GM Chrysler negative PR hurts sales

LA Times:

For six months, General Motors Corp. and Chrysler have been trying to convince the government that they need billions of dollars in aid, while assuring the American consumer that everything is A-OK.

It's proved to be the marketing equivalent of trying to stuff a Hummer into the trunk of a Corvette.

The negative PR campaign appears to have reached the right ears in Washington. On Monday, President Obama will announce his plan for supporting the two automakers beyond the $17.4 billion they've received, his press secretary said Friday. Obama is widely expected to offer them further financial help in exchange for deeper restructuring concessions.

But car buyers have also been listening, and they've been taking their business elsewhere.

Since the first congressional hearings on the auto industry in November, U.S. sales by GM and Chrysler have fallen a combined 45% compared with the year-earlier period; all other carmakers slid only 33% during that time. Taking federal money is keeping people away from their lots, consumer surveys suggest.

By comparison, Ford Motor Co., which has not accepted any government aid, saw its share of the retail car market rise for four consecutive months through January, the first time that's happened in 14 years.

Now, as Chrysler and GM extend their hands for as much as $21.6 billion in additional taxpayer cash, experts question whether the automakers can recover from the damage to their image that the drawn-out and painful bailout process has inflicted. Ultimately, they say, no amount of federal aid can guarantee the key to their long-term survival: getting buyers behind the wheels of Chevys, Buicks, Dodges and Jeeps.

"GM and Chrysler are sending out messages that are very definitely in conflict with each other," said Kelly O'Keefe, a professor at Virginia Commonwealth University's Brandcenter and the son of a former Chrysler executive. "On the one hand they're saying they're in trouble, and on the other they want consumers to keep buying. It's a marketing nightmare."

A survey released this month by polling firm Rasmussen Reports found that 88% of Americans would prefer not to buy a car from an automaker receiving government aid. That's worse than the 63% who said they would eschew buying from a bankrupt car company.

There is good reason for those concerns. Governments do not know how to run car companies yet the US is preparing to impose requirements on GM and Chrysler that will make them less competitive. By forcing them to build cars people don't want, their position will only get worse. The negative PR has also increased concerns about the value of the warranties of these companies. The warranty on my new Ford F-150 looks like a better bet than one on a Chevy or Chrysler. That is why they are losing market share to Ford.

There are some potential good things to come out of the restructuring. Revised labor contracts and the conversion of bond debt to equity will give the companies a better cost structure, but ultimately they still have to sell enough cars to meet the economies of scale in the auto business. That is something that all the makers are struggling with at this point. It Toyota and Honda are not making money in this market, government requirements that GM and Chrysler make more cars like theirs' is unlikely to make much difference.


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