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Archive for August, 2009

Marty’s Marketing Minutia

Product, planes and progress

by on Aug.28, 2009

Veedubu’s Quest for an Advertising Agency

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Hey, people: VW has changed advertising agencies twice in less than five years.

The phone calls, emails, faxes, FedEx’s, snail mails to Roth Associates about getting on the long list, short list, any list to qualify for the Volkswagen account has to be almost as long as the line-up for free government money in the “Cash For Clunkers” program.

Any agency’s new biz veep (a position of limited duration) the committee members and top execs are literally frothing at the mouth with eager anticipation. Why? Because winning an automotive account was tantamount to climbing the Mount Everest of the industry. To the winner went the financial spoils along with accolades and awards of a major advertiser. That was the old business model.

Hey, people: VW has changed agencies twice in less than five years – something is amiss in Herndon, Virginia or more likely in Germany.

So Kerri Martin brought in one agency without a “review” – who cares, except those who weren’t invited to the dance. Hell, she’d used them at Mini with (most will admit) great success and as I recall from an interview with her at that time, the charge was “raise people’s attention and interest!” This is exactly what CPB did as most will recall.

Did I like their work? Some of it, but certainly not all it, especially the use of the former Mrs. Andre Agassi, the most recent talking bug, and the split costume ads, but in between were often campaigns and ads of real genius that did get people’s attention. Attention did translate to visits to dealers, but once inside there, there was a major void – no interesting products.

And it is product, which drives the creative to new heights of accomplishment especially in the automotive business. Some recent examples include Audi (a VW company) which had a rather poor public perception for many years following a “60 Minutes episode” about unintended acceleration but rebounded with outstanding vehicles backed with product driven advertising in the luxury field. Take this recent commercial. They too were an agency switcher a few years ago.

Of course, there are the Korean kissing cousins brands of Hyundai and Kia.

Hyundai once on the bottom of the JDP study list has literally knocked the industry on its smug butt by not only creating the Genesis, the recent Car of the Year then backing it first with great product based advertising, then using that as the umbrella for the Assurance Program and buck forty-nine gasoline. They too recently switched agencies for reasons not clearly detailed.

Kia, which once shared the poor quality image syndrome, changed that perception by offering a 100,000-mile guarantee to support the reliability claim. There it is again: product based creative. New and better products were introduced and supported with product and demographically focused ads for the new Soul(reviewed here a few weeks ago) with arresting quirky ads and the Forte – a sedan with nice features at a good price that was scarily honest.

The voiceover reveals Kia didn’t invent the engine, speed, satellite, safety features MP3 players, attention to details and other attributes, Kia just brought them “as standard features.”

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Are Minicars Unsafe At No Speed?

The new influx of minicars could cause safety problems.

by on Aug.28, 2009

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Rear-end collisions, when a usually stopped car is struck from behind by a careless driver, are made to order for plaintiff lawyers.

They are, in the total mix, rarely fatal but can lead to painful neck and spine “whiplash” injuries with attendant claims. These are hard to defend because the cause is obvious, even though the problem is that such injuries are hard to either prove or disprove and many are suspected of being fraudulent.

Nevertheless, noise about whiplash injuries has led to some 40 years of vision-impairing head restraints in our cars under Federal motor vehicle safety standards.

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In the real world, rear-enders are not a significant source of fatal injuries (unless of course, it is you or one of your loved ones who’s the victim). In 2008, according to NHTSA numbers derived from FARS reports, there were a mere 1,187 rear-end car crash deaths, out of the total fatal accidents of 37, 261 reported.

This low number likely will change for the worse if the new influx of minicars to the American marketplace continues unabated and unregulated. So far, the minicar segment amounts to a tiny share. In he first six months of 2009, total sales of those I count as mini came to only 148,889, or just 4.7% of the market. And all were down significantly from year-before sales.

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My list of minicars includes the Smart ForTwo, BMW Mini, Chevrolet Aveo hatchback, Toyota Yaris hatchback, Honda Fit hatchback and the new Kia Soul hatchback. Even the larger VW New Beetle appears to offer insufficient rear crush space behind the rear seat.

Outside the U.S., such tiny vehicles amount to a greater share of the market. But outside North America, they are not overwhelmed in the traffic flow by the proportion of big pickup trucks, SUVs, vans and considerably heavier passenger cars. So our traffic is inherently more dangerous to tiny cars, leaving rear crush distance aside.

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New Chrysler Will Accept Old Liability Claims

Lawyers get another win under a Democratic Administration.

by on Aug.27, 2009

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State attorney generals were prepared to fight.

In a letter sent today to Members of Congress, Chrysler Group LLC announced that the company would accept product liability claims on vehicles manufactured by Chrysler LLC (now OldCarco LLC under the bankruptcy) before June 10, 2009, and involved in accidents on or after that date.

On June 10, 2009, Chrysler Group purchased substantially all of the productive assets of Old Carco and Fiat took effective control.

It appears a partial victory for product liability lawyers, who are substantial contributors to the Democratic party. Lawyers working behind the scenes had previously helped to force General Motors to accept all future product liability claims for its vehicles as it emerged from bankruptcy.

Under U.S. bankruptcy law it is usual for reorganized corporations to leave such claims behind in the ashes of the old structure under section 363(f) of the code, which allows companies to sell assets “free and clear of any interest in such property.”

However, state attorney generals were prepared to fight this interpretation, and the Auto Task Force established the compromise even though there was a strong “Federal Preemption of state law” argument that GM could have pursued.

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Toyota Kills NUMMI

by on Aug.27, 2009

NUMMI located in Fremont, California, was the only vehicle assembly plant in the state.

NUMMI was the only vehicle assembly plant in the state that is the single largest U.S. auto market

Toyota Motor Corporation’s board of directors has decided to close the New United Motor Manufacturing Inc. plant in Fremont, California despite some last minute pleas by political figures in California.

The plant is now scheduled to close in March, according to new reports on the West Coast, which quoted city officials in Fremont, California.

“Toyota’s announcement that it will close the NUMMI plant is devastating news for thousands of workers in California,” said UAW President Ron Gettelfinger.

Friends of NUMMI, a group recently organized in California to oppose the shutdown, also declined to comment on the reports.

Nonetheless, the reports were consistent with the news leaking out of Japan for the past week, which said the plant was doomed. Ironically, the plant had been the source of the Toyota Corollas that were the top car sold through the “Cash for Clunkers” program that ended earlier this week.

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The shut down of the plant will wipe out 5,300 jobs and could lead to the loss of more than 30,000 other jobs across California, where the unemployment rate just passed 12%.

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Car Dealer Restaurants: Curiosity or Trend?

Mercedes-Benz of Rocklin and Bistro 33 open dining spot.

by on Aug.27, 2009

Would you like an E-class for dessert?

Would you like an E-class for dessert?

Auto dealers and restaurants have been getting together for years now as automalls have grown in size to include various types of retailers, including fast food outlets and restaurants that are more formal. Larger stand-alone dealerships include a canteen of sorts where customers waiting for service can grab a quick bite or cup of java.

On the more ambitious end of the scale is Mercedes-Benz of Rocklin. The northern California dealership has just opened a restaurant this week inside its store, “Bistro 33 at Rocklin.” It’s said to be an upscale restaurant.

“While enjoying a meal, and looking across the lake at our dealership situated in Town Center, we thought why not bring two great brands together under one roof,” says George Grinzewitsch Jr., owner of Mercedes-Benz of Rocklin, as well as Mercedes-Benz dealerships in Sacramento and El Dorado Hills.

The new restaurant is open seven days a week, serving breakfast, lunch and dinner with a full bar.

“Customers will experience the ultimate luxury destination while dining on infused interpretations of timeless American classic fare with a modernistic sensibility at appealing prices,” says Matt Haines, one of the prolix owners of the restaurant.

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Ford Implementing Production Increases

Not full recovery, but baby steps in the right direction.

by on Aug.27, 2009

2010 Ford F-150

F-series production changes will result in about 10,000 additional units.

Two Ford truck plants are in the process of slightly upping their production for the balance of the year. The increases were previously announced by Ford as preliminary results from the now ended “Cash for Clunkers” federal rebate program showed sales gains.

The increased production, however welcome, is not the ringing endorsement for the U.S. economy or for manufacturing employment that they might appear to be at first glance. The company continues to pare or restrict the hours of its workforce.

In addition, Ford is forecasting a seasonally adjusted selling rate of between 10 and 11 million vehicles for 2009, down from a dismal 2008, which started out the year at more than 15 million vehicles and then steadily declined to 10 million units by December. All told, 2008 ended with vehicle sales of 13.2 million units, the lowest level since 1992.

As it stands now the Dearborn Truck Plant in Michigan, will resume a three-shift operation in September, to supply F-150 pickups in the U.S. and Canada. The move will result in a return to full-time employment for 2,800 employees who had been working on a two-weeks-on and one-week-off rotating basis since last April.

It’s becoming clear that conventional wisdom about the invincible Japanese is wrong. Toyota and Nissan, not American makers, have been trounced in the pickup truck wars; and have lost billions on their investments in large trucks. Ford, General Motors and, to a lessor degree, Dodge remain the dominate players in this segment, which represents 12% to 15% of the market.

Ford is also establishing three-crew shifts this October at its Kansas City Assembly Plant in Claycomo, Missouri. Compact Ford Escape and Mercury Mariner sport utility vehicles are built there.

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First Drive: Mahindra Pik-Up

Indian maker hopes to curry interest of American truck buyers.

by on Aug.27, 2009

Indian automaker Mahinda plans to begin marketing two models in the U.S., including the Pik-Up.

Indian automaker Mahinda plans to begin marketing two models in the U.S., including two versions of the Pik-Up, and an SUV.

It’s been more than two years since we first heard Mahindra was bringing small diesel pickups to the U.S. During that time we’ve covered a steady stream of news about the Indian company and its American distributor Global Vehicles U.S.A., but we’ve most wanted to know: How will these trucks perform and can they live up to the high expectations of American truck buyers?

To find out we drove two foreign-market Mahindra trucks – a left-hand drive version of the recently updated Australian Pik-Up and a Scorpio SUV – down near Atlanta earlier this week.

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The two trucks aren’t identical to the rigs that will go on sale here – the two-door TR20 and four-door TR40 pickups (coming in February) and the SUV (due later in 2010) – but they’re close enough so that the single cab Pik-Up and “mHawk” diesel-powered Scorpio with a six-speed automatic give us a reasonable idea of what the stateside pickup’s powertrain will be like.

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Think – Again

Norwegian EV maker exits bankruptcy, resumes operations.

by on Aug.27, 2009

Norwegian battery car maker Think has emerged from bankruptcy and will resume production of its City electric vehicle.

Norwegian battery car maker Think has emerged from bankruptcy and will resume production of its City electric vehicle.

The struggling Norwegian electric vehicle manufacturer, Think, is back in business, with the approval of a Norwegian court allowing it to exit bankruptcy production and resume production of its pint-sized TH!NK City battery car.

While the company continues to look for a potential U.S. production site, it will now partner with the Finnish Valmet Automotive to produce the City at a plant in the town of Uusikaupunki.  That same plant rolls out Boxster and Cayman sports cars for Porsche AG.  Production is scheduled to start sometime during the fourth quarter of the year, according to Think.

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The old Think plant, in Aurskog, Norway, will be closed, impacting 85 jobs.  But the makers headquarters, design and engineering operations will remain in Oslo.

The Norwegian courts gave the go-ahead to a plan that will not only write down Think debt but allow it to add an additional $47 million in capital, which it plans to use, among other things, for the development of future products and improved battery technology.

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Nissan and Chrysler Scrap Three Vehicle Programs

Nissan scrambling for alternative for next-gen Titan pickup.

by on Aug.26, 2009

The Titan has never come close to hurting domestic pickup trucks.

Titan never hurt domestic pickup truck sales.

Chrysler and Nissan have decided to part ways, scrapping three joint-vehicle programs originally intended to fill yawning gaps in their respective line-ups.

“For the past several months, teams from both companies have been studying the viability of the projects in light of significant changes in business conditions since the projects were announced in January and April of 2008,” Chrysler said in a brief statement. “Today, it was decided it was in the best interests of both companies to end the projects,” it added.

With Nissan officials recently telling TheDetroitBureau.com they were still open to working with their Detroit counterpart, it appears that the announcement was heavily influenced by Chrysler’s new parent, the Italian automaker Fiat. It also appears Nissan is the loser in the latest developments.

Chrysler has already been selling a version of the Nissan Versa through some of its Latin American retail outlets.  And it was originally expected to add another Nissan-based small car to its line-up, next year, in a bid to expand its global presence. Chrysler’s need for both small vehicles was eliminated by its merger with Fiat, which also sells a full-line of small cars around the world.

For the Japanese maker’s product portfolio, its erstwhile collaborator was expected to provide a rebadged and redesigned version of the Dodge Ram pickup truck as a replacement for the slow-selling, loss making Nissan Titan.  The Chrysler-based pickup was to reach Nissan showrooms, in the U.S., by 2011. Now Nissan dealers won’t have a pickup truck to sell.

That particular joint venture appeared to run into snags, according to Nissan’s truck chief, Larry Dominique, about the time it became clear that Chrysler would fall under the control of Fiat, post-bankruptcy.  Indeed, he suggested, during an interview with TheDetroitBureau.com, early this month, that Nissan couldn’t get any clear answer as to Chrysler’s plans – no surprise, suggested other sources, considering the turmoil at the troubled American automaker.

Actually it looks like the vehicle-sharing project was put on hold almost as soon as it started after Renault/Nissan chairman Carlos Ghosn expressed reservations about the plan when Chrysler began to run into serious financial problems last fall. Chrysler’s financial difficulties wound up with the company filing for bankruptcy on April 30. After Chrysler emerged from bankruptcy in June, Fiat gained effective management control of the U.S. car maker and has been pressing ahead with a complete overhaul of its operations.

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Toyota Shifting from V8s to I4s in Alabama

Latest move to smaller engines comes as big trucks flop.

by on Aug.26, 2009

Well, betting billions on full size trucks has cost billions.

Betting billions on full-size trucks cost billions.

The big multi-billion dollar bet that Toyota made on full-size trucks in the U.S. market that resulted in big losses continues to unravel.

In the latest reversal, Toyota Motor Corporation (TMC)  is spending another $147 million to install four-cylinder engine tooling at its under used V8 engine plant in Huntsville, Alabama.

The sales failures of the super-sized Tundra pickup truck and the Sequoia sport utility vehicles have left the plant working at about half of its capacity.

The latest expense comes at a time when Toyota is considering sweeping production decreases of 10% or more at its global factories and cutting costs by $10 billion in the current fiscal year, which began on April 1. Even so, it is projecting a $6 billion loss.

To accomplish the cost savings Toyota is also doing what was, after decades of sustained growth, unthinkable – closing plants abroad and in its home Japanese market. It is expected that as part of its retrenchment it will abandon its only unionized plant in the U.S., New United Motors Manufacturing Inc. (NUMMI) in California, even though California is its largest market in U.S.

The world’s largest carmaker appears to have little choice. Toyota Motor Corporation lost more than $815 million in the first quarter of its fiscal year, as revenues declined 38% when compared with its first quarter of last year.

The swing into negative numbers was breathtaking. Net income decreased from ¥353.6 billion to a loss of ¥77.8 billion or $4.52 billion. Major factors for the decline included ¥650 billion due to the effects of declining sales volume and mix, and ¥140 billion due to the appreciation of the Japanese currency, mainly against the U.S. dollar and the Euro.

Critics have maintained for years that the Japanese government manipulates the value of the Yen to subsidize its export driven economy, but the global Great Recession has upset that equation and, apparently, the ability of the Japanese government to keep the yen undervalued.

This recent Yen revaluation is behind the latest change production changes. Toyota Motor Manufacturing, Alabama, Inc. (TMMAL) will build 2.5-liter and 2.7-liter inline, four-cylinder engines so Toyota doesn’t have to continue importing them from Japanese plants as it currently does. An estimated 216,000 units annually will be built for use in the mid-size Camry model produced at Subaru of Indiana Automotive, Inc. and in the RAV4 compact SUV produced at Toyota Motoring Manufacturing Canada, Inc.

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