“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
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
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 (
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
Volvo AB of Sweden bought out GM‘s heavy-duty truck stake and then bought
International has also undergone a lot of change. After selling off the farm equipment business, the company changed its name to
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.