Plea for carmaker bailout backfires
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.
In the first two months of the year, the number of buyers considering a GM or Chrysler vehicle fell 12% and 33%, respectively, according to CNW Marketing Research, which specializes in the auto industry. At the same time, Ford saw a 12% increase in consideration.
“The companies seem to be hoping that if they can continue to get federal cash, then they can figure out how to restore public confidence in the long term,” said Jim McCarthy, president of crisis management firm CounterPoint Strategies. “It’s a risky approach to say the least.”
The automakers contend that they had little choice but to go to Washington. With sales collapsing and costs sky-high, the companies found themselves running out of money heading into last fall.
So amid the collapse of Lehman Bros., and public furor over bailouts to American International Group, Fannie Mae and Freddie Mac, GM and Chrysler mounted a campaign to spread the bad news.
Using websites, grass-roots letter-writing efforts and even YouTube videos, the automakers threw themselves at the mercy of Capitol Hill. They predicted nothing short of an industrial apocalypse -- GM pegged the hit to the economy at $400 billion -- if even one of them declared bankruptcy.
On Thursday, Obama weighed in. “I know that it is not popular to provide help to autoworkers -- or to auto companies,” he said. But on the condition that the automakers make hard restructuring choices, he added, “we will provide them some help.”
The same campaign, however, galvanized public sentiment against the automakers.
Although last fall’s Capitol Hill hearings will be remembered for the embarrassing revelation that executives flew to Washington on private jets, perhaps the most damage came from the pressure Congress put on the automakers to stop doing the one thing that could help: advertise.
Repeatedly, House members questioned their marketing budgets, which are among corporate America’s biggest. GM Chief Executive Rick Wagoner assured them that GM would not advertise during the Super Bowl broadcast for the first time in memory.
GM also dropped out of the Oscars and Emmys, and it canceled sponsorship of big names like golfer Tiger Woods. Chrysler ended its sponsorship of the National Hockey League. According to CNW Marketing Research, total ad spending by GM in the fourth quarter of last year declined 18%, while Chrysler’s was off by half.
So while the government has demanded the automakers cut debt, reduce costs and rework union contracts, it has done little to encourage car sales in the short term.
“The irony is that while they need to look like responsible corporate citizens, they also need to be out there reassuring consumers that they are going to be around and that they are truly building some great vehicles, and building some enthusiasm,” said Kevin Smith, a former advertising executive at agencies for automakers, who now owns a consulting firm.
He and others contend that a strong, positive marketing push -- along the lines of that taken by Lee Iacocca when Chrysler sought a bailout 30 years ago -- would help.
Yet Chrysler was roundly criticized for wasting taxpayer money in December when it attempted to address the matter more directly, taking out full-page ads in major newspapers thanking the American people for the bailout. The company has since stuck to regular car commercials. “We’re committed to meeting the guidelines” of the government loans, said Chrysler spokeswoman Carrie McElwee. “We have had to scale back some of our activities.”
GM, for its part, pledged last month to cut $800 million from its advertising budget this year, forcing it to stick to the script of traditional vehicle marketing. “We’re really focusing our marketing and advertising efforts on continuing to push the product message hard,” said Mark LaNeve, GM’s head of sales and marketing in North America. “We want consumers to be confident in GM and our products.”
GM is tackling the issue with a recent round of commercials for its Saturn brand, which the company pledged last month to shutter or sell by 2012. The ads sought to assure buyers that Saturn is “still here,” but marketing experts say the spots instead reminded consumers of GM’s woes.
“It’s like water torture,” said George Peterson of research firm AutoPacific. “The public is reminded over and again about how much trouble these companies are in.”
That’s a major reason Ford steered clear of federal support. Ford too is burning through billions every month and lost a record $14.6 billion last year, but it found itself in slightly better shape thanks to $23 billion it borrowed in 2006.
“From a corporate reputation standpoint, we absolutely considered the impact that taking the [federal] loans would have,” said Jim Farley, Ford’s global head of marketing and communications. “Saying no to the money in D.C. was really a door that opened to us so we could start talking to our customers again.”