(Not So) Green Machines

Adweek_jpegOriginally posted March 17, 2008
By Steve Miller, Adweek

They hoot about their hybrids. They fawn over
flex-fuels. But automakers are still cranking out more gunboats than
ever. What gives?

Green_machines_jpeg
At the 2008 Michigan International Auto Show in Grand Rapids last
month, Doug Scheer stood on a small stage flanked by a couple of
flat screens at the edge of the General Motors booth. Scheer, who
lives in Detroit, is a magician-for-hire, and the b-list auto-show
circuit is bread and butter for him. Scheer’s paycheck for this gig
will be drawn from GM accounts (no small part of why his delivery
is richly woven with lines about the automaker’s commitment to
alternative fuels and its dedication to saving the planet). Plus,
audiences of consumers who’ve been weighing sticker prices all day
long no doubt wish they possessed Scheer’s ability to turn a $1
bill into a twenty.

But there’s one magic trick that Doug Scheer can’t do, and
that’s conjure up an explanation for why, from Dayton, Ohio, to
Davenport, Iowa, he’s paid to talk about planet-saving technology
on a stage surrounded by fat-radialed leviathans that weigh 6,000
lbs. "People wonder how these huge sport-utilities and powerful
sedans are supposed to get great gas mileage," Scheer said.

This is hardly a road less traveled. In the late 1990s, U.S.
automakers kept cranking out SUVs even as gas prices rose and
public opinion began shifting amid environmentalists’ superheated
warnings about an ailing planet. Meanwhile, Toyota bet on hybrids
and was hailed as a visionary. Now it’s a few years down the road
and while automakers — Toyota included — are covering their rear
bumpers with eco-themed pr efforts and a few flex-fuelers, it’s
pretty clear that spotlight never really left the metallic glitter
coats of six-passenger gas guzzlers.

"Car companies are putting out a conflicted message," said Gary
Stibel, who heads up Westport, Conn.-based New England Consulting
Group. "But no more conflicted than the one [from fast-food chains]
that say we’re supposed to eat healthy, but give us a 2,000-calorie
sandwich."

The fast-food analogy is actually a very good one. If SUVs are the
equivalent of the triple-decker sub sandwich, hybrid vehicles would
be the salads — and consumers would have to share part of the
blame for what happens next. Much like you’ll hear Americans preach
about healthy eating but still order their Monster Thickburgers,
you’ll also hear them talk about global warming even as they tool
down the interstate in their Lincoln Navigators.

By continuing to stamp out gargantuan vehicles, are automakers
merely reflecting the solipsism of the market, or should the
industry be taking more of a leadership role and nudge consumers in
a responsible direction? And what if Americans really do end
up embracing environmentally friendly cars en masse? Will that
leave the industry — Detroit especially — behind the 8-ball yet
again, losing what’s left of its market share to smaller, more
agile makers who really can see the future?

They Like ‘Em Big and Round

Visit any auto show today and you’ll see the evidence of all the
recent eco-talk: nearly every automaker has a "clean diesel,"
hydrogen, electric or hybrid product on display. Yet much of what’s
parked on all that industrial polypropylene carpeting might also
make you wonder whether last decade happened at all: Everywhere are
massive, 8-cylinder machines drivers have favored since the 1990s,
when the SUV buried the minivan.

Shockwaves from the SUV earthquake are still rumbling underfoot
now, especially in the sedan line. While the Honda Accord is now a
leading mid-size seller, few recall that it came into this world as
a hatchback. Chevy’s tiny Aveo has, like most Americans, watched
its waistline swell. For its part, Toyota’s RAV4 has grown like an
adolescent. The 4-door sedan has, depending on model, gotten up to
6.3 inches wider and 19 inches longer since its 1996 debut.

To a degree, makers of these ever-girthier machines are only doing
what the free-market bible preaches: following demand. No matter
what people might say about global warming and alternative fuels,
many of them don’t want any of it getting in the way of their nice,
roomy cars. Figures from the Power Information Network, Westlake
Village, Calif., show that consumers are not in a hurry to buy
anything other than a gasoline powered engine. Last year, hybrid
sales represented a mere 2.6 percent of the 16.1 million cars and
trucks sold in the U.S. Diesels accounted for another 2.9 percent
and flex-fuel vehicles, which can run on either gasoline or an
ethanol blend, accounted for 6 percent. Meanwhile, gasoline-powered
vehicles represented 88.5 percent of sales.

And truck sales? Driven by a collapsing home-builder market, pickup
sales were off dramatically, but trucks overall represented 53
percent of all vehicle sales, per Autodata. That’s a drop from 54.9
percent in 2005, but still up from 50.9% in 2001.

At the same time, consumers are warming — if only about as
fast as the planet itself — to the idea of more environmentally
responsible wheels. Overall, sales of large vehicles have dropped
incrementally in the past two years. Edmunds.com reported in
February that demand for V8 engines had slipped from the 19 percent
share of car-shoppers two years ago to 15 percent today. According
to Autodata, while consumers still purchased six times as many
pickup trucks as subcompacts last year, sales of those dinky wheels
were up 20 percent. And when it comes to hybrid vehicles, J.D.
Power and Associates projects they’ll account for 6 percent of
overall market share by 2012 — about 1 million units.

Mixed Messages

These numbers are hardly the stuff likely to prompt automakers to
think small. As Jim Farley, group vp of marketing at Ford, told
analysts during a February meeting, "There are a lot of SUV
customers out there." Farley vowed that Ford would keep pushing its
larger vehicles.

At the same time, interest in eco-friendly autos clearly is there,
and it’s growing, and that is what appears to be driving a
certain degree of bipolar behavior from Detroit. It looks like
this: Make one kind of car, but hedge your bet by talking about
another.

Even at a time when the Lincoln Navigator’s boasting a second-row
console and a "cavernous interior" (their words exactly),
automakers’ spending on ads for hybrid vehicles rose a hefty 41
percent through November, per Nielsen Monitor-Plus, to a total of
$215.6 million.

Ask Mark LaNeve, GM’s vp of vehicle sales, service and marketing in
North America, if it’s more important to go big or go green, and he
won’t mince words: "Green," he says, "for the next five, 10, 20
years."

In terms of marketing, at least, LaNeve’s not kidding. GM spent
$39.7 million on ads for its hybrids last year through November,
including the Saturn Vue Green line SUV, and the Chevy Malibu
hybrid. GM also is spending millions on its "gas-friendly to
gas-free" campaign, via Campbell-Ewald, Warren, Mich. Still, the GM
roster is overwhelmingly packed with fuel-sucking monsters, from
GMC’s Yukon (which gets 13 mpg) to Cadillac’s Escalade (which does
slightly better, at 14).

LaNeve’s dilemma is one that also belongs to the whole industry.
Choosing between huge vehicles or green ones might not be as bad as
a Hobson’s choice, but it’s not much better than one, either. Much
of a green advocate as LaNeve might be, he knows why the market’s
where it’s at right now. "The one thing these smaller vehicles
can’t do is tow heavy loads," he said, adding that drivers "like to
sit up high. They like the flexibility."

Perhaps no one has been as blunt about the big vs. green quandary
as Troy Clark, president of General Motors North America. Speaking
at the Chicago Auto Show last month, Clark recalled attending a
focus group in Los Angeles, sitting behind the mirror as consumers
were quizzed over their desires for a so-called "green"
vehicle.

"When questioned if they would like to have a ‘green’ vehicle,
these L.A. folks responded, ‘Of course, yes,’" Clark related. "And,
what type of vehicle would that be? They went on to describe the
equivalent of a Chevy Tahoe that gets 45 miles per gallon."

Which means, if auto brands are making a big mistake with their
current strategy, it might be one they can’t help making. It’s hard
to fault an industry for hypocrisy when it’s following the whims of
hypocritical customers, many of whom seem pleasantly untroubled by
the fact they want what’s technologically impossible.

Take, for example, this Web posting from one driver: "I celebrated
last Earth Day by buying a new Volvo XC90 V8, but when is Detroit
(and the others) going to give us the rechargeable electric and
hybrid vehicles that we really want?"

Perhaps when it figures out how to divide by zero and turn lead
into gold. The driver continued: "I want an SUV that I can charge
in my garage and drive 500 miles a day." No doubt, top men are
working on it.

P Is for Pickle

The big problem is that while it might be easy to understand —
maybe even sympathize with — the automakers’ dilemma, car brands
could already be paying a high price for their strategy of playing
both sides.

For example, shortly after moving into Ford’s corner office in
2000, then-CEO Bill Ford made headlines when he pledged to boost
his company’s SUV mileage by 25 percent in five years — a strategy
that swerved off the road in 2003 when the company reneged. (That
made for even bigger headlines.) The Sierra Club fumed to
the New York Times  that the automaker was "telling the
American people that we can’t trust Ford’s commitments . . . Bill
Ford’s claims to being an environmentalist ring hollow."

Meanwhile, the lesson to other nameplates is clear enough: car
companies that send out a green message but fail to back it up with
real metal and rubber do a swell job of looking disingenuous.
Worse, the resulting credibility problem might prompt consumers to
wonder if other claims being made about the cars — such as those
about safety on the road — are equally bogus.

But let’s say a company didgo full-throttle with green —
both the product and the marketing — it faces another problem that
goes well beyond the risk of looking disingenuous. "Green makes it
tougher for a marketer to deliver the performance message," said
Steve Price, former president and CEO of Publicis, Mid America,
Dallas. "The perception of being environmentally friendly
sacrifices performance — and that’s the world automakers
are playing in."

Witness the "Power of H," which is how Lexus presented its hybrid
SUV in a campaign that broke in February. While the tag connotes
power — a key component to an SUV driver — the ‘h’ portrays a
vehicle with an electric component. In ads, the letter ‘h’ is
removed from modern society, showing what will happen in a world
without it. The campaign attempts to show that ‘h’ — as in hybrid
— has power. Confusing? Just a bit. Until technology catches up
with marketing, the idea of "hybrid = power" (especially compared
to modern gas engines) is almost, by definition, ludicrous.

Ilana Bryant, chief strategic officer at StrawberryFrog, New York
(the agency that Mitsubishi Motors Europe hired to make its Grandis
minivan cool enough for men to actually buy), said the key for
automakers is to create an added-and believable — value to the
environmental product.

"All brands are finding themselves in this area, because there are
few products out there that are just green," she said. "The answer
is not to be neutral about it. You can’t have a foot in both camps.
Those who have been successful with green messaging have taken a
stance and made people understand it. People gravitated to the
Prius because it set out a set of values. It’s an aspirational
area. The companies not leveraging that area are those who say,
‘Let’s just put the message on a background of trees.’"

Green Highway

Observers say that, short of government intervention, even higher
gas prices aren’t likely to get Americans out of their trucks and
full-sized SUVs anytime soon. That also means that car
manufacturers are just as likely to continue with some form of the
current dual strategy — paying some degree of attention to green,
but only as much as feels safe.
Is that shortsighted? Maybe.

Already, there’s evidence — both regulatory and societal– that
fuel-efficient cars are moving away from a fringe offering to an
asphalt standard. In December, lawmakers hammered out a deal on a
piece of energy legislation, later signed by the President, that
will mandate a 40 percent increase in fleetwide fuel economy by
2020 — setting a standard of 35 mpg.

Plenty of boomers and echo-boomers out on the road today flinch
over mandates like this. But remember that core car buyers of the
near future grew up riding around in Honda Accords, not Chevy
Chevelles.

"The Gen Y crowd is now getting into new car purchases and that
green message will resonate," said Tom Peyton, senior manager of
national advertising at Honda. "They will look for cars that are
also more affordable. In the next few years you are going to see
more affordable green cars. And green messages will be a
tenet."

In terms of high-mpg messaging (the "Environmentology" campaign,
though now discontinued, was a good example), Honda’s been a
leader, and has left many nameplates with a lot of road to make
up.

Yet for other brands — even those who’ve yet to get a set of green
wheels rolling off the line — there’s an opportunity in marketing
their enviro-sensitive side. That may be the way to go for those
brands that may lack the resources and technology to play in the
expensive green field, some say.

"Some brands are giving people a look at their operations as part
of their green effort," noted Wes Brown, an analyst at Iceology, a
marketing consultancy in Los Angeles. "Subaru had ads where it
talked about some of the environmental practices in place at its
Indiana plant. That was effective for this brand, which doesn’t yet
have a hybrid, a diesel or a flex-fuel vehicle in its fleet."

Now, all Subaru needs is magician Doug Scheer to pull a hybrid out
of a hat.

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