Brand Rule #1: Don’t Use Your Brand Name and Bankruptcy In The Same Sentence.

It appears to me the mere fact that the Big 3 Detroit automakers had to appear before Congress to ask for billions and answer questions about possible bankruptcy almost guarantees that consequence. An automobile is a major purchase item for American families. It is what we in marketing call a high-involvement decision. Sales for all automobile manufacturers have been challenging in the present economic climate to say the least. It doesn’t inspire confidence when you are about to shell out tens of thousands of dollars on a new auto purchase and you have concerns the brand will endure.

Purchasing an auto brand comes with a whole list of extended brand expectations: a strong local dealer, service, warranty, parts for years to come, etc. Scrutinizing the viability of the Big 3 before congressional committees is no way to inspire brand confidence and quite the contrary.

The automobile business is still one of the most important industries in the United States. Countless jobs depend on it. And I’m talking about both the Big 3 automakers and foreign auto brands that manufacture their products here. I’m for the bailout with a BIG IF.

That BIG IF is make them declare bankruptcy first. It will allow a purging of bad news.  Bankruptcy isn’t the end: just ask several airlines. Chapter 11 bankruptcy is meant to buy time and give firms a chance to reorganize. Even the Big 3 CEOs agree they need to buy time and reorganize. Bankruptcy will make sure that everyone who has a stake in the continued viability of the American auto industry shares in the sacrifices that bankruptcy forces. That includes present investors, employees, unions, dealers, vendors, etc. Once those concessions are made then, and only then, should taxpayer money be used. Taxpayers didn’t create this problem and taxpayer money can’t solve it alone.

Hopefully, part of the government’s support of the industry is a guarantee on auto guarantees. We must stand behind the brands if we want the brands to remain standing. The American auto industry already has many positive things going for it. That includes great new models, higher quality standards, many outstanding dealers to support the brand on the local level, and of course lower gas prices at the pump.

And speaking of gas prices, imagine your job as a long-range planner in that industry and trying to decide what to develop for a product line. With gas at $3.00/gallon, hybrids and electric models look like a no-brainer. Fast-forward a few months later, and even filling a Hummer looks reasonable. That is a challenging planning environment! This is an industry that requires years to develop and implement new product lines. That is difficult to do in a capricious marketplace. One thing I believe the industry will need to do to bring itself to modern realities is to continue outsourcing manufacturing here and abroad to make itself less dependent on vertical integration. It has already done much in this area, but not enough to operate in a world economy that requires remarkable manufacturing dexterity.

I hope the Big 3 brands survive and thrive, but I fear what is critical to that occurring is not a bailout in their present form, but government assistance after what the pain and sacrifices of Chapter 11 forces on the industry from top to bottom.