For example, there is a call by many that Ford drop Mercury and Volvo. A major advisor to Kirk Kerkorian has said it. And others are calling for the end of Buick and Pontiac and even General Motors vice chairman Robert Lutz has admitted that GM has too many brands and may have to cut off the weaker ones if they don’t perform.
When people talk about auto companies to dump, they point to Mercury and Volvo. It’s not hard to figure out why. During the past five years both brands have seen sale plunge. Mercury is down 36 percent and Volvo is down 4 percent.
This would not be the first time in recent history that an auto maker has dumped a division. General Motors dropped Oldsmobile and Chrysler abandoned Plymouth. But it doesn’t happen much because it simply is not easy to kill off or sell a brand. A whole lot of people are effected including customers who have purchased the cars the dumped divisions have offered. Dealers too are affected as well as laid off workers. And the parent companies that dumped the brand must contend with the costs of laying workers off and closing down plants.
Consumers loyal to a particular brand that is killed often do not buy cars later from the parent company that killed the brand.
Because closing down a marquee can be difficult and traumatic, auto makers would like to avoid it. That’s why we are seeing a re-construction of General Motors’ distribution network. They are combining Buick, Pontiac, GMC, Cadillac, Hummer and Saab into one retail channel and Chevrolet and Saturn are standing alone.
When pundits talk about brands to drop in the GM stable, they point to Buick. But Buick’s numbers look like it can survive. It is selling well in China -- 332,115 units in 2007, up 9 percent from the previous year. Why the division is still being pointed to for demise is because of its performance in the U.S. -- 185,791 units sole in 2007, down 23 percent over the year before.
And what about Volvo? Will Ford continue its relationship with that shaky division? Experts say its cost structure is too high for Ford and so there is a cost cutting effort going on.
And that’s what many companies are doing. To achieve this, companies like General Motors are having their models share platforms and more and more models are being made in China and in other countries where labor is cheap.
So as the pundits speculate, they and those of us who like to follow the industry wait for the shoe to fall. And that can lead to some fun things. Businessweek.com, for example, did a readers’ poll to see what brand they think is going into the trash can of history. The poll is on going. But at the time I wrote this, survey said that it will be Mercury that visits the grim reaper. Readers also are choosing Hummer.