Friday, 12 September 2008

What is to be of the CHRYSLER brand?

The tendency to disassociate trademarks from manufacturing and production misses the complex interrelationship between the two. Of particular interest is the move by a company from being an anonymous contract manufacturer (think of Taiwan and the semiconductor and electronics industries) to brand holder, whereby the manufacturer attempts to garner the value-added of consumer goodwill for its products.

The move from manufacturer to brand holder is not an easy one. The seemingly endless gestation of the ACER mark is testament to the difficulties that even the most successful contract manufacturer faces when it seeks to enter the brand-building and goodwill-generating arena.

An interesting twist on this phenomenon was reported recently in Business Week, under the title "A Strange Detour for Chrysler." We all know that US car manufacturers are in a dire straights, battered by gas that is too dear for many Americans, and stuck with dinosaur-sized SUVs that interest only the curator at the Smithsonian Institute. What to do with the excess manufacturing and distribution capacity? Chrysler seems to have come up with a challenging solution--turn yourself in a contract manufacturer and even a marketer of the cars of others.

The new home for SUVs?

As reported, it is not just that Chrysler is planning to put the CHRYSLER mark on a restyled Versa subcompact made by Nissan. After all, sharing platforms and the like is already old-hat in the auto industry. What is more interesting is that Chrysler is negotiating with Nissan to sell Nissan's ALTIMA brand vehicle through the Chrysler sales and distribution network. Moreover, Chrysler is also reported to be offering itself as an "assembler-for-hire" for any manufacturer that wants to sell truck and minivan products, but might want to save on the costs of manufacturer and production. (Why anyone wants to get into this business at the moment, especially since Chrysler itself has been a market leader, is another question, but both Nissan and Volkswagen seem to be interested of renting the Chrysler facilities for this purpose.)

One can be skeptical about this and ask the obvious question: If the name of the game in the US auto industry is to try and design cars that US consumers are likely to buy in an age of elevated oil prices, and if Chrysler is committed to protecting its brand, why is it selling cars for Nissan and making minivans for Volkswagen? That seems to be a sure-fire formula for brand dilution or worse. Should not Chrysler be committing 150% of its resources to designing, building and selling cars that Americans will want to buy?

According to the report, the reason for these measures can be found at the doorstep of Cerberus Capital Management, the private equity entity that forked over $7.4 billion dollars for 80% of Chrysler. Chrysler, aka Cerberus, needs to find ways to save cash and reduce costs. Better to generate an income stream for your underutilized sales and manufacturing facilities, even if they might dilute the long-term value of the marks and names.

Maybe that is the key point here. Maybe there isn't any long-term plan for preserving Chrysler as a going-concern and with it, the CHRYSLER name and brand. Save and cut costs today, and sell-off the company tomorrow. The name (in whole or in part) will go, and the sales and manufacturing capacities will change hands to someone else better able to turn them into successful product lines--but under that person's name and brand.

First you cut cookies, then you cut brands.

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