Domestic carmakers still have an image problem.
Even as the gap in quality between foreign and domestic cars has narrowed significantly over the past several years, many consumers are still buying based on a perception that Japanese cars are made better.
The culprit? Detroit’s continued reliance on incentives and zero percent financing has only contributed to the widening gulf between Detroit and Japan, according to analysts.
An addiction to impulse-buying incentives has cut into profits.
Even worse, some executives in the auto industry say, the deals, which get people into the showroom doors, imply that U.S. cars are inferior to imports.
“When you put cash on the hood, it makes your brand weak,” said Elena Ford, Ford Motor Co.’s director of product marketing.
“Incentives demoralize the brand,” she said.
As the Big Three continue to overhaul their operations to try to compete better with their Japanese counterparts, marketing remains a key trouble spot.
Though the auto industry had one of its best years on record last year, the Big Three’s share of the U.S. market fell to an all-time low of 58.7 percent.
Sales at General Motors Corp. and Ford Motor Co. fell in 2004. The Chrysler Group was the only domestic-based manufacturer to increase sales and market share.
GM’s declines came despite spending more on incentives than any other automaker in the United States.
While major Japanese brands increased their incentives dramatically last year, they continue to spend less than their U.S. counterparts on deals.
Yet Toyota’s sales rose 10 percent in 2004 to pass the 2 million mark in U.S. sales for the first time. Honda’s and Nissan’s sales in the United States were up as well.
Marketing strategies
“The U.S. tends to advertise the deal,” said Steve Szakaly, an economist with the Center for Automotive Research. “The Japanese sell based on their quality.”
European automakers like Mercedes-Benz and BMW take a different tack.
“The Europeans have an image and heritage focus to how they market their vehicles,” said Eric Noble, president of The CarLab.
He said European automakers emphasize either performance or prestige.
“They can’t market on their reliability, which is in many cases worse than that of the Americans,” he said.
The public’s perception that GM, Ford and Chrysler products are inferior to those of Toyota, Honda and other Japanese automakers stems from decades past, when it was true.
But the Big Three have made huge improvements in recent years, with some models registering fewer defects than competing models from Asia.
But that has done little to help ease the gap in consumers’ minds when it comes time to plunk down money for a new car.
“The old perception that the domestics build nothing but junk has pretty much dissipated,” said Art Spinella, president of CNW Marketing Research. But “it takes less of an incentive to move buyers from domestic or minor Japanese brands to Toyota or Honda because they perceive they’re getting better value.”
Chrysler’s Joe Eberhardt, executive vice president of global sales and marketing, said, “Quality is a hard sell and a slow process. You just don’t go out and say you’re better because no one believes you.”
Perceptions changing
CarLab’s Noble said, “In the 1960s, if you said something was made in Japan, it was an insult.” He said it took 30 years for Japanese cars and trucks to gain a reputation for stellar quality.
But some domestics are making a comeback thanks to a marketing revamp.
Cadillac, for example, has regained its footing with Lexus, Mercedes-Benz and other luxury models through striking styling, high performance and better manufacturing quality. Advertising featuring the music from rock band Led Zeppelin has helped hip up its image.
“They have styling that is superior to the Japanese and performance on par and in some cases superior to the Europeans,” he said.
As recently as the late 1990s that was not the case.
Now, with hip-hop artists and star athletes making the 100-year-old brand the ride of choice, Cadillac has become more attractive to a whole new generation.
Taylor tells a story of a 13-year-old boy who saw a gray-haired driver behind the wheel and asked, “What’s that old guy doing driving a Cadillac?”
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