Bankrupting the Brand - General Motors

Posted on | November 13, 2008 |

By Robert Passikoff

Questions have been raised this week regarding a rescue package for General Motors. The choice seems to be a government bailout or a bankruptcy sale. But not everyone thinks that a Chapter 11 filing would be a bad thing.

While painful for GM, it may be preferable to another government bailout, which might further weaken the company. A bailout might also result in higher levels of consumer anger toward GM brands. Consumers aren’t exactly happy with the proposed use of their tax dollars now, and a bailout package just might sink the GM brand.

Companies in other industries have shown that bankruptcy can offer a fresh start with a more competitive cost structure and edge, but few have been so poorly rated vis a vis engagement and customer loyalty as General Motors. In this year’s Customer Loyalty Engagement Index, auto brands ranked as follows:

1. Toyota
2. BMW/Mercedes
3. Honda
4. Nissan
5. Saab/Subaru
6. Chevrolet
7. Jeep
8. Volkswagen
9. Hyundai
10. Chrysler/Volvo
11. Ford
12. Kia
13. General Motors

Experts have noted that while a bankruptcy might create a stronger company in the long run, consumers could easily see it as a sign that the cars they bought might not retain their value, and seek other options. And given the current economy it might be worth remembering the prophecy made by Will Rogers: “We are the first nation in the history of the world to go to the poorhouse in an automobile.

Dr. Robert Pasikoff is President of Brand Keys
Consumer Insights Research and Consulting