The Right Brands Will Die

There was a fascinating moment of business drama last week in Washington, DC. Three of the most important chief executives on the planet met leaders from the US Senate and House to plead for extra public funds. General Motors' chief executive Rick Wagoner, Chrysler's Robert Nardelli and Ford's Alan Mulally testified at a Senate Banking, Housing and Urban Affairs Committee hearing to ask for an additional $25bn handout to keep their brands alive.

It was always going to be a difficult day, but the tone was set early by Democratic representative Gary Ackerman, who told the executives there was 'delicious irony in seeing private luxury jets flying into Washington, DC and people coming off them with tin cups in their hands'. Fellow Democrat Brad Sherman continued. 'I'm going to ask the three executives here to raise their hand if they flew here commercial,' he said. The three chiefs blinked but made no gesture. 'Second, 'I'm going ask you to raise your hand if you're planning to sell your jet... and fly back commercial.' Again, there was no response. 'Let the record show no hands went up,' concluded Sherman.

There are more than 20 non-stop flights from Detroit to DC with tickets starting at $200 for the two-hour trip. And yet these cash-strapped chiefs who came to communicate the dire straits their respective brands were in, opted to spend in the region of $20,000 each and use their private executive jets instead. It was a strange moment, yet one typical of the public-private shenanigans taking place worldwide.

Formerly proud capitalists are looking at 2009 with a mix of fear and desperation and turning in increasing numbers to government sources for help. The problem is these huge private institutions have enjoyed periods of unparalleled success, which has created a disgracefully indulgent operating model that contradicts directly with the premise of being given public funds.

There is a prime example taking place closer to my home this week. Ratan Tata, chairman of the Tata Group, whose net worth is about £30bn, is holding secret talks with the government to plead for a £1bn loan to help bail out the Ford and Land Rover brands. Tata acquired the brands only nine months ago, but both now look very vulnerable to changes in the economy and environment. With credit sources tightening, banks are refusing to help out the ailing group. So Tata is asking for a two-year government loan to help keep it afloat. Without it, both brands could disappear forever.

There is a long 'death list' circulating among consultants and investors predicting which brands will not survive 2009. Great brands from automotive, newspapers and the high street feature prominently. Yet reviewing the list is not as depressing as you might think. Brands are born, they grow and they also die. The past decade has seen an unparalleled combination of prosperity and stability and, as a result, marketers have grown comfortable with the idea that brands rarely, if ever, disappear.

But 2009 will be different: many great brands will fall, and so they should, because this is the way of the jungle. This is the game of capitalism and the rule by which it is played. You can have your million-dollar bonuses and private jets, if you can make money. But if you fail, you must face the consequences, and without the help of the taxpayer.

Weak brands must die so remaining brands can prosper and new ones can emerge. To support dying brands with the public purse is not only morally wrong, in my opinion, it's also bad for the economy that the government is trying to protect.

Update: Ford CEO will travel by car for next D.C. visit.

Courtesy of Marketing Magazine

Sponsored By: The Brand Positioning Workshop

Comments

[Martin Bishop]

Great post. One additional thought--some brands will fail because of poor business decisions, bad luck, macro economic trends or other reasons not directly related to the strength of the brand itself.

Even after the business has failed and the products and services are no longer in the market, some brands will stay strong (in the minds of consumers). And perhaps some will be brought back to market under new ownership. Land Rover, for example, is unlikely to disappear forever even if the Tata Group doesn't get the bailout it seeks.

[David Risley]

Great post. I liken it to natural selection. Just as the nonsuccessful species die out, companies die out and new ones take over who do things to survive. Yes, there are brands that need to die off. And they will. And all this begging at the trough of Washington is very unfortunate.

[Bruce Philp]

I could not agree more with the sentiment, but I fear that here, too, there will be injustices as some wrong businesses get saved and some wrong ones perish. The fact is, no matter how much we branding wonks want to believe that a brand is the crowning asset of enterprise, a brand and a business are not the same thing. Great brands often die as collateral damage to broken businesses. And crappy brands often survive because the companies they front are well operated.

Gotta say, though, I am totally with you that Ackerman's Inquisition was a watershed moment. More than most people realize for now...

Great post.