Talks of Brand Sales and Closures in Detroit Stirred By The Uninformed

Talks of brand sales and closures is gathering steam with the downturn in auto sales. It’s not that easy.

Tracinda Corp. adviser Jerry York mused recently that he would like Ford, in which Tracinda is gathering shares, to sell off Mercury and Volvo. Sell Mercury? To whom? Volvo? Ford CEO Alan Mulally tried to sell the Swedish brand last year. But a little thing called the credit crisis came along. BMW sniffed at it. But looking at a huge downturn in auto sales, and bracing to gird its earnings, it wisely (in my opinion) declined to buy a Swedish front-drive brand to try and mesh with its German rear-drive brand. To sell a brand, one has to have a supply of buyers.

Mercury is not a sellable asset. It’s like my red satin college radio station jacket. It has value to me, but no one else. Ford, in the bowels of its corporate headquarters, has people trying to sort out a future distribution scheme. None of those plans can seriously include Mercury. What some Ford execs would like to see is a single streamlined network of Ford Lincoln dealers. Plan B is a Ford dealer network, and a Lincoln-Mazda network.

There were thoughts trying to create a network of Lincoln-Volvo dealerships. But Ford’s interest in selling Volvo puts that idea away on the shelf.

And then there is General Motors. GM CEO Rick Wagoner astonishingly said recently, “General Motors’ different brands give the company the best position in the marketplace…Our Opel/Vauxhall, Saab, Chevrolet, Cadillac, Corvette and Hummer brands complement each other perfectly, and represent a clear and consistent market orientation unmatched by any other automaker,” Wagoner told a conference in Cologne, Germany.

What color is the sky in Mr. Wagoner’s world, I wonder. GM is served horribly by its portfolio of brands. It takes valuable resources to support all those mouths with product differentiation and marketing budgets. GM has proved to be pretty unsuccessful adequately supporting Buick, Pontiac, Saturn and Saab, while Chevy, Cadillac and GMC prove to be the core of the company, with Hummer as a sometimes interesting appendage. (Not so interesting when gas gets to be $6.00 per gallon).

GM has lost U.S. and global market share, and struggled to make a nickel while it has all these brands. “Best position in the marketplace.? As Ford CEO Alan Mulally said to some of his managers who tried to argue for hanging onto Jaguar and Land Rover because of their higher profit margins, “How’s that workin’ out for ya so far?”

Those who say Ford and GM should shutter or sell brands should acquaint themselves with the state franchise laws first. Generally, they make the primary rules of the Democratic party look as simple as those for a game of checkers. GM once spent between $1 billion and $2 billion shuttering its Oldsmobile brand. You know what kind of return a company gets by spending $1-$2 billion closing a brand? Nada. Nil. It cleans up the books and your appearance, but there is no return-on-investment.

GM just blew $2.7 billion getting itself tied up in a strike by UAW workers against its chief axle supplier (Yes, I would say GM’s mismanagement of that supplier relationship contributed to the loss, so I’m laying it at the automaker’s door. GM kicked in a little more than $200 million at the end of the strike to help American Axle end the strike. Had it ponied up the money in the beginning, it might have saved $2.5 billion.) It isn’t going to spend billions buying out dealers. Instead, it is trying to get dealers to merge and reduce their ranks via market conditions. It’s slow going.

Eventually, though, I predict that by 2020, GM will probably be lighter by at least two brands—either Buick or Pontiac will be gone, and Saab will be gone. It will happen as dealers go out of business, and then GM can kill off what’s left of the channels…when…hopefully…financial times are better.

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