GM and Chrysler: A Difficult Combination

November 5, 2008

As sales are down and production costs are up, automotive makers are being hit hard in this current economy. General Motors and Chrysler are still in merger discussions, strategizing funding options for the potential combination.

This merger will have branding repercussions, tough and murky decisions to make with regard to the resulting brand portfolio.  GM, which is already awash in brands: Chevrolet, GMC, Pontiac, Buick, Cadillac, Hummer, Saturn, and SAAB. Chrysler, Dodge, and Jeep would join these brands.  In many ways, the failed Daimler-Chrysler merger actually made more sense from a brand portfolio standpoint with Mercedes and Maybach brands on the high-end complemented by the more mainstream Chrysler brands.

CoreBrand often advises our clients on the strategic and financial implications of maintaining brands through the merger process.  Overlapping corporate or product brands are often viewed by the acquiring company as an opportunity to cut costs out of the new entity and return shareholder value, usually by closing plants and reducing overlapping management headcount. There is certainly a lot of overlap among the Chrysler, Dodge, Chevrolet, Pontiac, and Buick product brands, not to mention overlap among the GMC, Hummer, and Jeep product brands.  How will the new entity choose which of these venerable brands should be sacrificed to help ensure America’s presence in the global auto industry of the future?

At the corporate brand level, CoreBrand’s analytics show that Chrysler’s corporate brand power has been steadily increasing since 2001. GM’s corporate brand power has leveled out over the past three years after a long decline. If this proposed merger does indeed go through, we do not see an easy path for these brands. From the corporate parent brand down to the vast portfolio of product brands and models it will be a long and winding road before this merger generates a return on investment from a branding perspective. I don’t think either entity has the luxury of time to make the combination work.

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