GM shifts direction to gain global clout

General Motors’ decision to hire a European agency in an effort to win more share of the Continent’s car buyers, highlights its Ford-style refig and shift from manufacturing towards a marketing-led strategy.

Re-engineering and remodelling are terms that the motor industry traditionally reserves for new model ranges. But General Motors is now midway through a different type of re-engineering which, with arch rival Ford going through the same process (MW October 25), will reshape the whole industry.

GM’s search for a European agency to run an estimated $20m (13m) account to handle sales of its US Cadillac and Chevrolet cars in Europe (MW November 8) illustrates the way things are changing. It is described internally as a “tidying-up exercise” linked to a global shift in responsibilities.

But inside sources suggest it could also trigger efforts to sell more of the US marques across Europe, although substantially more than $20m will be needed for a full pan-European campaign. At present, GM sells 8,500 Cadillacs and Chevrolets in Europe each year.

“GM has seen what Chrysler is doing and decided that it should do the same,” says one company source, referring to Chrysler’s re-entry into the European market with its Neon and Voyager ranges. “It has to be the aim to sell more cars, firstly because any company selling vehicles must have the ambition of selling more, and secondly because it has cars that are different from those already on offer in Europe.”

In the past five years, Chrysler has revamped its product range and in January it reshuffled its US marketing. As part of the same thought process, GM has begun moving to a global brand management structure, under the watchful eye of the Detroit-based Ronald Zarella, who carries the snappy job title of vice-president North America operations sales service and marketing.

Put more simply, he is the man charged with guiding GM through a process which Ford has pioneered.

“GM is undertaking a vast global reorganisation of how it markets its cars,” says one source. “It is moving to be a marketing-, rather than a manufacturing-led company.”

That is where Zarella, who assumed his position in December 1994, fits in. He vowed to end the company’s “model year syndrome” – an industry-wide problem faced across all markets. What happens once a model has been launched with its requisite huge advertising spend?

There has been a tendency in the past for a manufacturer’s marketing department to move on to the plans for the next big launch once this year’s model goes on sale. Global brand management, the theory goes, means that the same people shepherd a car through its full lifecycle. This brings consistency and ensures that after 18 months a car is not left in a sales limbo waiting for a minor makeover to justify renewed marketing support.

The problem is most acute in the US simply because the budgets and communication problems are bigger. But it is a question which is being posed to everybody involved in GM marketing, be they in Cadillac, Chevrolet, Opel or Vauxhall.

As part of the restructure, for the first time the Zurich-based General Motors International Operations (GMIO) is taking control of European sales – in fact all sales, apart from North America – of Cadillac and Chevrolet. The objective is to create a more co-ordinated international approach.

The changes are more than just academic. GM and its main rivals all want to expand into developing markets, especially Asia Pacific and Japan. It believes European manufactured cars are more suitable to being “world cars”, which goes part of the way to explain the increasing product interchange between some of GM’s sister companies. The Vauxhall Omega, for instance, has been repackaged for the US market as the Catera and, similarly, the US-built Sintra MPV will go on sale in the UK next year.

To avoid confusion GM is determined to develop distinctions between Vauxhall and any of its other marques. There has been speculation that the Vauxhall name would disappear from the UK market to be taken over by Opel but this has always been denied by GM. The global restructuring of GM along branded lines would appear to strengthen Vauxhall’s hand.

GM has a three-level approach to branding. There is GM, the individual marques, such as Cadillac, and then the car models themselves.

Europe has always been an important region, but even more so now. By 1999 GM intends to have just three European-designed small car platforms in all world markets with different versions for Europe, the US and other developing markets. Logically, the larger vehicles, including the replacement for the Omega, will be sourced in the US. The same chassis but different styling brings down the engineering costs and adds to efficiencies.

GM’s European operation has the added bonus of being profitable, recording a 50m profit, in contrast with Ford’s third-quarter losses of 302m.

GMIO is talking to GM roster agencies in Europe. No budget has yet been fixed because no final decision has been taken on the ad strategy for selling Cadillac and Chevrolet. The options are a sales-driven strategy that would demand substantially more than the 13m budget whispered internally.

The second option is a branding campaign to position the brands ahead of any future attempt to hike sales. Those who say choosing a European agency is a “tidying-up exercise” are correct, but it is one that will be watched more closely than other moves.

The restructure is a public microcosm of the debates going on within the company. Having taken the logical step of shifting responsibility for European sales of US cars to this continent, many will see the advertising decision and the strategic route the company takes as offering some indication of GM’s future direction.

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