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A New Chevrolet Malibu, Aimed at G.M.’s Rivals

May 31, 2013 by Leave a Comment

It is unusual for a carmaker to make major changes to a new model so soon. But with the Malibu still lagging behind its competitors in the important midsize car category, G.M. is moving uncharacteristically fast to improve it.

G.M. has a lot riding on its success. The revamped Malibu, along with new pickup trucks coming this summer, is part of its effort to emerge from years of retrenching after its financial collapse and become a growth company again.

“In the past, we would have defended it and justified it and waited for it to sell,” Mark Reuss, head of G.M.’s North American operations, said of the Malibu at a news conference here on Friday to show off the new model. “But we’re not going to sit around and wait. We’re going to react to the marketplace.”

That marketplace has been decidedly cool to the car, even after last year’s revamping. Its sales have dropped nearly 12 percent from a year ago, even as G.M.’s overall sales in the United States are up about 10 percent.

G.M. has made some incremental gains this year in market share in the United States. In the first four months, it reported an 18.1 percent share, compared with 17.7 percent for the same period in 2012.

Better sales of the Malibu are considered essential to further bolstering share. To attract customers, a honeycomb-style grill was added to the front end, and the rear seats were redesigned for better comfort and more leg room. G.M. will also offer a more fuel-efficient engine that shuts down and saves gas when the car is stopped at a traffic light.

Analysts reserved judgment about the changes. “We’ll see how it does,” said Michelle Krebs, an analyst at the auto research site Edmunds.com.

She said that despite improvements in other areas of the business, G.M. still had a lot to prove in the midsize car category, which accounts for about one out of every six vehicles sold in the country.

“G.M. needs to be much more competitive in this segment,” Ms. Krebs said. “It’s still the biggest segment in the market, and they need to play stronger in it.”

Malibu sales have slipped considerably in recent years, particularly after work on a new version was suspended during G.M.’s bankruptcy. A fresh Malibu finally arrived in showrooms last year, powered by a new engine and sporting a better interior and more technology.

But consumers were not impressed. Despite the changes, sales fell further behind the Toyota Camry, which leads the midsize sedan segment, and the Honda Accord. And the Malibu fared poorly in a head-to-head comparison with the Ford Fusion, which has had a 25 percent increase in sales this year.

“We knew there were competitive pressures,” Mr. Reuss said. “And we knew we needed to get a better car out there.”

The new version goes on sale this fall. Until then, G.M. will try to generate interest in the current model with hefty rebates. The average Malibu incentive in April was the biggest in the midsize segment, at $3,793, compared with $592 for the Honda Accord and $1,946 for the Fusion, according to Edmunds.com.

Pre-bankruptcy, G.M. often relied on rebates to move unpopular cars. But Mr. Reuss said the company was committed to improving its products, so big incentives are unnecessary.

“We’re trying to address the concerns of the customer,” he said. “We have got to hit home runs with everything we put out there.”

The rush to fix the Malibu reflects G.M.’s overall struggle to remake itself after its bankruptcy and $49.5 billion government bailout.

While the company contends it has made great strides with most of its new products, its financial performance has been spotty. Its net income in the first quarter declined 14 percent from a year earlier, and its North American profits significantly trail those of the Ford Motor Company, its smaller hometown rival.

But investors appear to see a brighter future ahead. G.M.’s stock recently hit $33 a share, the first time the company achieved the share price of its initial public offering in 2010.

The government, meanwhile, is in the process of selling off its remaining shares in G.M., which should help the company shed its nickname of “Government Motors.”

Mr. Reuss said that in the past, G.M. would not have bothered to poll consumers about why they did not like the current Malibu.

But the days when G.M. would let a new model languish are over, he said.

“We are a company that lost the will to win during the bankruptcy,” he said. “We need to know that feeling of winning again.”

Industry analysts expect G.M. to report another slight gain in market share for the month of May, when the industry reports sales figures on Monday.

G.M.’s sales in the United States during May are expected to improve about 8 percent from last year, which would be a bit more than the overall market, according to the investment firm Sterne Agee.

Article source: http://www.nytimes.com/2013/06/01/business/a-new-chevrolet-malibu-aimed-at-gms-rivals.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Trying to Be Hip and Edgy, Ads Become Offensive

May 11, 2013 by Leave a Comment

Some of the biggest names in marketing, including Ford Motor, General Motors, Hyundai Motor, Reebok and PepsiCo, have been forced recently to apologize to consumers who mounted loud public outcries against ads that hinged on subjects like race, rape and suicide.

PepsiCo found itself meeting this week with the Rev. Al Sharpton and the family of Emmet Till — the teenager whose death in Mississippi in 1955 helped energize the civil rights movement — to try to quell multiple controversies involving its Mountain Dew brand.

“It’s like the Wild West,” said Paul Malmstrom, a founding partner of the New York office of the Mother ad agency.

Advertising experts offer a long list of reasons for the increasing frequency of such incidents, but the primary reason they keep happening, they say, is the growing anxiety on Madison Avenue to create ads that will be noticed and break through the clutter.

“It’s the pressure to create ‘viral’ advertising, the urge to get more views online, that leads people to push the envelope,” said Tor Myhren, president and chief creative officer at Grey New York. He added that another contributing factor was the focus on younger consumers. “There’s so much ‘How do we speak to millennials?’ in meetings,” he said.

The toll that those controversies are taking on the ad business is in some instances more than just embarrassment. Two senior creative executives at JWT India, including a managing partner, lost their jobs after the company produced fake ads for the Ford Figo hatchback that showed women bound and gagged in the trunk as celebrities like Paris Hilton and Silvio Berlusconi sat behind the wheel.

JWT apologized, as did Ford, although there was nothing to suggest that the carmaker had either approved or known about the fake ads.

The celebrities in the Ford India ads appeared without consent, but even instances where stars agree to work with a brand can be fraught with risk.

Those celebrities, particularly rappers and actors with images as rebellious rule-breakers and risk-takers, often appeal to marketers’ youthful target audiences and have huge followings on social media. That is what drew Mountain Dew to Lil Wayne, the rapper who signed a multimillion-dollar celebrity endorsement deal with the soft-drink brand last year. The brand severed ties with the artist last week, however, after the Till family took issue with an ad that referred to Till with vulgar lyrics sung by Lil Wayne on a remix of “Karate Chop,” by the rapper Future.

As part of its efforts, the family also brought attention to an offensive Mountain Dew video ad created by the hip-hop producer and rap artist known as Tyler, the Creator. The spot featured a battered white waitress trying to identify her assailant from a lineup that included African-American men and a goat. Mountain Dew dropped the ad on May 1.

On Wednesday at the PepsiCo offices in White Plains, company executives, including Frank Cooper, the chief marketing officer for global consumer engagement for Pepsi, and Till family members gathered for a private meeting with Mr. Sharpton.

In a telephone interview, Mr. Sharpton described the meeting as good and its tone as respectful. He said, “The family explained the pain that they have gone through since the killing” and Pepsi executives “repeated their apology and said they would have nothing to do with Wayne and his tour.”

In a statement, the Till family said: “We look forward to ongoing and meaningful collaborations which bridge the music community, corporations, grass-roots organizations and youth.” A representative from PepsiCo agreed that the meeting had been amicable but declined to provide details.

David Schwab, senior vice president at Octagon First Call, a division of Octagon, the sports and entertainment marketing agency, said that brands used stars “to build awareness and create differentiation.”

“But a celebrity who can be a difference maker can come with a high risk,” Mr. Schwab warned, meaning “there is more pressure on brands to be careful.”

Article source: http://www.nytimes.com/2013/05/11/business/media/trying-to-be-hip-and-edgy-ads-become-offensive.html?partner=rss&emc=rss

Filed Under: Media Business Tagged With: , ,

Government Sells Stake In Chrysler

July 22, 2011 by Leave a Comment

DETROIT — The federal government on Thursday shed the last of its stake in Chrysler, giving majority control of the carmaker to Fiat, the Italian company, while leaving taxpayers $1.3 billion short of recovering the full investment they made two years ago to keep Chrysler from going out of business.

The government had said in June that it expected to take that much of loss on its investment. But it has said that if it had not stepped in with a bailout and the company had been forced to shut down, the damage to the fragile economy would have been worse.

At the time Chrysler filed for bankruptcy in 2009, its prospects for survival appeared grim, even with the government’s help.

Still, the net loss on the Chrysler investment became political fodder over the terms of the federal bailout.

Representative Darrell E. Issa, Republican of California, said Thursday that the Obama administration “has sold out an American icon to a foreign company,” and is now “essentially giving that same company $1.3 billion of taxpayer money.”

The Treasury Department said in a statement that it had recovered $11.2 billion of the $12.5 billion it lent to Chrysler and that it would write off the bulk of the balance. The unpaid portion is on the balance sheet of the “old Chrysler” — a collection of unwanted assets being liquidated in bankruptcy.

As part of a previous agreement with the government, Fiat paid $500 million for the last of the Treasury’s 6 percent stake in Chrysler. Fiat, which bought Chrysler after it emerged from bankruptcy, had the right of first refusal. Fiat said in May that it wanted to buy the stake, and the price was negotiated after that.

Fiat also paid $60 million for the Treasury’s rights to buy additional Chrysler shares owned by a health care trust fund for retired members of the United Automobile Workers union, and $140 million for a smaller share owned by the Canadian government.

Chrysler, in a regulatory filing, said Fiat now owned 53.5 percent, on a fully diluted basis, of the carmaker, which returns to foreign ownership four years after its partnership with Daimler ended.

The union trust fund and Fiat, which has controlled Chrysler’s operations through a minority stake purchased in 2009, are the only remaining shareholders in Chrysler.

Fiat has said it expects to gain an additional 5 percent stake in Chrysler from the U.A.W. by the end of this year. Sergio Marchionne, the chief executive of both Fiat and Chrysler, last week said he planned to merge the management of the two companies, which would then operate essentially as one.

Congressional leaders, particularly in districts heavily reliant on jobs in the auto industry, applauded the move.

“We’ve seen a dramatic turnaround that’s not only great for Michigan but great for the country,” Representative Gary Peters, a Democrat whose district includes Chrysler’s sprawling headquarters in Auburn Hills, Mich., said in an interview. “It’s hard to make the argument that this was not a good investment. It’s a great investment for the taxpayers and the jobs that have been saved.”

Even though Chrysler is again controlled by an overseas owner, Representative Peters said, “the important thing is the jobs in America.”

In May, Chrysler repaid $7.6 billion to the American and Canadian governments, satisfying its full obligations to the countries.

Chrysler earned $116 million in the first quarter, its first profit since 2006. It will report second-quarter results on Tuesday.

“With today’s closing, the U.S. government has exited its investment in Chrysler at least six years earlier than expected,” said Tim Massad, the Treasury’s assistant secretary for financial stability. “This is a major accomplishment and further evidence of the success of the administration’s actions to assist the U.S. auto industry, which helped save a million jobs during the worst economic crisis since the Great Depression.”

The government still owns 26 percent of General Motors, after selling about half of its G.M. shares in the company’s November initial public offering. The Treasury is expected to begin selling more G.M. shares later this year, though they are currently worth about 11 percent less than the $33 offering price. To break even, the Treasury would need to sell its 500 million remaining shares at about $53 each.

A report in June by the White House National Economic Council estimated that the government would need to write off about $14 billion of the $80 billion given to the auto industry by the Bush and Obama administrations in late 2008 and early 2009.

Ian Austen contributed reporting from Ottawa.

Article source: http://feeds.nytimes.com/click.phdo?i=5989c049cd538e1a833f7eee6635034b

Filed Under: Business News Tagged With: , ,

Chrysler Pays Back Loans From the U.S. and Canada

May 24, 2011 by Leave a Comment

Chrysler said it made payments of $5.9 billion to the United States Treasury and $1.7 billion to Export Development Canada in a series of transactions completed Tuesday morning. The payments retired outstanding loans and covered interest on the debt.

Chrysler’s chief executive, Sergio Marchionne, planned to formally announce the move at a ceremony Tuesday afternoon at an assembly plant in Sterling Heights, Mich.

He was scheduled to be joined by Ron Bloom and Brian Deese, two members of the auto task force that was assembled by President Obama to shepherd Chrysler and General Motors through bankruptcy reorganization in 2009 with the aid of the United States taxpayers.

“The loans gave us a rare second chance to demonstrate what the people of this company can deliver,” Mr. Marchionne said. “We owe a debt of gratitude to those whose intervention allowed Chrysler Group to re-establish itself as a strong and viable carmaker.”

Chrysler had been struggling with high interest costs on the debt, which prevented it from reporting a profit until the first quarter of this year. The company said it recently reached agreement on new financing from a consortium of investment banks that includes a term loan of $3 billion, debt securities totaling $3.2 billion, and a revolving credit facility of $1.3 billion.

The new financing package allowed Chrysler to shed the government loans, which did not mature until 2017 but were hurting the company’s image in the marketplace.

Chrysler estimated that the new financing would save the company $350 million a year in interest expenses.

Treasury Secretary Timothy F. Geithner hailed the repayment as further proof of the effectiveness of the Obama administration’s efforts to bail out the struggling American auto industry.

“Because President Obama made the tough decision to stand behind and restructure the auto industry, America’s automakers are growing stronger, making new investments, and creating new jobs today throughout our nation’s industrial heartland.” Mr. Geithner said in a statement.

The loan repayment was made possible partly by funds from Chrysler’s Italian partner, Fiat.

Fiat paid Chrysler $1.3 billion to increase its stake in the Detroit automaker to 46 percent from 30 percent. Some of that cash was then used to reimburse the United States government.

Many auto analysts considered Chrysler a long shot to recover after it emerged from bankruptcy. Its truck-heavy product lineup was out of step with more fuel-conscious consumers, and it had few new models to attract buyers to its showrooms.

But with the aid of Fiat, which is also headed by Mr. Marchionne, Chrysler is re-emerging as a healthy competitor in the United States market.

Chrysler’s sales rose 22.5 percent through the first four months of the year, compared to a 19.6-percent increase for the overall U.S. market. The company’s new Jeep Grand Cherokee SUV and Chrysler 300 sedan are leading the comeback.

Earlier this month, Chrysler announced that it had earned $116 million in the first quarter of this year — its first quarterly profit since 2006. Mr. Marchionne predicted better times ahead as Chrysler continues to introduce new vehicles. “There is more work to be done,” he said.

Article source: http://feeds.nytimes.com/click.phdo?i=66882bb6bbf404057871881dc9cd6584

Filed Under: Economy News Tagged With: , ,