2009 02:09:45 +0000 admin http://blog.grokmedia.com/?p=447

Jeep. There's Only One.

And then there were two. ChryCerebus has turned the page to Chapter 11 (as opposed to turning the corner), and what’s left looks a lot like Crissis-ler. The conventional wisdom is that Chrysler is toast (the brand, not the company), Dodge is on the bubble, and Jeep is the only brand that has actual worth in a Detroit-style fire sale. Fair enough. For the sake of argument, let’s pretend that, with the bankruptcy, Chrysler is able to shed it’s legacy costs and indentured servitude to the unions union contracts, and can either move forward as a leaner, meaner company, or sell its assets in liquidation. With the Chrysler brand D.O.A., and Dodge coughing up blood, let’s examine the best way to save Jeep, either as a stand-alone company or as something worth acquiring, and allow me make an out in left-field proposal for who should buy Jeep, wheel-lock, stock and barrel.

Jeep is the quintessential American brand. Nothing says “all-purpose, tough-as-nails, durable and reliable vehicle” like Jeep. Or at least it did, until the Chrysler brain trust started mucking about with the time-tested, Trail-Rated® formula. But something in Chrysler’s history points the way to the way out for Jeep: Lee Iacocca’s humble K Car.

Set your WABAC machines for the start of the Lee Iacocca era, and how he saved Chrysler. He ruthlessly cut scope, found a single, simple platform upon which to build the future, and then rode that horse for all it was worth. What was a K Car? It could be practically anything…from pocket rocket to a scaled down Family Truckster, the K Car was a chameleon for Chrysler. I owned one – a Chrysler Laser – complete with a 4-banger turbo. Got over 130,000 miles out of that whip before I sold it and bought…a Chysler Le Baron convertible. So using that logic, I give you the future of Jeep, and the K Car for the new Millenium: The Jeep Wrangler/Wrangler Unlimited.

Before you scoff, look at what Jeep has already done with the Wrangler. Born of an all-purpose vehicle from WWII, the Wrangler has evolved into the ultimate off-road/utility vehicle. You can get a Wrangler in 2- or 4-doors, in 2- or 4-wheel drive, and in a removable T-top/hardtop, ragtop, or both. Where “cheap plastic interior” might be a problem in a Chrysler or Dodge, it’s a huge advantage in a Wrangler. Fill it full o’ mud? Divert a garden hose (or a river) inside, and hose that puppy out good as new.

What you may not know is that Jeep has been sitting on an Unlimited-based pickup for years. They already make one – for the Egyptian Army. That brings up interesting possibilities for Future Jeep.

What’s to stop Jeep from releasing a hardtop 2-door Unlimited configured as a pickup, or a hardtop 4-door Unlimited with an open cargo area like the Hummer SUT? With a ladder frame, there’s little to prevent them from bolting on other body configurations – say, a panel truck or a flatbed. Jeep’s got the rep – and the goods – to be a credible entry into the work truck market, and a modified JK platform offers immediate entry into the game.

But what of the rest of the line? Kill the Compass, the Patriot, and the Commander. Mothball the Liberty for some time in the future when the market will bear a “cute ute.” (Not the new one, but the older body style, that looked more Wrangleresque than the current “Nitro beaten with an even-uglier stick”), As the industry buzz says they have a segment-killer in the 2011 Grand Cherokee, keep that in the pipeline as a hedge against the future.

So let’s say we’re successful in refocusing Jeep. Who owns/runs the company? Current management has proved themselves incompetent. The union? Gimme a break. The obvious solution is to sell the Jeep division. But to whom? My choice (as insane as this will sound): Ford.

Ford has a history with the Wrangler’s forebearers – they made Jeeps right alongside Willys-Overland back in WWII. They took their medicine early, and as a result have resisted government handouts. And they are the OTHER quintessential American brand. Ford is the only domestic playa left standing. But aside from that, Jeep gives Ford something they don’t have – a credible off-road presence. It’s a better strategy than selling it to another Eurotrash buyer, or allowing the Obama Nation to create some sort of Frankensteinian American Leyland out of the salvaged parts from Chrysler and GM.

To see why Jeep is worth saving, you have but to look at the resale value of any Wrangler. America needs Jeep, but not as a Welfare Queen, but as a shining example of Capitalism, Know-How, and the American Way. Here’s to hoping that Chapter 11 won’t be the final chapter in the Jeep saga.

Marketing.

Yep. Ford’s chair drove all the way from Detroit to D.C. in an Escape Hybrid. Wow. There’s a PR move, if ever I’ve seen one. ‘Course, it would have been ever so much more effective if he’d done it a couple of weeks ago, instead of flying in with his corporate jet. “I just drove in from Detroit, and boy is my butt sore,” makes ever so much better a punchline than “I just flew in from Detroit, and boy is my stewardess tired.” Oh, and the Big Three CEOs have offered to take $1 a year for a salary! (No word on stock options and other incentives.) And they’ll give up the corporate jets! (Now we’re talkin’ pain!)

It’s interesting to see the Big Three get hip to appearances, and start doing something to make it at least look as if they’re trying to be contrite. Pity they didn’t come up with anything more than smoke and mirrors for a plan.

The simple fact is that none of the Big Three have a ghost of a chance of survival until they deal with the fact that their costs of manufacture are $1,500 higher than their competition.

Toyota, Nissan, BMW, Honda all build cars here, and build them better, faster and cheaper. Why? They don’t have unions dictating how many cars to build, how many people to keep on the job, and what models must be built, regardless of demand. Which is exactly what the unions have done to the Big Three. Oh, and they also put a gun to the heads of GM, Ford, and Chrysler as to wages, health care benefits, and pensions.

Oddly enough, I think marketing IS the solution. Just not in the way that it’s been used so far.

What needs to happen is that the Big Three CEOs need to man up, and come up with plans that address the real issues – specifically, the cost of manufacture. Once they are ready to propose the tough moves, they need to then market the plan – to Congress, to the UAW, to the shareholders and investor community, to the dealers, and suppliers…then ultimately to their customers.

When you present a plan that spreads the pain out among all the stakeholders, and that sharing that pain means the ultimate survival for the companies, and therefore the stakeholders. In the big picture, this works. On the smaller, more personal scale, it means that some will lose their jobs. Some will see their pensions and benefits shrink. Some will see their salaries cut. Everyone will feel pain. If you can use marketing to sell the wisdom of this plan to everybody, there’s a chance that restoring the principles of capitalism to the Big Three will save them. No guarantees. No promises. Because when you invoke free market capitalism, you live and die on supply and demand – not union rules, jobs banks, and Soviet-era 5 year plans.

Can marketing save the Big Three. Yes – if they market a plan that works. Otherwise, all the CEOs in the world driving all the hybrids in the world won’t save them.

What we’ve got here (with apologies to Strother Martin) is a failure to communicate…the truth.

And it’s that failure – and the framing/spin/mendacity that’s going on that is so bloody fascinating. To wit…

Detroit would have us believe that if we don’t hand them our wallets, It Will Be The End of America As We Know It.™ They insist that only an immediate cash infusion will stay the wolves from the door, save the farm, and give Tiny Tim that operation he so desperately needs. Of course, they also insist that said bailout come with no strings attached. After all, THEY are the Captains of Industry, and THEY have no intention of abandoning the helm in this Time Of Crisis.™

Problem is, they are are (collectively) to piloting their companies through these treacherous economic shoals what Joseph Hazelwood was to the Exxon Valdez.

“Um…Captain? Wake up…we seem to have hit something.”

“What’d we hit?”

“Um…Alaska.”

Do you really want to write a blank check to the auto industry and give it to the same clowns that ran the industry aground? I didn’t think so.

Any reasonable person would see that this is a bad idea. You know it. I know it. Congress knows it. The auto execs know it. So what’s a poor, overpaid, clueless auto company exec to do?

Marketing…to the RESCUE!

The chairman of the Big Three (and their minions) swept into Washington this week, with stories of gloom and doom. Their leitmotif was that they MUST have the money before Thanksgiving, or Disaster is Certain. Workers (read: VOTERS) will Lose Their Jobs! The Domino Effect will lay waste to the American Economy! A Worldwide Great Depression will follow! We will never recover! Millions of Jobs will be Lost Forever!

In a performance worthy of Professor Marvel, the Big Three honchos worked the crowd like a carnival huckster preying on a bunch of Kansas farmhands.

Pay no attention to the man behind the curtain.

But we must pay attention. First it was SecTreas Paulson, selling us a bill of goods about the finance system. “We need $700 Billion NOW, to avoid another Great Depression! Don’t bother with the details! Trust me! We’ll buy up all the bad loans!” Of course, now we find out that it was bait and switch – no bad loans need apply. Nobody knows how the $700 Billion is being spent. But the Fear, Uncertainty and Doubt tango worked. Next came the rest of the (mis)management supplicants, wailing and gnashing their sharp teeth, looking for a handout. But now, cynicism has set in, and it’s getting harder to stir the populace into a froth worthy of your neighborhood Starbucks.

So they cut a commercial.

The car execs have to do SOMEthing. (That is, something OTHER than actually address the problems at hand. Actually FIXing things would require bold moves like taking their companies through bankruptcy, jettisoning bloated union contracts, unsustainable health care plans, exorbitant pension funds, then cutting product lines, brands, and bloated dealer networks. That is something they WON’T do.)

The dirty little secret here is that the Big Three are behaving like your junkie nephew that got thrown out of his parent’s place for stealing. He’s come to you, because he thinks you’ll take pity on him, and not force him into rehab.

To put it another way, how’d you like to buy a new car? Not in the market for one today? Okay, how’d you like to pay for a new car – but not get to drive it? THAT sounds better, doesn’t it? Essentially, a taxpayer-funded bailout is just that. We’d pay Detroit to build cars, but we wouldn’t get to drive them. Even if you do go out and buy one, it would be like paying for it TWICE. Now THAT’S marketing!

And there’s the problem. The only thing that throwing money at the problem will do is to delay the inevitable. But the automobile execs are so unwilling to make the hard choices, they simply will not acknowledge reality. Call this bunch of Detroit Pharaohs the “Kings of Denial,” for they have had ample chances to do the right thing, yet they persist in the fantasy that more money will do the trick.

I’m a big believer in marketing. I believe that marketing has the power to change hearts and minds. But marketing cannot change reality. And the reality here is that, no matter how much – or how little – money we throw at this problem, it won’t matter. In the greater scheme of things, money is not the problem. Bad management, bloated contracts, oversupply and under-demand are. It’s time to step aside and let market forces and our bankruptcy laws deliver a little tough love, and force the healing process to begin.