Identity Crisis : Sales of ‘Orphaned’ Sterling Sedan Prove to Be Major Disappointment
There was to be this perfect combination--Japanese engineering and British elegance.
Leather from English craftsmen, a precision engine from Japanese techies. They put a royal-sounding nameplate--Sterling--on the body of an Acura Legend, one of the fastest-selling Japanese imports in America.
At $21,740--far below the sticker price on most European luxury cars--how could the public resist? Well, the public has found a way.
The Sterling, the new luxury car developed by a British joint venture between Austin Rover and Honda, is fast turning into one of the biggest losers in the worsening sales slump plaguing upscale European imports this year.
Indeed, while the Acura Legend, virtually an identical car built by Honda in Japan, has quickly gained the Japanese a new foothold in the American luxury car market, the Sterling has found it hard to get off the ground.
Simply put, Sterling has a serious identity crisis. Few car buyers know what it is, where it comes from or even where to get one.
“It’s kind of like an auto snipe hunt,” laments James Jenkins, a salesman at Sterling of Cerritos. “One guy came in and said he’d seen a Buick Sterling, and wanted to look at them. A woman said she was sure she had seen one in Korea, a real small one. They think they’ve seen them, but they really don’t know what they are.”
Being one of the auto industry’s best-kept secrets hasn’t been so good for Sterling’s sales.
Launched in February, 1987, with an ambitious sales target of 90,000 units annually within five years, Sterling will be lucky to sell much more than one-tenth that number this year. In April, Sterling sales plunged embarrassingly low--to just 546 units--roughly one-third the volume posted a year earlier, and May sales of 632 weren’t much better. By contrast, the Acura Legend, with a similar sticker price, reported sales of 6,160 units in the month, roughly twice what Sterling has sold all year.
Now, Sterling is backing away from its earlier heady sales predictions. “I would see that 90,000 prediction as really just a forecast made in the heat of the moment a couple of years ago,” says Chris Woodwark, the new president of Austin Rover Cars of North America, Sterling’s U.S. distributor.
Little Sales Support
Sterling’s failure to excite consumers shows just how difficult it has become to successfully launch an entirely new brand of cars in today’s fiercely competitive auto market.
While Honda has been able to use its vast marketing and distribution resources to turn the Legend into a best seller, Sterling has been something of an orphan, with little marketing and sales support to transform it into a household name.
“The Acura Legend has a bigger name and a lot more money behind it,” concedes Michael Geylin, Sterling’s spokesman. “The Honda name behind it has made a big difference.”
But industry analysts also blame Austin Rover and Sterling’s original American distributor, Miami car dealer Norman Braman, who had no previous wholesale experience, for failing to understand how much money and effort would be required to gain acceptance in the U.S. market.
“To try to do the marketing on a shoestring like they did was a formula for failure,” notes Martin Stein, an auto industry consultant with Abt & Associates, a Boston-based consulting firm.
“As an organization, Braman’s group was ill-equipped to become a car distributor,” adds Maryann Keller, automotive analyst with the investment firm of Furman Selz Mager Dietz & Birney. “You can’t just take the car off the boat and then expect to sell it. My understanding is that Braman wasn’t prepared to do it properly.”
Sterling Shake-Up
Austin Rover apparently agreed. Although Austin Rover executives deny they were unhappy with Braman, they nevertheless began to shake up Sterling’s American operations last month. The British auto maker took over its U.S. distributor in mid-May, buying out Braman, who had held the American distribution rights since Sterling’s introduction.
Braman couldn’t be reached for comment. But Woodwark insists that Austin Rover bought out Braman only because it wanted to consolidate Sterling operations into Austin Rover’s organization.
Yet almost immediately, Austin Rover also ousted Sterling’s American president, Raymond Ketchledge, a former executive at Volkswagen of America who had been brought in by Braman.
Ketchledge was quickly replaced by Woodwark, an Austin Rover veteran who has moved from Britain in the last few days to take over at Sterling’s Miami headquarters.
Austin Rover has also fired Sterling’s second ad agency in 18 months, Hal Riney & Partners, which just won the huge Saturn Corp. account at General Motors, and thus had a new conflict with its Sterling business.
As a result, Sterling is now without an ad agency at a time when its image is adrift, and when Sterling dealers seem increasingly impatient for some kind of marketing push from Austin Rover.
“The car needs more advertising,” says Rick Nabers, general manager of Nabers Cadillac-Sterling in Costa Mesa. “They haven’t done enough to put the car in the public’s mind.”
Confusion for Consumers
What’s worse, the advertising that has been done for Sterling has seemed muddled and ineffective. After initially stressing the car’s hybrid Japanese-British roots and its ties to Japanese engineering, Sterling ads now have dropped all references to Japan.
Instead, current Sterling ads portray the Sterling as having a purely British lineage. They show the car in front of a painting of the English countryside, accompanied by verse from a British poet from the Romantic era. The tag line: “Sterling. The inevitable British road car.”
Consumers have thus been confused. “There certainly is a problem in that the car isn’t being presented well enough to be acceptable,” says Thomas O’Grady, automotive analyst with Integrated Automotive Resources, a Wayne, Pa., market research firm.
Another key problem, analysts say, has been the fact that all of Sterling’s 180 dealers are “dual” dealers, which means that they all sell other car lines out of the same showrooms they use for Sterling. By contrast, Honda was able to demand that all Acura dealers be “exclusive,” forcing franchise holders to build new dealerships just for Acura.
As a result, Sterlings are often stuck in the corner of a Cadillac or Buick dealership, ignored by salesmen and customers alike. Acura, meanwhile, is developing an identity of its own. And so, even though it is sold by only about 60 more dealers than Sterling, Legend has about seven times the sales volume.
“I think everyone is making a mistake by looking at this car and asking, it looks like a Japanese car, so why doesn’t it sell like a Japanese car?” Keller says.
“The biggest difference is the dealer network,” she adds. “All that is sold in those Acura dealerships are Acuras. Needless to say, the car has tremendous dealer support. But at Sterling, all of the dealers are selling a number of products, and the dealers don’t care which product you buy. Their loyalties are split.”
Complaints About Quality
Yet some of Sterling’s problems have come because of the car itself. Complaints about quality problems have led some industry analysts to conclude that the British joint venture has not met the same high standards that Honda sets in Japan.
Woodwark insists that Sterling is working to meet such standards of quality. He notes that, until recently, Legends bound for the European market were built on the same British assembly line as the Sterling. “So we’re obviously very familiar with the Legend’s quality,” Woodwark says. “We’re keen to make sure the car is of the highest quality possible.”
Still, sophisticated car buyers, who discover that the Sterling is the same as a Legend, appear to be opting for the aura of Japanese-built quality, analysts say.
“They’ve got a major problem with differentiating themselves from the Legend,” says William Pochiluk, an analyst with Autofacts, a Paoli, Pa., market research firm. “They’ve got to try to explain that they are different and better than Acura. That’s a very, very difficult marketing problem,” given Honda’s excellent reputation in the United States, Pochiluk observes.
“The problem is you are dealing with an Acura Legend that is not built in Japan and so doesn’t have an image of Japanese quality,” O’Grady adds. “A lot of people don’t know what the Sterling is, and those that do know say, let’s buy the real thing. And then they buy an Acura.”
