The brand shuffle

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“Brand names should mean something.” -Jim Walton


I‘ve been doing a lot of thinking lately (a dangerous occupation for me, I know) about the General Motors-International Truck & Engine deal announced late last year, with GM selling its medium-duty commercial truck business to International for an estimated sticker price of $500 million or so.


What‘s interesting to me is this deal is yet another sign of the opposite strategic paths auto and truck makers in the U.S. are on these days. For decades, U.S. automakers like GM and Ford seemed to be on a brand-name breeding program - even buying other brands of cars and trucks to add to their stable.


GM‘s Buick, Cadillac, Chevrolet, GMC, Oldsmobile, and Pontiac brands were later joined by Hummer (bought from AM General), Saab (bought from Sweden), and Opal (bought from France). The company also went into partnership with Isuzu to gain diesel engines for its medium- and light-duty trucks (the Duramax) and get a lighter cabover medium-duty vehicle as well. It even built Class 8 trucks via a partnership with Volvo and White Mfg. for many years


Ford always had the Lincoln and Mercury brands, then went out and bought Volvo‘s car business, Land Rover, and Jaguar. It even used to build heavy Class 8 trucks under the Aeromax brand.


Truck makers, by contrast, kept focused on core products - medium- and heavy-duty trucks only. Each had a distinct brand (Freightliner, Peterbilt, etc.) The only exception proved to be International Harvester at the time, which built farm equipment, heavy trucks, and even the famous Scout light vehicle (now a collectors item), an early version of Jeep‘s Cherokee SUV. But by and large, each truck maker really supported only one brand name in the market - not the plethora GM and Ford supported.


How times have changed! Now the automakers are the ones rapidly divesting themselves of brands and product lines, whereas the truck makers are adding more - and on a global scale to boot.


Ford sold off its Class 8 business in the late 1990s and is trying to find buyers for Land Rover and Jaguar now, while paring down the product offerings across its Lincoln, Mercury, and Ford brands. It‘s nearly seven year relationship with International to build a joint cabover medium-duty truck and get diesel engines may very well end soon, with Ford building its own diesels in house. GM has been just as aggressive - shutting down Oldsmobile, selling off its “bread van” business, Allison Transmissions, its medium-duty business, all while shrinking product offerings across the board.


The truck makers, now, they are going down the path GM and Ford used to follow. Jim Hebe, Freightliner‘s former chief, got the ball rolling. After being acquired by Daimler AG of Germany, Hebe went out and bought Ford‘s Class 8 business, which it turned into Sterling Trucks, followed by Thomas Built buses, Canada‘s Western Star, and others. Freightliner later bought Workhorse Custom Chassis. Daimler acquired big diesel engine maker Detroit Diesel and added that to the Freightliner mix.


Volvo AB of Sweden bought out GM‘s heavy-duty truck stake and then bought Mack Trucks in Allentown, PA. Paccar, which owns Kenworth and Peterbilt, bought DAF trucks in England and plans to add that company‘s diesel engines to the U.S. market via a big $400 million plant it‘s building in Missouri.


International has also undergone a lot of change. After selling off the farm equipment business, the company changed its name to Navistar in the late 1980s. Finding that brand didn‘t do well, it gradually brought the International nameplate back to the fore. Technically, though, the company is still Navistar and gets referred to as such by most stock analysts because it didn‘t change its stock listing name - and that causes more than a little brand name confusion out in the market from time to time.


So what does all this shuffling mean, in the great scheme of things, when we look at the GM/International deal? Well, for starters, GM gets to take all the engineering resources it used to spend on medium-duty trucks and refocus that on its light-duty pickups - a real bread-and-butter line for the company. I talked to Mike Matheny, owner of GM dealer Matheny Motors, about that very subject and that is what makes him happy about this deal.


“We have a whole separate commercial department for light trucks and I consider it pretty steady business compared to our retail sales,” he told me. “The one thing I wish we had was something to match Ford‘s 450/550 truck - what we need to get there is time and money, and now we‘re getting some money to do it.”


On International‘s side of ledger, though, the challenge will be integrating the Chevy and GMC brands into its lineup without diluting them or its core International brand - a tall order, in the eyes of Jim Walton, president of PR firm Brand Acceleration.


“Here‘s the problem that Navistar will face if they continue to use all three names. In the eyes of the consumer, Chevy is a car sold by General Motors and GMC is a pseudo-Chevy, [also] sold be General Motors,” he told me.


“One reason that companies like to keep three brands is because they are afraid of losing any of the collective market share ... [but] brand names should mean something,” he added. “The ‘big three‘ forgot that more than thirty years ago: Oldsmobile is now gone and the Cadillac brand nearly ceased to exist.”


So where the Chevy and GMC brands go in the medium-duty market now is up in the air. Though they‘ll be around for a while, International controls their destiny, so anything is possible. One thing is for certain: It‘ll be an interesting brand transition to watch.

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