Jun 5, 2009

Bankruptcy Talk Clobbers GM, Chrysler

Several industry experts predicted that bankruptcy or even the talk of bankruptcy would create havoc for those companies caught up in the maelstrom. According to a recent study by BIGresearch, bankruptcy rumors on top of overall bad economic news nationwide are proving to be a double whammy for General Motors and Chrysler brands. Results from the firm’s Consumer Intentions and Actions (CIA) Survey of over 8,600 consumers show that Chevrolet, Dodge and soon-to-be-cancelled Pontiac all took a hit in consumer equity share among consumers planning to buy a new vehicle, which does not suggest a quick recovery.

Consumer Equity Share is a measure of how well individual brands are doing in terms of consumer preference.  It is calculated by subtracting the average percentage of those considering a brand as first choice or second choice from the current percentage of ownership of the same brand. Brands that do poorly in this measure are likely to lose market share.

As a brand, GM’s Chevrolet has been hit the hardest in this metric. The brand lost over five and a half points in consumer equity share over last year. Chrysler’s Dodge, which was in positive territory in 2008, dropped into the negative. And given the reports of Pontiac’s demise, it’s no surprise that its equity share was down as well.

On the other hand, the one American-based car manufacturer that didn’t accept bailout money, Ford, showed a positive consumer equity share in the survey and edged out the competition for the top spot among consumers considering a new vehicle in the next six months. Brands like Nissan, Honda and even General Motors’ GMC brand, all showed positive consumer equity shares as well.

“The uncertain futures for Chrysler and GM appear to have affected those consumers planning to buy a new car with consideration down for these automakers' nameplates,” said Pam Goodfellow, senior analyst, BIGresearch. “Ford, however, has accepted no government money, didn’t go bankrupt and seems to be a more solid choice for consumers as their consumer equity share has increased year over year.”