"GM Pouring Ad Money Into Chevy Brand"

Recently GM has been putting a lot of effort into its marketing campaign for Chevrolet Motors.  In this past GM has had weak marketing strategies when it comes to Chevy, however, now GM is ready to make a change.  The new marketing strategy of Chevy is trying to use the theme of American identity to appeal to the customer.  To illustrate the struggles that the Chevy's marketing has encountered, one can look at the how Chevy has fired and replaced three marketing chiefs in that last two years. In addition Chevy has let go of its ties with Campbell -Ewald, a marketing firm. This was a huge step as the two companies ended their 91 year relationship.  To start, the new marketing chief, Joel Ewanick, has claimed that GM is now spending 70% of its ad budget on Chevy and will increase its total spending by 3% to 5%.

This event has a huge effect on the marketing aspect of the Automotive Industry.  From this, Chevy will be having a huge impact in the near future.  Chevy will hopefully benefit greatly from GM's actions.  This marketing campaign will further enhance the competition among car companies.  More money will be poured into marketing campaigns throughout the Automotive Industry.

As a student I now understand how important and delicate marketing is in the Automotive Industry.  It is what can make or break a company.  The company relies on its marketing to appeal to the consumer, and therefore result in sales.  If GM is willing to spend $2.2 billion on ads, then you know that marketing is a very influential part of its company.

http://online.wsj.com/article/SB10001424052702304173704575578073119960604.html?mod=WSJ_auto_IndustryCollection

Patrick Mehlert

There are many different types of segmentation within the automotive industry. The market is segmented into different groups. Some of these groups include: luxury cars, trucks, environment friendly cars, affordable cars, family cars, and even vintage cars. The different segments represent the different areas that companies think they can have the most sales. Ferrari looks to dominate the luxury vehicles by offering one of the nicest and fastest cars available. They don't advertise to many different groups. While Toyota would go after more people in the "green" segment with their prius. Ford looked to try and dominate the midsize sedan segment with their Ford Focus. They were competing with the Toyota Camry, so far the camry is doing much better in the midsize sedan segment.

The segmentation within the automotive industry helps divide up the market so that different types of cars can be advertised and sold to specific people. This reflects how the industry works because it shows the different aspects of every company. It shows how they create cars for different people. They group people into segments and then create vehicles that they think will be popular.

http://www.msnbc.msn.com/id/19636744/

Retail Segmentation

The retail sector of the automotive industry is divided into 3 general categories:

- Auto dealers

-Service Stations

-Aftermarket

They each account for 48.1%, 27.9%, and 24% of the global retail sector, respectively.

While each segment is separate, they are still interconnected. Autodealers thrive on the large profit margins of service, just as service stations do. Aftermarket product sales thrive when consumers cannot find the options they look for in a vehicle or when base models have very few features. Aftermarket products offer a cheap alternative to buying factory options, or offer discerning car owners the ability to customize.

Competition in the auto industry is always increasing, and added value for any vehicle gives a competitive edge to manufacturers. If auto makers continue to add value, such as reliability, low maintenance, and bonus features, I think there could be a significant decrease in the aftermarket segment as well as the service sector (which includes auto dealerships' service departments). While auto sales may increase or stay the same, the fat profit margins that dealerships experience from service may thin out. Electric vehicles, still in the early stages of development, may present a new opportunity for dealerships and service stations as the need for service will become less, such as charging stations and battery-swaps.

Additionally for the aftermarket sector, there is always something that drivers can't get from an assembly line vehical, but as base models increase in added-value, I think auto dealers may steal a portion of the market away from the aftermarket retail segment.

Sources:

Ibis Auto Industry Report

http://web.ebscohost.com/ehost/detail?vid=14&hid=15&sid=81b64854-fbf7-4aa8-aaba-b265256c2c36%40sessionmgr4&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=buh&AN=49736455

Nissan Getting Smart

Penske Automotive Group Inc., “a large chain of car dealerships”, made a deal with Nissan Motor Co. agreeing “to sell a Nissan-made small car in the U.S. under the Smart brand.” Penske already sells Daimler AG’s two-passenger Smart ForTwo. Hoping to boost Smart sales, Penske is looking forward to adding this Nissan-made car. Smart is distributed only by Penske. This new Smart model is to be sold only in the U.S. and is expected to go on sale in the fourth quarter of 2011.

Nissan’s four-door model will expand Smart’s brand because Daimler’s Smart is a two-door. It will be designed and engineered by Smart and Nissan.

Chairman Roger Penske states "We are proud to be a partner with both Daimler and Nissan, two companies focused on bringing high-quality, fuel efficient products to the U.S. market.”

When gas prices hiked to four dollars a gallon, Smart sales increased. However, since gas prices have fallen, Smart sales did the same. Because of the current lower gas prices, and therefore a changed market, it is a bright idea to grow the Smart brand. Smart will benefit from expanding their vehicle lineup to attract a wider range of people.

Nissan’s new Smart car will be a gasoline-powered hatchback sold by Smart USA and will be larger than the Smart ForTwo. Nissan is a company focused on bringing high-quality, fuel-efficient vehicles to the U.S. market. The U.S. market will react positively to Nissan’s new car’s seating capacity. Its increased seating capacity, compared to the Smart ForTwo, allows Smart to meet the needs of more consumers, especially American customers. Since Smart is suffering now, it is wise for Nissan to build a new four-door version to boost its sales. Penske will benefit from its deal with Nissan. I expect this new vehicle to sell well in the U.S.

Irene Kalis

http://online.wsj.com/article/SB10001424052748703735804575535663717483060.html

What's the word for production in 2010?

Capacity utilization rates for automotive assembly plants are good indicators as to how the industry is performing. Since 2005, the plants' rates have been on a steady decline. From 2003-2005, capacity utilization lingered around 80%. By January of 2009, rates were at 25.6%. Rates fell due in large part to massive inventories after the recession which killed further production.

But now, as consumer demand for new cars beings to slowly come back, production rates are also increasing. By the end of the year, production rates should rise 45%, which should hopefully put capacity utilization rates back at 2007-pre-recession levels of around 70%. In January of this year, the CU rate was 57.5%. While this is a drastic improvement from earlier years, so much wasted capacity means significantly less profits versus running at near-full capacity.

How will automakers make up for a decrease in capacity utilization? There are many answers to this. I think automakers will really start capitalizing on what people want, rather than what they want. U.S. auto companies have been focusing on the production of large gas guzzlers due to the production methods they already have in place, and they need to make a shift to compact, fuel efficient, hybrid, and electric vehicles, which they have begun to do (yet not on a large scale). In the midsts of rising prices of fuel, steel, and everyday living, U.S. automakers meed to make the switch to a new market of small cars to contend with foreign manufacturers. This would mean not only more profits but also maximizing efficiency and squeezing all the profit they can from their existing capital.

Capacity utilization rates for 2010 (which we will know by the end of the year) will hopefully be back to pre-recession levels, due in part to adaptive efforts of US automakers. But if manufacturers employ some innovative and effective strategies to deliver cars people really want, they might be able to maximize their production. Automakers are currently wasting their resources, and until they respond to global demand, it will be hard to operate at capacity.

Source: IBISWORLD Industry Report

"GM's Volt Not Always All-Electric"

General Motors has recently found itself in an unwanted predicament, as it is now being accused of lying about its new automobile.  GM's new automobile, the Chevrolet  Volt, has been advertised as an "all electrically-driven vehicle". However this is not true as the Chevrolet Volt contains a gasoline engine that aids some functions of the car. GM hid the fact that the gasoline engine is connected to the drive train, making it more appealing to the public.

GM's defense in this accusation is that they did not want to share this information about the Volt because they feared that other car manufacturers would steal the idea, so they waited for patent approvals.  This is unfortunate because it an "all-electric car" would have been an amazing innovation to the Automotive Industry. It would have opened many opportunities for the future of the industry.

This is an ethical issue in the Automotive Industry because GM was allowed to falsely advertise.  This created a positive reception from the public, which was looking forward to this product.  Should GM be punished for a inaccurate advertisements and marketing strategies?

Patrick Mehlert

http://online.wsj.com/article/SB10001424052748703440004575548461540233810.html?mod=WSJ_auto_IndustryCollection

Mercedes Provides Different Options

The look on cars has usually been "a car for every purse and purpose" but mercedes is now changing their look to "for different purposes, different cars." They are offering all different types of cars for specific jobs. All of these cars are offered with new bio fuel or some form of fuel efficiency. Mercedes is really looking to "go green" and help the environment but also offer cars to people that are looking to save money on the every rise gas prices. Also in the near future they are going to be releasing 200 hydrogen powered cars to specific buyers. These cars will be very expensive but for the people willing to buy them they will have the top of the line automotive product.

I really like what mercedes is doing. They are creating different types of cars for different jobs. They have bigger cars for towing and longer distance and then they have smaller cars that are better for city dwellers and shorter trips. They are all reasonably expensive but they are very fuel efficient and they have good intentions for the planet.

http://online.wsj.com/article/SB10001424052748703440004575548142995118902.html?mod=WSJ_auto_IndustryCollection

Toyota announced today that they plan on offering more electric cars, hybrids, plug in hybrids, and fuel cell vehicles in order to boost car sales for the US. Toyota also will offer a 25,000-mile, two-year free maintenance deal in the U.S. on all Toyota and Scion-brand models. Toyota had an increase in sales to 1.3 million units (1.1 percent) from January to September of 2010, compared to 20 percent for Hyundai Motor Co. and 21 percent for Ford Motor Co. Toyota also recently invested around $1Billion on a plant in Mississippi to produce Corolla compacts. Toyota said they are using local engineers and designers to make products. Toyota is aiming for 2 million sales by 2013.

I think that it’s a great idea for Toyota to use American engineers and designers. This promotes nationalism and the fact that Toyota is trying to raise the economy in America. Toyota is trying to produce more hybrid cars and plug in hybrids in order to gain back buyers after their huge recall of the number one vehicle, the corolla. I wonder if using American engineers will draw Americans to buy their cars.

DAVID KABAKOW

http://www.businessweek.com/news/2010-10-06/toyota-says-more-hybrids-electric-cars-on-the-way.html

Toyota in America

Toyota announced today that they plan on offering more electric cars, hybrids, plug in hybrids, and fuel cell vehicles in order to boost car sales for the US. Toyota also will offer a 25,000-mile, two-year free maintenance deal in the U.S. on all Toyota and Scion-brand models. Toyota had an increase in sales to 1.3 million units (1.1 percent) from January to September of 2010, compared to 20 percent for Hyundai Motor Co. and 21 percent for Ford Motor Co. Toyota also recently invested around $1Billion on a plant in Mississippi to produce Corolla compacts. Toyota said they are using local engineers and designers to make products. Toyota is aiming for 2 million sales by 2013.

I think that it’s a great idea for Toyota to use American engineers and designers. This promotes nationalism and the fact that Toyota is trying to raise the economy in America. Toyota is trying to produce more hybrid cars and plug in hybrids in order to gain back buyers after their huge recall of the number one vehicle, the corolla. I wonder if using American engineers will draw Americans to buy their cars.

DAVID KABAKOW

http://www.businessweek.com/news/2010-10-06/toyota-says-more-hybrids-electric-cars-on-the-way.html

Increasing Affordability

"In 1973, the average US citizen needed 17.5 weeks of annual family income to buy an average-priced car, a figure that rose to 22.6 weeks by 1995. By 2009, however, the figure had fallen to 19.6 weeks. Standard & Poor’s estimates that this figure will rise in 2010, as the economy improves."

Since the 70's, prices for cars have been increasing, but pay rates have not. Due to a low demand for cars and increased costs of living during the 2008 recession, demand for cars went down, and automakers suffered

Due to increased unemployment and fear of future job loss, consumers are now more frugal than ever. They are also looking for cars that will last. This makes for cutthroat competition between automakers. Also, in times of economic instability, union workers are pushing harder and harder for job security and benefits, which cut into the thin profit margins of auto makers.

I think these factors combined will produce some great cars in the future. In the past we have seen small manufactures emerge with ground-breaking technologies, but I think the ever increasing competition will spur massive development of very high tech vehicles. This is out of necessity, for if automakers do not forge ahead and create innovative products to gain the upper hand, they will lose market share and be sucked up by highly competitive landscape. If automakers cannot offer consumers a cool new product to lure them away from their customers, their competitor's lower selling price will simply be the bottom line when consumers make their choice.

Source: NetAdvantage- Auto Industry

Future of the Automotive Industry

The future of the automotive industry lies within the smaller cars. Most companies are starting to expand their markets into other counties and they are introducing smaller cars. The future lies within the compact cars because the global market calls for more fuel efficient cars so that people can save money on gas. Most people are looking to "go green" and help the planet and their walets at the same time.

I think that the future of the automotive industry is looking very positive. With expansion into new countries and the new hybrid technology there will be tons of revenue pouring into the industry. The demand for new fuel efficient cars is very high and most of the car companies are taking advantage of it. The future will only bring more of that.

Ford Fiesta Represents Future

The new Ford Fiesta is out to impress with its 37 mpg on the highway. This $19,000, small car has style. Ford’s 2011 Fiesta embodies the future of American automobiles. American automakers are pushing to make cars more fuel efficient, especially since the Obama administration is anticipated to implement fuel efficiently rules on automakers for the years 2017 to 2025.

California is aggressively trying to make cars “two to three times more fuel efficient by 2025 than they were in 2009.” This state “wants automakers to boost their fleets’ average fuel economy by 3% to 6% a year from the 35.5 miles per gallon target already set for 2016.” California’s goal would help America prepare for a 50 to 60 mpg average fuel economy objective by 2025. This would strongly encourage all car makers’ car to average a 60 mpg intake.

Technology plays a huge role in meeting this goal. Another factor that would allow this to happen is if more people would chose cars like the new Fiesta. Automakers are bond to create cars similar to the Fiesta in order to compete. The Fiesta already has many competitors in the U.S., such as the Honda Fit, Scion xD and Hyundai Accent.

The U.S. is behind Europe and China “in demanding advanced petroleum-saving technology”.  In order to be tough competitors, U.S. automakers need to let go of their fuel inefficient cars because if they continue, they will be making cars that do not appeal to foreign countries. The U.S. also needs to be on top of new technology in fuel efficiency and advertise their fuel efficient cars affectively. A way America stands a chance is to quickly realize they need to embrace compact and strictly fuel efficient cars.

If the Fiesta is a success, it will encourage and give confidence to U.S. auto manufacturers and the public to give technologically advances, fuel efficient, small cars a chance. 

Irene Kalis

“Why We Could Be Driving Fiestas”

By Joseph B. White

The Wall Street Journal

"New Crash Tests Curb High Scores"

From 1990 to 2010, automobile manufactures have conquered the Government's crash-safety test.  Around 99 car models in the 2010 model year received 5 stars in both side and front crash tests.  The US Transportation Department believes that those results were to easily earned, so the new tests will be more rigorous and difficult.  David Strickland, chief of National Highway Traffic Safety Administration, said "Were just trying to make the manufactures stretch," referring to the safety aspect when producing the cars.  The new test will include crash dummies that will replicate and female body, and look into if the car has accident prevention technology, etc.  As of right now only 33 cars have received a 5 star rating, compared to the 99 cars in 2010.

This is a very informative issue discussed in this article. Not only does it tell of the government's actions and concerns in the Automotive Industry, but it also shows how car companies will not be able to advertise as efficiently. In previous advertisements for some cars, the car company can advertise the 5 star safety rating, however that is now not true for cars such as the Ford Taurus and the Toyota Camry.  This issue show how the government and industry interact and deal with the demands of both groups.

Patrick Mehlert

http://online.wsj.com/article/SB10001424052748703843804575533961959252030.html?mod=WSJ_auto_LeadStoryCollection