GM’s New Oldsmobile? ACDelco, a Brand in Jeopardy

The goal of any brand manager would be to make a product marketed under a particular brand most readily accepted by the public for its perceived quality and consistency. Some of these most recognizable brands are, Nike, Coka-Cola, Sony, Microsoft, or Apple. I once read that, “Brand Management is defined as the application of marketing techniques to a specific product, product line, or brand. It seeks to increase the product’s perceived value to the customer and thereby increase brand equity.”

So what’s happened to the ACDelco Brand? In the eighties and nineties ACDelco was a preeminent brand and organization serving as the automotive parts marketing arm for General Motors with a stated objective of building its Brand Identity, thus increasing the perceived quality and value of its products. What remains of ACDelco is not the result of a successful “Branding” effort. In fact the ACDelco Brand appears to be in jeopardy. Recently while doing research for a friend and client I stumbled onto some interesting information that may suggest trouble for ACDelco. Let’s lift the hood on ACDelco to study the brands evolution.

Brief History of the ACDelco Evolution

1901: Two brothers, Frank and Perry Remy, form the Remy Electric Co., and begin building dynamos and magnetos.

1908: Albert Champion joins forces with Buick Motor Co. and makes spark plugs in the AC Spark Plug Division. The AC of ACDelco is born.

1916: United Motors Corp. (UMC) forms United Motor Services Inc. (UMS) to sell and service parts.

1926: Ten years later Remy Electric merges with Dayton Engineering Labs Co. (Delco) and forms the Delco Remy Corp.

1971: United Motor Services changes its name to United Delco Division.

1974: The consolidation of AC Spark Plug Sales Division and United Delco Division creates the AC-Delco Division.

1995: ACDelco creates a new logo to focus the consumer attention on one unified Brand Image for its many product lines.

2002: ACDelco DDG (Dedicated Distribution Group) reduces national distributor base from 2,500 to less than 100.

Most of these organizational changes were non-controversial and from a corporate view, necessary. Two organizations AC Spark Plug and United Delco developed and grew separately until a consolidation in 1974 as AC-Delco. They became ACDelco (no hyphen) in 1995. Prior to this all of the various ACDelco products were packaged and marketed as separate brands. AC Spark Plugs, Delco Remy Ignition, NDH Bearings, Delco Shocks, Delco Batteries, Packard Wire, etc. The intention of the renaming to ACDelco was to focus the retail and trade customer’s attention on one single ACDelco Brand. ACDelco began doing its best to improve on their new brands recognition throughout this period marketing their products through a distribution chain which at one point exceeded 4,000 automotive distributors and mass-marketer customers.

A Channel Conflict is a Channel Conflict is . . . A channel conflict exists when there are two similar products competing for the same customer. General Motors has had a long history of this behavior and would seem to have all sorts of channel conflicts what with Chevrolet, Pontiac and Buick all selling virtually the same car under a different name. Like the 107.5’ wheelbase: 1988-1996 Buick Regal, 1988-1997 Oldsmobile Cutlass Supreme, 1988-1996 Pontiac Grand Prix, 1990-2001 Chevrolet Lumina, 1995-1999 Chevrolet Monte Carlo were all made on the same platform. The 109’ wheelbase: 1997-2005 Buick Century, 1997-2004 Buick Regal, 2000-2005 Chevrolet Monte Carlo, 1998-2002 Oldsmobile Intrigue all the same. The 110.5’ wheelbase: 2000-2005 Chevrolet Impala and 1997-2000, Pontiac Grand Prix, again, the same. Finally the passenger truck and SUV lines of GMC duplicated Chevrolet all be it with different names. Supposedly these nameplates have produced Brand Loyalty each with their own separate customer base and the consumer is none the wiser. GM had a different sort of channel conflict with ACDelco and its sister company, GM Parts, selling the same customer, the GM Car Dealer. GM knew it could realize a higher profit selling the GM Car Dealer direct than they could through the “middleman” ACDelco Distributor. To eliminate this GM would create a plan for ACDelco’s future with the Dedicated Distribution Group (DDG).

ACDelco launched the Dedicated Distribution Group (DDG) in 2002. The goal was to increase corporate profit by turning the GM Car Dealer business over to GM Parts and let ACDelco concentrate on the automotive aftermarket customer, service stations and independent garages. GM Parts would form programs to capture most or all of the GM Car Dealer sales while ACDelco would become more profitable with its plan to increase sales while reducing its distributor base. (By estimate ACDelco went from roughly 4,000 distributors in 1995 to 2,500 in 2002 before DDG. The number after DDG was 97) The Corporation assumed that if there were fewer distributors then those remaining would be more loyal and would want to stock and sell the entire breath of the ACDelco product line due to territorial exclusivity. They also assumed that the individual DDG’s, with virtually no competition due to exclusive sales areas, would become more profitable and add branch warehouses throughout their distribution areas. At DDG’s inception ACDelco’s distributor base consisted of car dealer specialists and aftermarket specialists although many were a combination of the two most were heavily weighted as car dealer specialists. Roughly eighty percent of ACDelco DDG Distributor sales went to GM Car Dealers. With GM’s corporate goal to sell the GM car dealer through GM Parts these aftermarket distributors would now have to make their living without the car dealer as a customer. One also wonders that with a distributor base of 97 DDG’s nationwide would one of those aftermarket customers, a service station or independent garages, necessarily be able to buy an ACDelco part if they needed one and most importantly, when it was needed?

Autos become increasingly complex. With the advent of more sophisticated emission controls, fuel and ignitions systems, the traditional service station, or garage was less able to stay abreast of the increasing vehicle complexity. Computer diagnostics became the norm and simple service stations and garages could no longer keep up with the technology. This forced many car owners to return to the car dealer for reliable service. Due to new car sales incentives there was also a marked decrease in vehicle age. New vehicles need fewer repairs than older vehicles. Finally improving vehicle quality kept vehicles from the need for repair and extended warranties again sent vehicle owners back to their car dealer for service. So to begin with the ACDelco DDG was left to deal with a declining customer base.

ACDelco’s mass marketer customer base was also trimmed. This happened in different ways. ACDelco eliminated the mass-marketer contract and went to one uniform contract for what was left of its customer base. Secondly ACDelco reduced the number of product lines offered to mass-marketers from the thirty or so lines sold to traditional warehouse distributor customers to six product lines. Mass marketers also lost what was referred to as a “meet comp” program where ACDelco priced their products at the levels competitive to other mass-marketer suppliers. ACDelco claimed that they were not realizing any profit on sales to its mass-market customers. The result of all of this was that ACDelco lost much of its mass-marketer business. They also lost their visibility to the average consumer who no longer would see ACDelco Products at their favorite retailer.

ACDelco’s approach to advertising also changed. With the sales focus on the automotive installer, not the consumer, ACDelco dropped its consumer oriented advertising and focused on trade advertising. Without visible consumer advertising the public no longer would hear or be reminded of ACDelco’s existence. Out of site is out of mind, so it goes with brand names.

Promises, Promises. When pitching the DDG, one of ACDelco’s requirements was that in return for controlled trading areas, each DDG would be responsible for establishing branch locations. These new branch locations would theoretically offset ACDelco's loss of some 2,400 distributors. When DDG became effective, written into each individual DDG marketing plan was a schedule for adding the branches throughout the DDG’s primary areas of responsibility. The one problem was cash! Where would these Auto Parts Warehouses come up with the money for the rapid expansion that was required of them? It had been promised to them, although not in writing, by the ACDelco representatives who had been responsible for selling the DDG. It was said that GM would make sub-prime money available to finance branch expansions. There must have been a reason why GM didn't write this into the DDG contract because it was never made available. Many DDG's would try to adhere to the DDG contracts by adding the required branches would soon find themselves with liquidity issues requiring them to raise prices which made them less competitive. These were exceptions. The majority of DDG's never bothered to add any branches. In short, no money, no branches!

So much for history here’s what started me on this rant: I was doing research for a client, looking for keyword phrases around which I would design their website. To do this I use tracking software to find the most popular search terms. I’ll enter a word or a phrase, the software scans the internet and returns information on the number of daily global internet searches and the number of web sites that use that particular word or phrase. It’s not necessarily scientific since I pick which phrases to scan. You may be able to think of several other phrases I could have added. I only entered thirty but I was dumbfounded by the results. The once lofty brand name of ACDelco was right there at number twenty-eight just below “kia parts”.

		Daily
Rank	Phrase	World
		Searches
1	auto parts	10,566
2	car parts	7,355
3	ford parts	2,351
4	honda parts	1,982
5	auto accessories	1,629
6	truck parts	1,175
7	toyota parts	986
8	mercedes parts	975
9	nissan parts	959
10	gm parts	724
11	mopar	654
12	automotive tools	564
13	discount auto parts	517
14	chevy parts	480
15	remy	464
16	ngk	403
17	dayco	340
18	denso	336
19	delco	257
20	federal mogul	246
21	timken	239
22	champion spark plug	184
23	valvoline	158
24	raybestos	152
25	walker exhaust	108
26	sealed power	91
27	kia parts	91
28	acdelco	84
29	motorcraft	53
30	renault parts	42

Going out of business? As you can see it’s easy. Just get rid of all but a few of your direct customers, deprive them of their (GM Dealer) customers and you’re off and running. Go on and remove your products from the shelves of mass marketers where the public can see you still exist. Furthermore scrap your consumer-advertising program at a time when it’s needed most to keep the ACDelco name visible and deny expansion money necessary to what’s left of your distribution base and there you have it. You’ve destroyed a brand and wrecked a perfectly good company. GM couldn’t have done a better job if it tried. Or did it? Was this all intentional or did someone at GM actually expect this “DDG Plan” to work? Well, GM did successfully transition almost all of its Car Dealer business to GM Parts thus dramatically increasing its revenue, so what if ACDelco could no longer turn a profit. After all ACDelco wouldn’t be the first of GM’s Brands to become extinct now would it?



Steve Leyndyke
dexter deZigns – Brand Management and Strategy

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