Automotive: A case study in rapidly shifting fortunes

This week, I just happened to be on an assignment which involved working with a number of car dealership owners and managers, with the goal of helping them study industry and consumer trends, and explore ideas to help re-connect with the consumers they serve (that is the essence of Elm Street Economics).

On the flight home last night, I had a chance to think about the events of the week. Could there be a better time or topic in which to study shifting opportunities and challenges… than right now, and the auto industry?

I’ve already written in this space about Toyota’s self-imposed suspension involving (both sales and production of) eight models (see the Elm Street posting from 1/27). But consider where Toyota was just a few short years ago. To me, it seemed like Toyota was about the last major manufacturer to be affected by the recession, having ridden a reputation of quality smoothly through the first signs of economic turmoil. (An economic downturn hit the greater automotive industry earlier than most other sectors.) But recall issues – and the general downward momentum of the overall economy – helped the company catch up (or down) to their rivals, in terms of challenging sales. The events of the week will clearly have an immense impact on local dealerships that carry the line (here’s a story on that topic).

In the other extreme, there is Hyundai. Again, just my opinion, but it was not that long ago that Hyundai wasn’t even on the radar for most consumers. Fueled by awards recognizing their improved quality, however, and further aided by their recession-related “gesture marketing” efforts that began last year (the “Assurance” campaign), the company has recently enjoyed growth in market share, in the face of significant strife in the general economy.

Another example of optimism is Ford. A little over a year ago, the company decided against taking the offer of bailout money from the federal government (see the story), which might have given the company a credibility advantage compared to those who did accept the cash. Today, the company announced that 2009 was a profitable year (see the story). These factors, along with a head-start in digitizing the dashboard and making their vehicles “sync” with the driver’s gadgets, give Ford a sense of momentum, in my view.

Across town at General Motors, the past week has brought a new CEO and perhaps a new sense of direction and optimism, as the company now vows to pay back its bailout obligations earlier than previously planned (here’s the story from the NY Times). Having essentially euthanized Saturn, Pontiac and Hummer, and now having made a deal for Saab, it seems like the company can start looking ahead again, rather than swatting at the flames that were coming up behind them.

Implications: Of greater interest to me than the big headlines about recalls, bailouts, or new CEOs… is the response that will occur at the local level, among both dealerships across North America, and the consumer those dealers serve.

Many dealers look to their manufacturers for a sense of direction, and consider the nameplates they carry an important part of their identity. In a world where the manufacturer’s reputation or product line has become “tainted,” the relationship each dealer has with its customers—and the communication they share—becomes more important than ever. And even those companies that are doing well right now must look at the events of the past two weeks and thing, “Gosh, glad that’s not me.”

The fact is, that might apply to a wide range of categories, products and services, I suppose… as crisis seldom asks any company whether now is a good time to visit.

Mike Anderson