Competitive Connection July 30, 2007

A look at the competition
Toyota’s profitability
Toyota won customers in the U.S. with Corolla and Camry cars. As a result, Toyota is 58 times more profitable than GM. In response, GM has found new buyers in Asia and Latin America, making China and Brazil the Detroit-based company's second- and third-biggest markets.

In the first half, Toyota sold 4.716 million vehicles, while GM sold 4.674 million. Toyota, which earns as much as 60 percent of its operating profit in the U.S., took a 16.1 percent share of the U.S. market in the first six months, up from 14.6 percent during the same period in 2006. GM's share fell to 23 percent from 24.3 percent as it pared low-profit sales to rental-car companies, which get discounts for buying in bulk. –Source: Bloomberg, July 20, 2007
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A look at the competition
Cars vs. Trucks Sales

	Cars	Trucks
Domestics	37%	63%
Japanese	64%	36%

Source: Forbes, July 24, 2007
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What others are saying . . .
Yen is a factor
Labor costs aren't the only thing putting Detroit carmakers at a disadvantage to Japanese rivals. U.S. companies complain that an artificially high yen makes Japanese vehicles cheaper in this market.

The currency issue is often pooh-poohed by those outside the auto industry, but a 2006 study by the Harbour-Felax group found the advantage for Japanese makers is substantial--about $1,400 per vehicle at today's exchange rate (121 yen equal $1). On a Lexus luxury car, for instance, the currency subsidy is upwards of $8,000, according to the Automotive Trade Policy Council, a Washington lobby group for Detroit's automakers.

No wonder, then, that Japanese carmakers are exporting more than 2 million cars a year to the U.S., about the same level as 20 years ago. U.S. carmakers have lobbied for help in Washington, but so far have gotten nowhere.–Source: Forbes, July 24, 2007
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What others are saying . . .
The cost of technology
General Motors said that it now expects 40 percent better fuel economy in city driving from the gasoline-electric hybrid versions of its full-size SUVs than their gasoline-only counterparts, giving the hybrid Chevrolet Tahoes and GMC Yukons 19 or 20 miles a gallon in stop-and-go driving.
"There's still an appetite for full-size SUVs, but gas prices have cooled things off," says Mark Cieslak, chief engineer for GM's full-size trucks. Fuel prices, plus social and political pressure for better mileage, have "accelerated development" of fuel-saving technologies.

GM officials said that the automaker will lose money on hybrids at first. The hybrid hardware adds $10,000 per truck to the cost, too much to simply tack onto the sticker price. GM hasn't decided on prices yet. The automaker expects to profit from the vehicles if strong sales pull down the cost of components.—Source: USA Today, July 25, 2007
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What others are saying . . .
Taglines and brands
Advertising taglines help connect customers to a car, such as “BMW: The Ultimate Driving Machine” or a brand: “Toyota: Oh, What a Feeling”.

But are auto makers these days yanking advertising taglines too fast? Switching taglines abruptly is becoming more common – symbolic perhaps of today’s disposable society. If brands don’t have a clear image, the practice could hurt sales more than it helps, experts say.

Changing taglines too often can be “a huge mistake,” as it signals the company doesn’t know what its brand stands for and, ultimately, why it’s different from the competition and a consumer should buy it, says Wesley Brown, a partner at Iceology, a Los Angeles consulting firm.  “Those brands that seem to have had multiple taglines over the years, or even in the same year, naturally perform the worst in the current marketplace,” he says.

Here are some taglines that garner praise – and some that don’t.

Hits. They reinforce the core brand, so they’re tops:
BMW – “The Ultimate Driving Machine”
Chevrolet – “Like A Rock”
Mini – “Let’s Motor”
Volvo – “For Life”
GMC – “Professional Grade”
Dodge – “Ram Tough” and “Grab Life by the Horns”

Misses. They may be cute, but say little about brand identity or reputation:
Toyota – “Dogs Love Trucks”
Nissan – “Shift 2.0”
VW – “Make Friends with Your Fast” followed immediately by “Safe Happens”
Buick – “Beyond Precision” –Source: wardsauto.com, July 24, 2007
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Then and Now
Attitudes about American Cars
Many car shoppers have simply written off American brands. They are impervious to advertising, dismissive of new American models, and disdainful of those who buy them.
As recently as six years ago, according to Ford Motor Co., slightly more than 48 percent of car buyers in the U.S. said they would consider only domestic brands such as Ford, Chevrolet and Chrysler. Today that proportion has shrunk to 36 percent.
The phenomenon of shoppers that turn their noses up at venerable U.S. automotive brands has been growing for at least two decades, propelled by poor quality, reliability, durability and resale values of many domestic nameplates. Import makes, meanwhile, have made steady improvements.
The new cars from GM, Ford and Chrysler unquestionably are better than ever. Some, like the Ford Fusion, are reasonable alternatives to Camry and other foreign brands. But if consumers withhold what marketers call purchase consideration it doesn't matter: new U.S. models won't make shopping lists. –Source: Bloomberg, July 19, 2007
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