So with all the kerfuffle around the GM bankruptcy (and the gajillions of dollars we’ll all be shelling out to save its butt from the fire), the one thing that gets forgotten as always is the brand strategy angle: 60-90 days from now, GM will be re-emerging from bankruptcy under a new coporate banner. Now, that could be a simple mechanical switch, but we at Brandvelope started thinking: what if the new boss has something to say about that?

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GM announced yesterday that it would be phasing out the Pontiac brand, after 83 years.

In a busy world of brands, differentiation is generally thought to be a good thing – so goes the title of this blog. But differentiation in the North American auto industry has brought about a sort of cannibalistic competition among brands owned by the same manufacturer. Take Ford’s Mercury brand as an example. In today’s auto market, there must be a very, very small niche of consumers to whom the Mercury brand spells higher quality, greater value, or superior service than Ford. A smaller niche still who would pay a premium for it. Yet, Ford continues to churn out Mercury vehicles and marketing with a “premium” spin. Then, there’s GM. Take the logo off a Chevy or a GMC truck and what else is different? The same goes for Pontiac and Saturn, both brands geared towards a virtually identical target market. Why do these brands survive? Why do manufacturers continue to spend precious marketing dollars promoting tiny brand differences that were created artificially?

As Dale Buss writes in the article “Detroit’s Big Three: Car Brands in a Pile-Up” at brandchannel.com, there are numerous factors in play when considering brands that have such a history with consumers. As Detroit’s executives consider how best to spend taxpayer’s dollars, they are forced with the option of dropping brands from their portfolios. But what would that entail?

Let’s look at the costs. The cost of producing a Mercury vehicle in a Ford plant in minimal. Therefore, the majority of the cost lies in marketing the extra brand. In this particular case, Ford does not spend considerable dollars on Mercury marketing. A few magazine ads is what they have been reduced to. Further, Ford plants currently operate at roughly 95% capacity building Ford and Mercury vehicles. Without Mercury, that efficiency level would drop to 80%.

More important than production efficiency is market share. While Mercury does not command huge market share, they do manage to carve a small niche of consumers that would otherwise not purchase a Ford vehicle. Evidence has shown, through GM’s axing of Oldsmobile, that when market share is sacrificed, it does not necessarily remain within the organization. Oldsmobile market share, after it’s demise, did not translate into GM market share. On top of that, GM was forced to pay $2 billion in settlements with Oldsmobile retailers. Not exactly pocket change for the GM or Ford of 2009.

So, Mercury, Saturn, Pontiac, Saab, and Hummer are safe for now (no, wait, Hummer is for sale). It seems that, although some of these brands may have been differentiated artificially, they are now effectively differentiated in the minds of North Americans. Although a Saturn may be nothing more than a Pontiac with dent-resistant side panels, Saturn also has a share of consumer’s minds, and a share of the market. Together, worth millions of dollars in marketing spend every year. (Even if they are taxpayer dollars…)