Bailout = Brand Disaster

With a handful of ailing financial ratios and bottom lines in the red, there’s no doubt the CEO’s at Ford, GM, and Chrysler are in tunnel vision for survival.  Ironically, their struggle with Washington to make ends meet will be the very thing that secures their extinction.

According to a recent poll by CNN, 61% of Americans oppose the bailout, and other polls indicate that Americans are ticked in general about the recent handouts from Washington. On top of a brand image of poor quality and irrelevant vehicles (Hummer + Green Movement = Bad), the brand managers at the Big 3 will now have to deal with resentment towards their brand over the bailout.

And it makes sense doesn’t it? After the highly contested $700 billion bailout earlier this year, my hunch is that tax-payers are now taking it personally. A bailout with tax payer dollars will be the nail in the coffin from a brand positioning perspective. Consider the Catch-22:

Option 1: Washington Bails Out Big 3. Detroit is saved from bankruptcy and survives the recession. Resentment towards American-branded cars increases as tax payer dollars are used to support deficient business. Ford, GM, and Chrysler can’t sell any cars. —Big 3 go Bankrupt.

Option 2: Washington Does NOT Bail Out Big 3. Ford, GM, and Chrysler can’t sell any cars. —Big 3 go Bankrupt.

The question is, Do we want the American auto industry as we know it to die slowly, with 25 billion in public funds wasted, or die now? I think the polls show how most of us would answer this question. Perhaps if the CEOs in Detroit could look past the Balance Sheet and see what’s happened to the American car in the eyes of their market, they wouldn’t waste our time or our money.

Of course, we haven’t talked about what should happen post-bankruptcy, which is another issue in itself. My inclination is that Detroit would be better positioned for a come-back if they didn’t have the brand resentment of a bailout on their plate.

Thoughts or advice for the Big 3?