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Automaker Rebadging Revisited

by: Markham Lee August 17, 2008 | about stocks: GM / HMC / NSANY / TM    
Markham Lee

Markham Lee

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Normally we think of rebadging as a situation when a stronger automaker (profits, engineering prowess, brand, etc.) builds cars for a weaker one to sell under its own name, the idea is that the weaker automaker could benefit by getting one of its competitor's better products and the supplier of the cars can benefit via having another sales channel, an opportunity to save on costs, etc.

But how about doing it the other way around?

Part of the problem Detroit faces right now is that even if they start making world beating products their brands are so weak that it's very likely the customers they need to introduce these products too will never even try them, let alone give them any significant consideration. So what if Detroit put some money into building a couple of great products in collaboration with a foreign competitor, and then sold that product under the name of the stronger competitor?

Just think about it: if Chevy were to build a Malibu that was superior to the Accord and Camry in every way, it would still have trouble denting the sales of either cars because Accord and Camry shoppers generally never consider Chevy in the first place. But, if Chevy were to make a deal with Honda where the cars were sold as Hondas or even under a new brand name all together, they would probably generate a lot more traction in the marketplace and do wonders for the GM (GM) brand.

It's the harsh reality of having a weak brand: even if your product gets great reviews and appears stellar, customer perceptions are hard to change and they'll still be wary of your product.

Obviously it's unlikely that Honda (HMC) (or Toyota (TM) or Nissan (NSANY)) would agree to such an arrangement, after all, what's in it for them? However a smaller automaker like Subaru is a possibility, especially with the new Chevy Volt that's slated or a 2010 release.

A Subaru Volt would be a lot easier to sell then a Chevy one, and revealing later that the car is really a Chevy once it's winning in the marketplace is a possible way to strengthen the Chevy brand. At this point GM has to do something drastic to rebuild its brand, and doing the rebadge thing in the reverse of the usual way might be the way to go.

Desperate times call for innovative tactics.

Disclosure: at the time of publishing the author didn't own a position in any of the companies mentioned in this article.

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This article has 19 comments:

  •  
    Aug 17 10:54 AM
    I couldn't agree more - why does GM stick with the same brands? Let them go - perception is reality. I don't want to buy a Chevy.
    Reply
  •  
    Aug 17 11:09 AM
    What analysis have you done to determine that selling a Volt as a Subaru would achieve higher volumes that as a Chevy? If 10% of Chevy buyers pick a Volt, that would still be a higher volume than if 20% of Subaru buyers chose it. As for building the brand, becoming a supplier to another OEM is not a brand building exercise (how many end customers have ever heard of Magna?)!
    Reply
  •  
    Aug 17 11:13 AM
    The premise is soooooo stupid !!! Haven't you heard of the "Internet"? Every car website shows badge engineering within a company and badge engineering between companies ( see Matrix and Vibe). Have your people run out of ideas? Subaru is a Northeast US brand. It has little traction in the marketplace other than quirky 4x4's. At GM, it is a process getting the buyers back. Probably slower than desired, but check the Malibu's sales. They selling everything they can produce.
    Reply
  •  
    Aug 17 12:36 PM
    I couldn't agree more - building better cars so you can build up the image of another company rather than yoor own is possibly the most brainless idea anyone ever came up with. And the idea that those who remember the bad old models GM produced years ago will forever be the car buying public apparently forgets that the population constantly ages and new youngsters come along who don't have any memories of bad GM products. Altogether, one of the lamest articles I've seen in quite some time. Alpha can be proud - you're number one in the idiot journalism hit parade.
    Reply
  •  
    Aug 17 01:43 PM
    This is one of my Main complaints with GM, cross pollination. A couple of examples: Saturn's Sky (If Saturn wants a 2 seat roadster, then let them design one! Stealing Pontiac's is so lame); any GMC truck vs. Chevy Trucks (Is the U.S. consumer this stupid to think there is a nickles difference between a GMC and Chevy truck?). Big frinkin' deal there's interior differences, like that in the Cadillac Escalade. It's the same truck design.

    All manufactures do this to a degree. What's the difference? The Author attempted to answer this. It is the perceived low evel of quality of U.S. auto products, regardless of how it is badged.

    Stop the cross pollenation and put Engineering first.
    Reply
  •  
    Aug 17 01:45 PM
    Great idea! GM does sell some very good vehicles (including the mentioned Malibu as well as their Avalanche pickup). Some other brands would be enhanced if they sold select GM vehicles - I'm thinking Hyndai/Kia perhaps. GM probably needs to start importing their Korean product to the US as well for traditional badge engineering. They do it in the rest of the world where they are marketed as Chevys. Just don't remind everyone of the origin manufacturer - Dawoo!
    Reply
  •  
    Aug 17 02:31 PM
    What do you mean? Do you mean that readers are having trouble believing what J D Powers and those other quality examiners are saying? People have no trouble believing what JD Powers say about imports but not our domestic models? Is that what you are talking about?
    I think the real reason we are wary about our domestic makers stems largely from the quarrels between managements and unions. Either unions or managments got to shut up and do the job! This will do the trick!
    Reply
  •  
    Aug 17 02:37 PM
    If I prefer imports over GM or Ford, I would buy imports as long as GM and Ford is still financially sound. It is quite the opposite lately, I would reconsider GM and Ford this time around until they get back on thier own feet. This is not the time to compare now, we should know by now that GM and Ford might not be around much longer if we continue to wear blinders. It is like watching a huge ice block breaking off the ice shelf down there in the Antarctica. Once GM and Ford goes, so will the rest of the American industry. Maybe General Electric, 3M, Caterpillar, Dow Chemical will be next to go down the tubes.. We already lost a lot of companies over the past decades.
    Reply
  •  
    Aug 17 02:42 PM
    JD Powers is a joke. Anyone that puts any substance into what JD Powers has to say is falling into the “Marketing” trap. They design consumer poles to measure aspects with compete disregard to other, more meaningful aspects of any given design.

    It’s like asking does chocolate taste good? (Even though it might be a chocolate-turd cookie that is being reviewed).
    Reply
  •  
    Aug 18 06:51 AM
    Did you not have anything meaningful to write about? At least then your lack of understanding of the automotive market would not stand out. The arguments against your premise, are in the other neatly listed in the other comments (dilution of brand, contribution to another brand, etc.) Your example of Chevy is a bad one, as this one of GM's better global brands. While the fickle, myoptic American public has not caught on yet to the change in its vehicles, the rest of the world has and is considering Chevy as a good vehicle.
    Reply
  •  
    Aug 18 09:10 AM
    This was one of the worst pieces I have read. Your premise is wrong. The VOLT is going to be a Chevrolet. This is damn good news for GM and the American consumer. The last thing GM would want to do is to sell the VOLT under another manufacturers name!!! Can you be more stupid???? The Chevrolet brand is not weak. Cars like the Malibu and Cobalt are sold out to 2010. Wake up! The Corvette is a Chevrolet. The new Camaro is a Chevrolet. Get a clue! Chevrolet is the #1 selling car brand in the USA.
    Reply
  •  
    Aug 18 09:27 AM
    What would you think about GM marketing ALL its future electrics under a new brand named "Volt," guys?
    Reply
  •  
    Aug 18 12:06 PM
    And this is because Honda did such a good job of selling re-badged Rodeo's as Passports??? And Mazda sells so many re-badged Ford Rangers??? Platform sharing and common components= cost savings. Rebadging=brand dilution and market confusion. This is the worst article I've ever read.
    Reply
  •  
    Aug 18 01:25 PM
    The idea makes some sense but using Subaru as an example isn't the best ones. People who buy Subarus buy into robustness. It still is the only car manufacturer who can boast to have 97.5% of its cars on the road to date. Plus, Subaru has a strong image already, despite the company's silly tries to revamp its lines.
    Reply
  •  
    Aug 18 02:22 PM
    Quite the spirited debate this article incited!

    If GM doesn't reposition its brand in the hearts and minds of customers, a host of new products won't save the company even if they're the best cars on the road for the simple reason that people won't try them out in the first place.

    Merely putting out a new product with a commercial saying "we're the best" isn't going to get the job done, if the customer is already convinced that the competition is better and GM is trying to saw them with marketing fluff.

    So for the Volt and other new GM products to be successful they need to do something innovative and/or drastic to fix their branding issues, whether that's partnering with a foreign automaker via rebadging (or selling Volts under a new brand name at their dealerships, etc), or something else that increases the standing of the GM brand.

    If you don't fix the brand, you can't fix the company.

    Management and Union quarrels in my mind aren't the reason why many Americans look down their noses at the products coming out of Detroit. It's more than that, it's how the cars perform, styling, quality, etc, people feel they're making a smarter decision when they buy Japanese.

    One of the failings of the J.D. Power Surveys is that they're often touted by the automakers themselves, so when Buick says "Hey we're tops in Quality" consumers ignore as marketing fluff and focus on their own experiences, or maybe someone like consumer reports that seems more objective, and whose rankings favor the Japanese cars.

    The other issue is that it's just not about quality, resale value, levels of luxury, styling, cachet, etc, are all factors as well. A Buick SUV and a Lexus SUV may cost the same and be the same quality, but which one would most people rather drive?

    Ames I serious doubt that Chevy is the #1 selling brand in the U.S., especially when they need to use incentives to sell their cars and Toyota and Honda don't need to. Furthermore if I want a Malibu I can to the local Chevy dealer and walk away with one from a sales person who will roll out the red carpet for me, while the Honda dealer won't negotiate and will tell me if that if i don't take the one I'm looking at now it will be sold by tomorrow.

    During the month of July over 2 1/2 more Accords (ditto for Camrys) were sold than Malibus: analyticalwealth.com/b... and Honda and Toyota are crushing Chevy in terms of resale value.

    I don't see where you get #1 brand from.

    In the end it's just an idea, domestic brands rebadging foreign ones has never worked, so maybe the opposite direction will. Of course you run into many of the same branding issues, BUT if people find out that the Hyundai they bought is really a Chevy it could potentially have more of a positive effect then people finding out the Chevy they bought is really a Hyundai.

    The former surprises people and makes them think: maybe that company is better than I thought, whilst the latter just reinforces their negative feelings: "See, Chevy is so bad they had to get Toyota to make the car just to get people to buy it".

    -M
    Reply
  •  
    Aug 19 12:01 PM
    This is the stupidest piece I've read in many months. Any familarity with GM's experience with the Geo brand? Chrysler's experience with Eagle? GM's multi-billion-dollar misadventure called "Saturn," which has yet to make a cent? A "new" brand won't buy any traction, at all, and will cost tremendous amounts of money. And, Subaru? Do you have any sense of the pipsqueak volumes of that brand? Or, utterly confused gay/granola liberal/punk ricer image of that brand? If the Subaru brand were so appealing, they might be able to sell more Subarus under it.

    The Volt at the oft-discussed $40K price point is going to be a very difficult sell under any brand. Despite all the discussion about it being the "savior" of GM, it's a niche product that's more of a PR effort than a viable volume product. The whole point is to prop up the image of the Chevy brand, so why would anyone want to market it under another brand?

    Whoever wrote this piece could not know less about the car business.
    Reply
  •  
    Aug 20 04:00 PM
    Launching the Lexus brand did well for Toyota, ditto for Acura (Honda) and Infiniti (Nissan), the issue isn't so much in launching a brand in general as it is

    1) Proper Brand management & development

    2) The right brand matched with the right product

    Eagle wasn't a new brand for Chrysler it was a brand they bought from AMC.

    Saturn started out as a great brand with loyal customers (how many other American brands in the early 90s had fan festivals?), then GM began to mismanage it.

    GEO was a mistake from the beginning as it wasn't really selling anything different from the rest of GM.

    New brands have indeed been launched successfully so there is nothing inherently fatuous about launching a new brand, the problem is that launching a new brand is pointless if you don't do it RIGHT.

    Mind you Subaru is a small brand but it does have a reputation for building high quality products, and the very people you needlessly derided are indeed the very ones who often purchase Priuses and would be interested in the Volt.

    As always, thanks for reading



    -M
    Reply
  •  
    Aug 25 03:48 PM
    To comment on SpclEd's comment, they didn't steal anything from Pontiac, they stole it from Opel, their German brand. They did the same thing with the latest GTO, using a Holden(their Australian division) design. It is a fairly common trend in the automotive industry to cut costs by using a common platform for several lines, used by Ford with the Jag X-type built on the Mondeo/Contour chassis or Chrysler with the MB E class platform as the base of the 300/Charger.
    Reply
  •  
    Aug 25 04:11 PM
    The greater problem in my eyes with the US auto industry and it's Euro cousins is a seeming inability to see and adjust to market trends until it's in trouble. Daimler blamed Chrysler for it's financial issues, but at the time it sold the Chrysler unit off(mind you after selling off the profitable units like Mopar to Bosch) they failed to ever put into production an efficient model to replace the Neon sedan, which sold millions of units and made inroads in the compact market, with a model of equal or better efficiency to compete with the Civic or Corolla, when the market was trending towards higher fuel costs, opting instead to do what they thought was going to yield a quick quarterly buck. Now they lack a model for that segment when they need it most at the same time Daimler is dropping the SMART car on US shores. Sounds less a marriage of equals as was touted at the merger than a corporate raid. I'd love to see Chrysler under Cerberus' hands produce the Hornet concept, using US assets rather than China and I'd be willing to invest money into them to see it happen.
    Reply
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