WHEN COMPARED with other consumer goods producers, carmakers tend to be fairly mediocre brand managers.
At least that's what ex-Proctor & Gamble Chairman John Smale thought when he became non-executive chairman of General Motors in 1993. Smale's focus on brand awareness at GM soon spread throughout the entire car business. But brand management - as some define it - is now out of favor at GM and is being downplayed at many other auto companies. Not only are 'brand managers' no longer executive fast trackers, they don't seem to exist anymore.
Of course, carmakers always have and always will manage their brands. It's the single most important thing they do. Designing and building great cars is simply the noblest form of brand management.
In fact, European automakers will soon have to get a whole lot better at protecting their brands as a consequence of Europe's new car distribution rules.
The European Union's proposed changes to the block exemption break the link between sales and aftersales service. Dealers will be free to find subcontractors to handle their service operations. Of all the rule changes proposed by European Competition Commissioner Mario Monti, this one probably worries automakers the most. But virtually every aspect of the new rules will make it harder for car companies to protect their reputations and keep customers satisfied.
The Commission will make its final decision on the new block exemption in July, after consulting member states at a committee meeting on June 6. Unlike other types of EU legislation, block exemptions do not require the approval of national legislatures. The new rule will take effect on October 1 and automakers shouldn't expect much relief between now and then.
Automakers need to prepare for the new retail world outlined by Monti. There are signs that it is happening. For example, Toyota has created a new executive position in the UK aimed at keeping multi-franchise dealers from harming the brand as they cram lots of franchises into one facility. The new exec's job is to make sure brand communications are consistent. Basic stuff, maybe, but crucial in this new age.
Carmakers also need to set up audit organizations - such as Audi has - to check independent repair shops. They must verify that the new repair outlets can, for instance, handle a major recall. It would take years for a vehicle manufacturer to recover from a poorly executed recall caused by an unmanageable service network.
The car brand will suffer most if the independents fail. Consumers won't distinguish between pre- and post-block exemption servicing. The manufacturer will get blamed.
Carmakers also need to prepare for the large dealer groups that will emerge and exercise much more power than most current retailers. The big groups cannot be counted on for the level of cooperation auto companies require - the kind of support they can now command. The big retailers don't care much about brand shaping - or at least they care a lot less than carmakers.
European auto companies need to make these issues a priority. An important step might be to create all-powerful brand czars at management board levels to address every issue that touches on brands, from design and development to dealer networks - not unlike the quality czars that emerged in the 1990s.
They don't need brand managers as much as they need to appoint and empower executives with company-wide reach and authority.
In any industry, lack of vigilance will kill a brand. With the changes to retailing laws, the time for vigilance in the car business is now.