How GM Gets Its Groove Back

With General Motors in bankruptcy, an army of lawyers will battle over the best way to dispose of the assets of the “old GM.” But an even more important job is keeping the “new GM”—the smaller, healthier company expected to emerge from bankruptcy—in business.

Ditching debt, slashing costs, and streamlining its product lineup will help GM improve its financial prospects. But the stumbling automaker still needs to connect with consumers, overcome the stigma of bankruptcy, and persuade buyers to take a chance on a GM vehicle. Some new research suggests GM can pull that off—if it focuses on the right things.

[See what bankruptcy means for GM customers.]

The market-research firm CNW Marketing Research recently ran a series of focus groups among people in the market for a new car, testing different types of messages a bankrupt GM could send to consumers. The weakest approach was a straightforward explanation of the different types of bankruptcy and how they would affect a car company. Boring. That sort of simulated advertisement left car shoppers feeling a bit more positive toward GM, but not much.

Another approach was to invoke the glories of the past, by showing snippets from an old ad for the 1954 Corvette. Apparently a 55-year-old car—even a Corvette--doesn’t exactly light up buyers; that approach was only a bit more effective than the bankruptcy primer. CNW also tested the current Chevrolet ads in which Howie Long mocks vehicles from competitors like Honda, Toyota, and Dodge, pointing out how Chevys are better. And it showed potential buyers sketches of future GM cars. Both approaches slightly improved consumers’ impressions of GM.

[See 7 American cars worth bailing out.]

What worked best, however, was a combination of messages. The old Corvette ad combined with the Howie Long spots and a hint at future products improved GM’s image the most. That’s not surprising, since it highlighted GM’s strengths in the past, present, and future. Cutting out the Corvette ad, and simply focusing on today’s and tomorrow’s cars, worked nearly as well.

What didn’t work well was any mention of bankruptcy. Mixing the bankruptcy primer with other messages left buyers with a worse impression of GM than if the bankruptcy issue had simply been ignored. CNW researchers concluded that “GM is in the position of having to approach the market with an effort that combines a nod to past glories with a strong comparative message vis a vis Toyota and Honda and a tone or finish that basically says, ‘We know we’re here to stay and just to prove it, how about these concept cars that are on the drawing board?’” In other words, don’t expect to hear the B word in any GM ads this summer.

[See why foreign automakers are more “domestic” than Detroit.]

Oh yeah, there are a few other factors working in GM’s favor, like $50 billion in backing from the U.S. government. And a pledge from President Obama himself that the feds will back the warranties on GM vehicles if the automaker can’t. Last year, before any government aid, 51 percent of buyers in a CNW poll said they would refuse to consider a GM vehicle if the company were in bankruptcy. Today, that’s fallen to 37 percent. Apparently bankruptcy isn’t so bad for business after all.