Brand corrosion: mass-marketings threatto luxury automobile brands after

merger and acquisitionPavel Strach

University of Economics, Prague, Czech Republic, and

Andre M. EverettUniversity of Otago, Dunedin, New Zealand

AbstractPurpose The purpose of this research is to explore the practical implications of brand management decisions, particularly those involving thecombination of luxury and mass-market brands within the same organization through merger or acquisition. The aim of the paper is to expand brandtheory by linking it to administrative heritage in the context of the increasingly integrated global automobile industry.Design/methodology/approach Integrated case studies of Jaguar, Mercedes-Benz, and Saab illustrate the effects of brand extension and dilutionthrough the lenses of brand development, luxury brands, and administrative heritage theories. The recent history of acquisitions and mergers involvingluxury automobile brands provides background to the in-depth examination of these three specific instances. Conclusions are reached by comparingand contrasting the experiences of these firms relative to their mass-market siblings.Findings The blending of luxury and mass-market automobile brands in one corporate portfolio engages advantages of scale and scope economies,but induces potentially fatal brand corrosion. Consumer perceptions of luxury brands are influenced by the degree of commonality with the associatedmass-market brands, independent of whether the luxury brand or the mass-market brand is the dominant corporate vehicle.Originality/value The paper provides insights useful to practitioners as well as academic researchers. The novel juxtapositioning of the concepts ofluxury brands, administrative heritage, and global strategic management through mergers/acquisitions demonstrates the unintended consequences ofcomplex interactions in a dynamic industry. The paper concludes with suggestions for further research.

Keywords Brands, Acquisitions and mergers, Brand extensions, Globalization, Automobile industry

Paper type Research paper

An executive summary for managers and executive

readers can be found at the end of this article.

Introduction

Recent empirical research indicates that mergers and

acquisitions can induce innovation (Prabhu et al., 2005),which leads to higher firm and brand value (Pauwels et al.,

2004). This contrasts with the results of acquisition processes

in the automotive luxury segment, where new up-market

models based on their mass-market sister products have failed

to boost the premium brands market value. Attempts to

create mass-luxury are an inherent consequence of the

strategic direction implemented by major multinational car

manufacturers with respect to their premium-brand

acquisitions. The strategies resulting from such mergers or

acquisitions can inadvertently lead to brand corrosion

evaporation of distinctive features, attempts to appeal to new

customer segments while not building on brand heritage, and

boosting production figures through less expensive models or

reduced attention to quality. Such strategies, emphasizing costsavings and operational efficiencies rather than market-relatedperformance, are the result of insufficient customer

orientation during integration (Homburg and Bucerius,2005).Nearly all new car models constitute brand extensions,

capitalizing on current consumer perceptions and positioningthe new model within the brand family. In some cases,established model names have been continued for essentiallynew products (e.g. the Toyota Corolla, Volkswagen Golf, and

Ford Mustang have been marketed for more than twodecades, with substantial changes). Step-down vertical brandextension (Kim and Lavack, 1996) can partly explain the

resulting brand corrosion. Brand dilution, caused by over-extension of models and production quantities, has beenobserved in more prestige brands, including automobiles(Chen and Chen, 2000; Kirmani et al., 1999), although thissame effect was not confirmed in the case of master brands(Leong, 1997). The negative impact of extensions on branddilution has been researched through focus groups and

market experiments in fast-moving consumer goods (FMCG)(e.g. Martnez and Pina, 2003; Glynn and Brodie, 1998; Johnet al., 1998; Loken and John, 1993).Generation of a new theoretical perspective, rather than

confirmation and verification, indicates that a qualitativeparadigm should be employed (Deshpande, 1983). Theexamination presented here is based on case studies, an

established research methodology (Whitley, 1932) recognizedin mainstream academic literature in domains such as

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1061-0421.htm

Journal of Product & Brand Management

15/2 (2006) 106120

q Emerald Group Publishing Limited [ISSN 1061-0421]

[DOI 10.1108/10610420610658947]

106

sociology (Kiser, 1997), law, economics, and history. Case

studies are used for in-depth contextual analysis of events or

conditions which, although significant, occur only in smallnumbers (Cooper and Emory, 1995), or concern marketing

cognition and symbolism (Deshpande and Webster, 1989).

Yin (2003) suggests picking cases with diverse initialconditions (literal replication), which are represented here

by different ownership, company size, and country of origin.

Eisenhardt (1989, 1991) proposes that cases should bepresented until theoretical saturation is reached.This paper integrates three otherwise separately presented

fields brand development, luxury brands theory, and

administrative heritage of large transnational companies. The

latter term builds on Bartlett and Ghoshals (2000) suggestionthat multinational corporations (MNCs) are captives of their

past and therefore their administrative heritage cansignificantly inhibit their attempts to change. Three

premium brands Jaguar, Mercedes-Benz, and Saab are

utilized as examples, examining relevant aspects of theircorporate and brand histories preceding and following

mergers with and/or acquisitions by mass-market

corporations. While Jaguar and Saab were acquired by thetwo largest US auto makers, the parent of Mercedes-Benz

reversed this situation by taking over the third of the US Big

Three. All three situations represent a clash betweenAmerican and European perceptions of brand management,

with divergent outcomes. The nature of premium brands isnot based purely on their boutique status (e.g. Jaguar and

Saab), as demonstrated by the annual million-vehicle sales of

Mercedes-Benz, supporting the optimistic sales growthexpectations of the two US parents. However, the

distinctiveness of exclusivity is a material component of

brand perceptions, as confirmed in a recent study of car brandcommunities (Algesheimer et al., 2005).Substantial acquisition, and even some divestment, of

established automotive luxury brands became a central part of

the strategic game among the dominant car manufacturers

beginning in the mid-1980s, featuring ownership transitionsof premium marques such as Rolls Royce, Bentley, Ferrari,

Maserati, Lamborghini, Bugatti, and Lotus, as well as

somewhat less exclusive makes such as Jaguar, AstonMartin, Volvo, Alfa Romeo, and Saab. Brand management

at Detroits Big Three (General Motors, Ford, and Chrysler)became a focus of interest in the early 1990s (Lienert, 1998).

Recognition arose that automobile brands were less developed

than brands in other sectors such as FMCG (Goodyear,1996).This paper is organized as follows. First, the history of

luxury automobiles is briefly introduced, indicating why theydiffer and what is occurring in the premium brand market.

Next, the brand development model introduced by Goodyearis overviewed. Subsequent sections are devoted to in-depth

analyses of three case brands (in alphabetical order): Jaguar,

Mercedes-Benz, and Saab. The paper concludes with adiscussion of lessons that may be learned from these three

stories, providing links to both theory and practice.

Literature review

Luxury items are typically expensive (both in relative and

absolute terms), somewhat trivial, and without any clearfunctional advantage over their counterparts (Dubois and

Duquesne, 1993). They feature a unique set of

characteristics, including consistently premium quality,

craftsmanship, recognizability, exclusivity, reputation,distinctive variation, timing, and a clear reflection of

personality, values, and heritage, as well as association witha country of origin that has an especially strong reputation as

a source of excellence in the relevant product category(Nueno and Quelch, 1998, pp. 62-63). Five dimensions

differentiating luxury brands were empirically derived byVigneron and Johnson (2004), resulting in factors they

labeled conspicuous, unique, quality, extended self, andhedonic. Important features of luxury products include

superb quality, aesthetic design, and excellent service(Dubois and Duquesne, 1993). Additionally, luxury brands

must be perceived as luxurious, because they act not only asstandards of excellence but also as social codes. Luxury

brands typically combine an international reputation,

elements of fantasy and desire, and limited distribution,imbuing them with rarity and desirability (Kapferer, 2001).Not all luxury goods possess the same degree of

distinctiveness and exclusivity. For instance, a Cadillac and

a Rolls-Royce may be both perceived as luxury cars, but onecompared with the other would be considered more

luxurious (Vigneron and Johnson, 2004, p. 485). Followingdemographic and economic trends including smaller family

sizes in developed nations and increasing consumerpurchasing power in developing countries, luxury markets

have expanded over the previous decade (Fiske andSilverstein, 2004). Higher accessibility and wider circulation

of luxury goods led some professionals to distinguish betweensupraluxury and mass luxe (Jordan Keane and McMillan,

2004) or to talk about the mass marketing of luxury(Nueno and Quelch, 1998). This study examines the set of

automobile brands with a low ratio of function to price,regarded as status symbols while simultaneously being

manufactured by the thousands on traditional assemblylines. The terms luxury and premium are utilized

interchangeably here to reflect the nature of these brands,located below the supraluxury market.The notion of a luxury car varies widely in the literature.

For example, Rosecky and King (1996) cite five different

definitions and limit their study to owners of Mercedes,BMW, Jaguar, Cadillac, Lincoln, Lexus, Infinity, and Acura

brands. Is a $50,000 Ford a luxury? What about a $20,000BMW? It is probable that no strict financial criterion can be

applied. Luxury car drivers are usually status seekers, older orretired males, highly educated, and high income people

(Choo and Mokhtarian, 2004). Although only 20 percent ofthe sales of luxury products are mens products, most luxury

goods are purchased by men (Nueno and Quelch, 1998).Older consumers search for less information before they

realize a purchase (Srinivasan and Ratchford, 1991) andconsider fewer brands (Lambert-Pandraud et al., 2005),making them more susceptible to traditional brand-heritageconsiderations (Ewing et al., 1995); in turn, this makes theirpurchase decisions more vulnerable to strategic brandrepositioning.

Overview of the luxury car market

The combined market share for all premium brands in theworlds largest car market (the USA) has increased steadily

since 1986. Up to 1996, total sales accounted for 5 to 7percent, but unit sales grew by 17 percent annually between

1997 and 2002 (Mintel, 2003), lifting luxury brands market

Brand corrosion

Pavel Strach and Andre M. Everett

Journal of Product & Brand Management

Volume 15 Number 2 2006 106120

107

share to 10.2 percent in the first half of 2003 (Wards AutoWorld, 2003). By 2009 the North American luxury carsegment is expected to rise a further 69 percent to 1.26

million vehicles annually (Henderson, 2005). Several newly-created luxury brands (including Lexus, Acura, and Infiniti)

were originally developed for and marketed only in the USA,taking advantage of market characteristics attributed to both

cultural adolescence and a generally shorter memory amongAmerican consumers (Simister, 2004a).This examination of the recent dramatic changes of

ownership of luxury automobile brands focuses on the pasttwo decades; some brief highlights follow. Toyota made its

first move into the premium segment by purchasing Lotus in1984. This brand was sold to GM in 1988, once Toyota had

absorbed Lotus multivalve engine technology and adapted itfor mass production. GM subsequently shunted the brand

into near-bankruptcy before taking its hands off in 1996,happily leaving the company to be acquired by Proton of

Malaysia (which is now using Toyota engines in some Lotusmodels). From 1988 to 1993, GM-owned Bugatti

experienced a similar troublesome story. Bugatti became apart of the Volkswagen (VW) Group, together withLamborghini, in 1998. Lamborghini was originally

purchased by Chrysler (1987), but sold off to Indonesianinvestors in 1994. Fiat began its luxury acquisitions in 1969

with a 50 percent stake in Ferrari, purchased from its founderEnzo Ferrari; buying an additional 40 percent in 1988 gave it

nearly complete control. Fiat gained further experience withthe sporty brand Alfa Romeo, obtained in 1986, before

purchasing Maserati in 1993.Ford has accumulated specialty brands consistently since

1987, when it purchased Aston Martin. More recentacquisitions by the Premier Automotive Group (a division

of Ford) include Land Rover (2000), Volvo (1999), andJaguar (1989). Since 1998, the Volkswagen group has ownedBugatti, Bentley, and Lamborghini. In 2000, BMW withdrew

from its six-year marriage with MG-Rover, retaining the rightto produce an upwardly re-priced Mini. BMW added Rolls

Royce to its portfolio in 2003 (from 1998 to 2003, this brandwas managed by Volkswagen). Such acquisitions and their

management have been far from trouble-free, since theirinception (Feast, 1998).The inherent aim of luxury acquisitions creating mass

demand for niche products by capitalizing on large-scale

production efficiencies is intrinsically illogical for luxurybrands, although it appeals economically. For example, losing

a niche orientation by sharing platforms and engines withhumdrum sister marques at Ford and GM has led somecustomers to express concerns that new models are not real

Saabs or Jaguars (Stones, 2004). A parallel situation hasoccurred at DaimlerChrysler, where some Mercedes-Benz

models have been perceived as too similar to Chryslers orMitsubishis due to shared features and components.An emerging relationship between country of (group) origin

and treatment of premium brands can be identified in Table I.

Over the past 20 years US automotive multinationals havepreferred to acquire established premium brands rather than

developing their own. However, they force their luxurydivisions to share platforms with the mainstream divisions.

This is consistent with the findings of Bartlett and Ghoshal(2000), who describe US-based MNCs as coordinatedfederations, where formal control procedures over

subsidiaries are in place. A major bottleneck affecting this

type of organization is hypothesized to be a parochial and

even superior attitude towards international operations,perhaps because of the assumption that new ideas and

developments all came from the parent (Bartlett andGhoshal, 2000, p. 509).European MNCs typically configure themselves as

decentralized federations, with national subsidiaries loosely

controlled and primarily focused on their local markets. Theyalso display distinctively national characteristics. In the case of

German-American DaimlerChrysler and German BMW, theparent company is the birthplace of the groups luxurybrands, fostering a perception of credibility and engineering

quality. The German VW Group supports individualdevelopment of Bentley, Bugatti, and Lamborghini models,

but the engines and platforms of its Audi models are sharedwith its other core brands, Volkswagen, Seat, and Skoda.

Neither of the two remaining French manufacturers, PSA(Peugeot and Citroen) and Renault, offers its own luxury

brand, which is noteworthy considering that Moet Hennessy,Louis Vuitton, Coco Chanel, Christian Dior, and many other

distinctive luxury marques originate in France. Fiatsapproach can be seen as a continuation of Italys famoussports car tradition, where Ferrari and Maserati share hardly

anything with their cheaper siblings; Italy does not producenon-sporty luxury vehicles. In this context, Yamawaki (2002)

differentiates the pricing strategies of European car makersbased on their country of origin.MNCs of Japanese origin tend to exhibit the organizational

structure termed centralized hub (Bartlett and Ghoshal,

2000). Centrally controlled units produce global products,aiming at efficiency and quality, with a strong emphasis on

engineering design (through quality function deployment andsimilar approaches) at their headquarters. Although Japanese

cars of the 1970s were patterned after American limousines,their manufacturers did not introduce upscale versions,developed internally, until 1986 (Acura) and 1989 (Infiniti

and Lexus). All three brands maintain a sharp distinctionfrom their parent companies in the North American market,

although Lexus is still sold in Japan under the Toyota badge,while Infiniti and Acura are marketed as models within the

Nissan and Honda range elsewhere.Since the initial announcement of the merger, the situation at

DaimlerChrysler has been reported as a classic example of apotentially successful merger in terms of minuscule internal

cannibalism threats, although as a flipside of this argument itwas deemed barely economically viable due to minimal overlap

in models and markets. DaimlerChrysler was established on thebelief that purchasing power would reduce overall operationalcosts. However, the two companies were producing vastly

different products Daimler focused on the upper end of theinternational market while Chrysler produced vehicles targeted

at the middle of the US market. Although the expensive partsof Daimlers vehicles could be used for more affordable

Chrysler cars and the cheaper Chrysler parts be used onDaimler vehicles; both these moves were likely to reduce the

competitive advantage on each of the markets in which theoriginal companies operated. Chrysler cars could have become

less affordable while Daimlers brand might have lost itsreputation for quality (Rugman and Collinson, 2004, p. 478).Car brands currently represent almost 10 percent of the

worlds most valued and respected global brands (see TableII). Toyota is presently the most valuable car brand; in 2004 it

passed Mercedes, which held the top spot among car brands

Brand corrosion

Pavel Strach and Andre M. Everett

Journal of Product & Brand Management

Volume 15 Number 2 2006 106120

108

for the two preceding years. Prior to that, Ford was far and

away the leader, peaking at the worlds seventh most valuable

brand in 2000. Volkswagen also faced a sharp brand value

decrease, although its luxury Audi brand more than offset the

loss while entering the chart in 2004 and increasing in value in

2005. Among luxury car brands, only four (all German)

ranked among the top 100 most valued global marques of

2005. Mercedes-Benz maintained its absolute value while

BMW added substantially to its brand value. The German

origin of the most valued global luxury car brands supports

the importance of administrative heritage and demonstrates

country of origin effect. Toyotas and Nissans gains may be

connected to the rising reputation of their luxury divisions,

which badge cars under the main brand, whereas Fords

Premier Automotive Group vehicles are sold under their own

brands and therefore do not affect the value of the Ford brand

itself (although they do affect the value of the company).Korean and Chinese car makers will probably have their

luxury say in the near future. The Koreans are now selling

locally their President, Equus, Chairman, and similar

(licensed and un-licensed) emulations of American,

German, and Japanese limousines, and the drive to establish

their own luxury makes is strongly evident. China, as the third

major auto market in terms of volume, is beginning to show

both the intention and capability of producing its own luxury

brands, as evidenced at the Beijing Autoshow 2004, where

Daimler-Chrysler broached plans to sell in China 1,000

Maybachs per year; Porsche echoed that goal a year later at

the Auto Shanghai show, aiming to sell 1,000 in China during

2005 (Li, 2005). Ferrari (2005) claimed that, for calendar

year 2004, New and growing markets (China, Russia,

Eastern Europe and South America) contributed substantially

to volumes increase, without jeopardizing the exclusivity of

the brand. Production of Cadillacs officially commenced in

GMs new Shanghai factory on 25 May 2005 (General

Motors, 2005).

Contextualizing brand development

Brands and branding strategies affect the value of companies

and thereby serve as a measure of their success (e.g. Aaker

and Jacobson, 1994; Rao et al., 2005), and are evenconsidered a key to their survival (Aaker, 1997).

Development of a brand usually takes three to five years

and is of critical importance for the success of car

manufacturers (A.T. Kearney, 2001). Goodyear (1996)

recognized six stages in brand development, in this context

applied to luxury car marques (see Table III). According to

Goodyear, perception and strength of a brand will depend on

the maturity of consumerism in the market, on brand

marketing, and on the level of customer loyalty. Customer

loyalty depends on both market maturity and brand

marketing, which in turn includes aspects such as customer

service and trust (Reast, 2005; Delgado-Ballester and

Munuera-Aleman, 2001, 2005; Andreassen and Lindestad,

1998). Empirical research has shown that luxury car

purchasers are more loyal to the segment at large than to

any particular luxury brand (Colombo et al., 2000). As anexample of a strategy designed to counter this effect, Volvo

attempts to implant the companys core values into customers

and create the brand through personal identification of buyers

with the brand (Urde, 2003).This study explores the impacts of a change in the form of

ownership of luxury brands, from independent firms targeting

top-end markets to global giants intent on capitalizing on the

brand while gaining economies of scale. The number of

Table I Luxury brands of the top 12 auto manufacturers

Company (parent, alliance, or group)

Productiona

(million, 2004) Origin Luxury brands

General Motors 11.7 USA Cadillac, Hummer, Saab

Ford 7.8 USA Aston Martin, Jaguar, Land Rover, Lincoln, Volvo

Toyota 7.5 Japan Lexus

Renault-Nissan 5.9 France and Japan Infiniti

VW Group 5.0 Germany Audi, Bentley, Bugatti, Lamborghini

Daimler-Chrysler 4.8 Germany and USA Mercedes-Benz, Maybach

PSA 3.3 France

Honda 3.2 Japan Acura

Hyundai-Kia 3.1 South Korea

Fiat 2.0 Italy Alfa Romeo, Ferrari, Maserati

Mitsubishi 1.5 b Japan

BMW 1.3 b Germany BMW, Rolls-Royce, Mini

Notes: a PriceWaterhouseCoopers (2005); b International Organization of Motor Vehicle Manufacturers (2005)

Table II Most valued global car brands (2000-2005, $ millions)

Brand 2005 2004 2003 2002 2001 2000 2005/2000

Toyota 24,837 22,673 20,784 19,448 18,578 18,824 32%Mercedes-Benz 20,006 21,331 21,371 21,010 21,728 21,105 2 5%

BMW 17,126 15,886 15,106 14,425 13,858 12,969 32%Honda 15,788 14,874 15,625 15,064 14,638 15,245 4%Ford 13,159 14,475 17,066 20,403 30,092 36,368 2 64%

Volkswagen 5,617 6,410 6,938 7,209 7,338 7,834 2 28%

Porsche 3,777 3,646 a a a a

Audi 3,686 3,288 a a a a

Hyundai 3,480 a a a a a

Nissan 3,203 2,833 2,495 a a a

Note: a Not featured among top 100 global brands for the yearSource: Annual research compiled by Interbrand and published in BusinessWeek (2001, 2002, 2003, 2004, 2005)

Brand corrosion

Pavel Strach and Andre M. Everett

Journal of Product & Brand Management

Volume 15 Number 2 2006 106120

109

luxury automobile brands today is relatively small, and each

has a unique story to tell; three will be addressed in the case

studies presented here. First, Jaguars fluctuating sales,

divergent model releases, and recently announced plant

closures (with redundancies) are only the most evident issues

Jaguar has had to deal with. Second, Daimler-Benzs

acquisition of Chrysler continues to produce unforeseen

consequences and periodic reversals of fortune. It also

constitutes the unique occurrence in the automobile

industry of a luxury brand buying a mass-market

manufacturer. The dramatic decline in consumer

evaluations of Mercedes-Benz automobiles and speculation

that cross-brand sharing is to blame adds tension to the

situation. Finally, Saab is of particular interest as its

acquisition by General Motors began relatively early, and

remains an ongoing saga with direct links to research on the

impacts of administrative heritage on luxury branding.

General Motors recently announced that it will relocate

manufacturing mid-size and development of all Saab cars

away from Sweden, leading to speculation about the possible

discontinuation of the brand.

Case 1: Jaguar

Since its founding in the 1920s, the name of Jaguar has been

inextricably linked with high performance, as exemplified by

its championships beginning in the 1930s at Le Mans (seven

times), the Monte Carlo Rally (twice), and countless other

events. Luxury and performance intertwine to form the

personality of the marque, sometimes described more as a

mystique or a phenomenon than just another brand.

Treated as an iconic brand in its English homeland, Jaguar

has attained the status of brand as personality (based on

Goodyears classification) in the USA, its major market by

volume, since its acquisition by Ford in 1989. However, it

seems that the brand has been personally identified with old

upper-class male drivers (Stones, 2004).Prior to its acquisition by Ford in 1989, Jaguar experienced

major restructuring, passing through the bureaucratic hands

of British Leyland, which discontinued perhaps the most

famous Jaguar model (E-Type), presented Jaguars jointly with

other brands at auto shows, and induced a lengthy, painful

strike in 1980. Jaguar was reasonably profitable after

separation from Leyland, reporting record sales of 49,500

vehicles in 1988, the year before its acquisition by Ford. The

workforce numbered 12,000. A widely recognized and real

problem was the infamous sloppy quality and outdated work

practices throughout the company (Feast, 1998). Quality

issues permeated public anecdotes about the brand. Difficult

trading conditions led Jaguar to consider potential

collaboration with a larger car manufacturer. General

Motors and Jaguar discussed cooperation in manufacturing

and marketing, and acquisition of a minority stake in Jaguar

by GM. At the time, Ford was racking up experience with

second-hand sports car brands. In 1970, it acquired Ghia

(producer of Ghia and De Tomaso cars), a famous design

studio in Torino, Italy and promptly downgraded the brand

into a mere label for Fords own top lines. In 1987, it

purchased three-quarters of sports car maker Aston Martin,

completing the acquisition in 1993. Ford opened negotiations

with Jaguar in September 1989, and repeatedly announced its

intention to make a full bid for the company. Fords offer of

Table III Six stages of brand development

Stage Attributes Luxury car brandsa

Unbranded Commodities, packaged goods

Major proportion of goods in non-industrialized contexts

Minor role in Europe/USA

Supplier has power

Brand as a reference Name used for identification

Any advertising support focuses on rational attributes

Name over time becomes guarantee of quality/consistency

Acura, Hummer, Infiniti, Land Rover, Lexus, Lincoln

Brand as personality Brand name may be stand-alone

Marketing support focuses on emotional appeal

Product benefits

Advertising puts brand into context

Alfa Romeo, Aston Martin, Jaguarb, Maserati, Mini, Saabb, Volvo

Brand as icon Consumer now owns brand

Brand taps into higher-order values of society

Advertising assumes close relationship

Use of symbolic brand language

Often established internationally

Audi, BMW, Cadillac, Lamborghini, Mercedes-Benzb

Brand as company Brands have complex identities; consumer assesses them all

Need to focus on corporate benefits to diverse customers

Integrated communication strategy essential though-the-line

Bentley, Bugatti, Ferrari, Maybach, Rolls Royce

Brand as policy Company and brands aligned to social and political issues

Consumers vote on issues through companies

Consumers now own brands, companies and politics

Notes: a Only brands from Table I, belonging to the top 12 companies, are included; b As the focus of this study, the placement of Saab, Jaguar, and Mercedes-Benz is examined in greater detail within the textSource: Adapted from Goodyear (1996, pp. 114 and 119) (car brands column added)

Brand corrosion

Pavel Strach and Andre M. Everett

Journal of Product & Brand Management

Volume 15 Number 2 2006 106120

110

$2.55 billion was hard to resist and swiftly extinguished the

prospects for GM.In 1992, Jaguar sold just 22,478 cars, half of the pre-Ford-

takeover number. In 1993 the new owner installed a newassembly line at the Browns Lane factory in Coventry. Jaguars

started improving in quality and reliability. However,production figures did not recover to the 1988 level until

1998, and then shot upwards to attain 120,570 vehicles soldin 2003. The challenging era for the Jaguar name began with

Fords $1.3 billion development of the S-Type and X-Typemodels, which would lead the brand into the twenty-first

century.The S-Type, mid-sized sports saloon joined the Jaguar fleet

in 1998 as the first model fully developed under Fordsstewardship. Before this model, Jaguar sourced about 65

percent of its parts within the UK, a figure which dropped to40 percent for the new model, showing the larger share of

foreign (Ford) components (DTI/SMMT, 1999). The vehicleshared its platform with sisters Lincoln LS, Ford

Thunderbird, and the new Ford Mustang (announced for2005). Jaguar crossed the magic line of 50,000 units sold in

one year and sales were predicted to climb to 85,000 in 1999and 90,000 in 2000 (Bruce, 1998). Anticipating the arrival of

the X-Type, sales for 2002 were forecast to skyrocket to200,000 units (Jaguar USA, 2004).Fords Halewood (UK) plant was built in 1962 and

assembled its last Ford Escort in June 2000. The

plant underwent a large scale transformation to support thenew X-Type, which was unveiled during the Geneva Motor

Show in 2001 and promptly labeled baby Jag. The X-Typeshared its platform with the markedly cheaper Ford Mondeo

and was the first model for the brand featuring four wheeldrive technology. The X-Type has suffered build quality issues

since its launch (Richards-Carpenter, 2003). The modelshould have attracted younger buyers and should have opened

up a bright future for the established make (Burt, 2001a).However, elderly customers downsized to the cheaper car and

the perception of Jaguar being an old mans car was not lifted(Stones, 2004).A few months later, the 1.5 millionth automobile bearing

the Jaguar badge was celebrated in Browns Lane. Not far

away, a new 40-hectare design and development centeropened in Whitley, accommodating an additional 2,500

engineers. In 2002, the company admitted it had over-estimated the sales volume for the X-Type (Grant, 2002) and

production was slowed for several weeks in September andOctober to clear unsold stock. The 2002 model year featured

another new arrival to the product range; the traditional body-type XJ saloon replaced the previous XJ8 model. The new XJ

made heavy use of aluminum parts, resulting in a light, strongchassis. An extension to the regular sedan series, the S-Type R

was one of the most powerful mass-produced saloons in theworld, featuring a 4.2 liter eight-cylinder turbocharged enginecapable of accelerating from 0 to 60 mph in just 5.3 seconds.Jaguar sales surged from around 50,000 at the time of

Fords acquisition to 130,000 in 2001, but then began tocontract. The cardinal change in the sales pattern wasachieved with introduction of the S-Type and X-Type, the

first Jaguar vehicles attracting mass attention. However,tripling sales logically implies less distinctiveness and

exclusivity for the marque.Jaguar today has facilities located at Castle Bromwich in

Birmingham (production of S-Type), Whitley in

Coventry (engineering), Halewood on Merseyside

(production of X-Type), and Browns Lane in Coventry(production of XJ limousine and XK sports coupe). Someengines are produced in the Ford engine factory at Bridgend,

South Wales. Jaguars are marketed in over 70 countries withthe most important single market being the USA followed bydomestic sales within the UK.The year 2004 was particularly colorful and critical for the

British marque. Two Peugeot-engineered diesel engineswere introduced in the X-Type (four-cylinder) and S-Type(six-cylinder). Ford relinquished its own engineering efforts

targeting such engines, which previously occurred at theWhitley development center. As diesel fueled vehicles havebecome increasingly popular, these models should boost thecompanys coffers by attracting more European customers.In order to expand sales of the X-Type, Jaguar introduced

its first-ever station wagon in the 2004 season. Originally, this

vehicle was not intended to be marketed in the USA, butlower than expected sales of the X-Type there reversed thisdecision, and the X-Type sports wagon faced Americancustomers starting in October 2004. The Jaguar S-Type

received extensive exterior modifications as well as a newaluminum hood, a more luxurious interior, and a newsuspension system (Hammonds, 2004).In the second quarter, Ford reported a $362 million loss for

its Premier Automotive Group (consisting of Jaguar, LandRover, Volvo, and Aston Martin), out of which Jaguaraccounted for about half, $178 million. In September, Ford

announced a $450 million restructuring plan for Jaguar,featuring closure of the Coventry factory. 400 voluntaryredundancies were expected as a result of shifting production

to Castle Bromwich. 750 white collar jobs would be lost atCoventry and in other parts of the company. 300 jobs wouldshift to the Aston Martin factory in Gaydon. Jaguarsheadquarters and wood veneer manufacturing (with about

310 staff in total) would remain at Browns Lane. Generalsecretary of the Amicus labor union Derek Simpson claimedthat Fords decision may kill off Jaguar (BBC, 2004). Fordalso considered closing the Land Rover plant in Solihull.

Some industry experts suggested that Jaguars should be madeat only one plant, potentially outside the UK (BBC, 2004).Coventrys new city stadium, under construction, was

intended to be named Jaguar Arena, given the companysapproximately 7 million pound sponsorship. However, threemonths after announcing the closure of its factory there,

Jaguar withdrew from the deal, leaving some locals with abitter impression. One wrote the following on a BBC HaveYour Say web site:

When jaguar announced it was to sponsor the arena it appeared they wereleaving a legacy in the city after announcing the closure of the Browns Lanefactory, withdrawing this sponsorship is a kick in the teeth to the people ofCoventry, though why should Ford care, I suggest that everyone associatedwith the city SHOULD NEVER BUYA FORDAGAIN (Sutherland, 2005).

Fords restructuring included Jaguars exit from the Formula

One championship following the last race of the 2004 season,when the Jaguar Racing team placed seventh inthe constructors championship with ten points, far behindfirst-place 262-point Ferrari (as well as BAR-Honda, Renault,

BMW-Williams, McLaren-Mercedes, and Sauber-Petronas)(Formula1, 2004). Nonetheless, engagement in Formula Oneracing was seen by some customers as a major factor in

recreating the Jaguar brand as it symbolized performance andtechnological superiority.

Brand corrosion

Pavel Strach and Andre M. Everett

Journal of Product & Brand Management

Volume 15 Number 2 2006 106120

111

It was believed that Jaguar cost Ford more than $6 billion

by 1998 in terms of purchase price, investments, loans, and

accumulated annual losses (Feast, 1998). The rise in salesfigures is attributed to the downmarket X-Type, which some

believe has destroyed the brands values without increasing its

long-term sales potential (Stones, 2004). The S-Type and X-Type were both reported among the least reliable cars on the

market (Garsten, 2002), but performed well in some qualityrankings. Since 2001, studies by J.D. Power (2004) cited

Jaguar among the three top brands sold in the USA, together

with Lexus and Cadillac, in terms of initial quality.

Case 2: Mercedes-Benz

The history of Mercedes-Benz constitutes the history of the

automobile in significant ways. Two inventors Gottlieb

Daimler (1834-1900) and Karl Benz (1844-1929) laiddown independently of each other the foundations for some

680 million motor vehicles running worldwide by the year2000 (Soubbotina and Sheram, 2000), with another 40-plus

million added annually since then. It was Karl Benz who,

on 29 January 1886, applied for a patent for his three-wheelgas-engine vehicle a patent considered as the birth

certificate of the automobile. Daimlers four-wheel

motorized carriage patented on 28 August in the same yearfollowed immediately in his tire tracks.Karl Benz developed a two-stroke engine (1879) and

patented many other original solutions including an engine

speed regulation system, axle-pivot steering, and a battery

ignition system for combustion engines. Gottlieb Daimlercreated and patented an uncooled, heat-insulated engine with

unregulated hot-tube ignition. This one-horse-power enginewas capable of 600 revolutions per minute (rpm), while

previous engines could achieve a maximum of 180 rpm. This

engine was installed in the worlds first motorcycle, in 1885.The Mercedes brand was established in 1901, chosen by key

investor and dealer Emil Jellinek after the name of his

daughter. Eight years later, the three-pointed star appeared asa Daimler trademark and from 1910 it has been a distinctive

feature of Mercedes cars. The three-pointed star (laterenclosed in a circle) was supposed to symbolize a passion for

motorization on land, on water and in the air. Further

engineering innovations followed, including an occupantssafety cell (patented in 1951) and the unique 1954 gullwing

coupe with vertically-opening doors. In 1979, the companyentered a new segment with the G-series, an off-road vehicle

combining high all-terrain performance with exclusivity a

precursor to the M-class sport-utility vehicle (SUV),manufactured in a new plant in Tuscaloosa, Alabama since

1997. In 1988, the post-war production total of Mercedes-

Benz vehicles reached ten million.Daimler-Benz set up a joint venture in 1994 with the Swiss

watchmaker Swatch to build a mini-car. Swatch left the mini-car partnership in 1998, and Daimler-Benz launched the

Smart two-seat mini-car to European customers later that

year. However, its 9,000 euros price tag did not prove overlyappealing. In 1997, Daimler-Benz survived a catastrophe as

the long-awaited small A-class vehicle was flipped by aSwedish journalist during the infamous elk test (swerving

around an elk on a slippery road), prompting significant

design adjustments. The A-class was re-launched a fewmonths later, labeled Baby-Benz by the press, but has not

yet become a financial success.

In 1998, Chrysler, one of Detroits Big Three auto makers,

was just returning to financial stability; its models (such as theretro-styled PT Cruiser and four-wheel-drive Jeep Cherokee)

were again popular, and lean production and a new, friendlyapproach to customers finally made an impact. However,

vulnerability to a hostile takeover proposed by shareholderKirk Kerkorian was high. Daimler-Benz was actively seeking

expansion opportunities, particularly beyond the Europeanhorizon where the companys traditional strength lay. The

unusual combination of circumstances, managerial egos, anddynamism of the automotive sector pointed towards futureconsolidation on both sides of the Atlantic.The date 6 May 1998 gained fame as the day of the biggest

industrial merger ever, with the new DaimlerChrysler

company valued at $75 billion. Shortly after theannouncement, analysts pointed out that in theory the

merger would lower costs through volume purchases andslashed redundancies. On the other hand, it was evident that

Daimler-Benzs key advantages lay in quality, innovation, andexclusivity while Chryslers success was based on size, rapid

decision-making, and flexibility (Smith, 1998). Additionally,American and German ways of running an auto maker arebased on different administrative and cultural heritages.DaimlerChrysler was incorporated in Germany, with

Daimler-Benz shareholders receiving 58 percent of the new

firm while Chrysler shareholders received the remaining 42percent of shares plus a cash premium of 28 percent of their

shareholdings value (Vlasic and Stertz, 2001). On17 November 1998, DaimlerChrysler introduced the first-

ever global registered share (GRS) under the symbol DCX,launched simultaneously on 21 world markets (Karolyi,

2003). Both CEOs Jurgen Schrempp of Daimler-Benz andRobert (Bob) Eaton of Chrysler became co-leaders of the

newly established company.Within a few months Bob Eaton vacated his role of co-

chairman, leaving Mr Schrempp as sole emperor. Two yearsafter the merger, Jurgen Schrempp told The Financial Timesthat he never envisaged the merger as a partnership of

equals (Burt and Lambert, 2000). Chryslers originalmanagement team had been dispersed and key positions

had been occupied by German expatriates. Chryslersrenewed financial difficulties provided ample argument for

such an upheaval. The merger has been retrospectivelylabeled a cultural fiasco (Priddle, 2000). Complicating the

situation, DaimlerChrysler acquired a controlling 34 percentstake in enormously indebted Mitsubishi Motor Company for

$2.1 billion in 2000.The Mercedes Car Group became a special division of

DaimlerChrysler responsible for production and marketing ofthe Mercedes-Benz, Maybach, and Smart brands, while theChrysler Group handled Chrysler, Dodge, Plymouth, and

Jeep (Plymouth was discontinued at the end of 2000). Themerged company reported its first-ever quarterly loss due to

the poor performance of its Chrysler division in 2001.Consequently, DaimlerChrysler announced one of the largest

restructuring plans ever undertaken by any company. 26,000employees were downsized and six plants shut in the

Americas. There were rumors that the company might bebroken into parts and sold. There is little doubt we would be

interested in parts of the business. Of course, Mercedes andsome parts of Chrysler are very attractive to any buyer, a GMexecutive said (Hickey, 2001). In 2002 DaimlerChrysler

revealed a ten-year plan to integrate more closely the

Brand corrosion

Pavel Strach and Andre M. Everett

Journal of Product & Brand Management

Volume 15 Number 2 2006 106120

112

Mercedes-Benz, Chrysler, and Mitsubishi brands, which

would cut the number of different engines and transmissions.The overall impact of the merger on Daimler-Benz has been

reported as negative due to the loss of talent it had to divert to

both Chrysler and Mitsubishi (Chambers, 2003). A media

leak that Mercedes bought leather from Bulgaria brought

fears that its cost-cutting strategy could result in substandard

products. In terms of consumer satisfaction, Mercedes-Benz

ranked first in 1999 and 28th in 2005 out of 37 brands

(Simon and Mackintosh, 2005). In the most recent J.D. Power

customer satisfaction survey of British executive and luxury

car owners, it was revealed that the Mercedes-Benz E-Class

finished next to last and barely made the top 100 overall, with

the C-Class being only two places above the E in this sector

(What Car, 2005). Mercedes-Benz cars scored well below

industry average and shared 21st place with Seat of Spain.

Customers were particularly unhappy with the M-Class SUV

and S-Class sedan (Kelly, 2003). In 2004, DaimlerChrysler

ran into troubles again; currency effects, product changes,

and quality improvement efforts were blamed for financial

difficulties in the Mercedes Car Group, and the company

reduced its stake in Mitsubishi following recalls and profit

problems there. Profits coming from the Mercedes-Benz

brand slid from 784 million Euros in 2003 to 20 million in

2004 (Smith, 2005) and declined further to an operating loss

of 954 million in the first quarter of 2005 (including Smart

restructuring costs of 800 million) (BBC, 2005a).The quality shift which resulted from closer integration in

later stages of the merger is illustrated in Table IV, which

shows a steady decline in initial mechanical quality since

2000. (The J.D. Power Initial Quality Study looks at owner-

reported problems in the first 90 days of ownership; this score

is based on problems reported with the engine, transmission,

steering, suspension, and braking systems.)To regain its reputation, the Mercedes Car Group

announced in 2004 that it would aim to top the J.D. Power

US survey in 2006. However, this goal was subsequently

placed under review as admittedly the J.D. Power survey may

too closely reflect American tastes, which might not be

desirable for a global car brand (Reuters, 2005). In early

2005, the new B-class sports hatchback was introduced,

increasing the number of Mercedes-Benz passenger models to

13 (smaller hatchbacks A- and B-class, classic C-, E-, and S-

class, roadsters and coupes SLK, SL, CLK, CL, SLR, and

CLS, and off-roaders M- and G-class). The company is

expected to launch its R-class sports station wagon in 2006.

Mercedes-Benz star decorates the grill of multi-purpose-

vehicles, campervans, vans, buses, trucks, and Unimog

vehicles for extreme conditions.Smart cars have had a significantly negative financial effect

on the Mercedes Car Group (Smith, 2005). In April 2005, it

was announced that the Smart division would eliminate two

out of its four models and lay off 700 employees; arestructuring charge of 800 million Euros was taken in early

2005 (BBC, 2005a). It was believed that Smarts problem was

not the vehicles lack of appeal but its high production anddistribution costs (Landler, 2005). At the same time,

Mercedes recalled the largest number of vehicles in its

history 1.3 million to modify braking systems on E-, SL-,and CLS-class cars built since July 2001, the voltage regulator

in alternators in six and eight cylinder vehicles built between

June 2001 and November 2004, and the battery unit softwarein E- and CLS-class models made from January 2002 to

January 2005 all of which occurred during the new era of

parts commonality across brands.

Case 3: Saab

In April 1937, a new company, Svenska Aeroplan

Aktiebolaget (Swedish Aeroplane Stock Company), later to

be known as Saab, was founded in Trollhattan in response togovernmental support for the establishment of a national

defense industry in Sweden. Within a few months, the

company launched licensed production of the German-designed Junkers medium-heavy bombers for the Swedish

army. The company rapidly established itself as a success in

the military aircraft industry. However, the approaching endof the Second World War implied that if the company wished

to continue operations, a search for new market opportunities

in civilian sectors would be in order. In 1946, the companyintroduced a passenger car, the Saab 92. The first Saab car

was a true eye-opener, both technically and aesthetically.

Since December 1949, when the first bottle green Saab 92 leftthe production line in the Swedish provincial town of

Trollhattan, almost four million Saab cars have cruised

roads worldwide, symbolizing luxury, safety, andinnovativeness. Saabs were the first cars with standard

turbocharged engines (1978), heated front seats (1971),

dual-circuit brake systems (1963), halogen headlights (1969),side-impact bars (1972), CFC-free air-conditioning (1991),

and headlamp washers (1970). Since then, many things have

changed; nowadays the marque is battling to retain its verynature.Production in the 1970s peaked at 90,000 annually before

falling back to 65,000 in 1980. A new, still-standing annual

Table IV Initial mechanical quality of selected Mercedes-Benz models

Model 1998 1999 2000 2001 2002 2003 2004 2005

C-Class **** **** **** *** *** **** *** ***E-Class ***** **** ***** ***** ***** ** *** ****S-Class ***** ***** ***** ***** **** *** ** ***M-Class **** **** **** *** ** *** **** **Total *s 18 17 18 16 15 12 12 12

*s above minimum possiblea 10 9 10 8 7 4 4 4

Notes: ***** among the best, **** better than most, *** about average, ** the rest (there is no single * rating);a maximum possible 20 *s; minimum

possible 8 *sSource: Data from J.D. Power Consumer Center (2005)

Brand corrosion

Pavel Strach and Andre M. Everett

Journal of Product & Brand Management

Volume 15 Number 2 2006 106120

113

record was reached in 1987, when 134,112 cars rolled off the

production lines. In addition to Trollhattan, by 1990 Saabshad also been assembled in Linkoping, Arlov, Malmo (all in

Sweden), Mechelen (Belgium), and Nystad/Uusikaupunki(Finland).At the end of the 1980s, the high-end car market was

increasingly important, profitable, and attractive. Smaller car

manufacturers were on the block worldwide. Fiat bought AlfaRomeo; Chrysler bought Lamborghini; GM acquired Lotus;

Ford took over Jaguar. Simultaneously, the Saab-Scaniadivision of the Saab Group declined negotiations with Mazda

over possible cooperation in 1989, instead signing anagreement with Fiat. Disappointed but enlightened by its

failed Jaguar courtship, GM started secretly dating Saab.Surprised and bewildered Fiat was suddenly left out of the

game and GM became a half-equity partner in the newly-established joint venture Saab Automobile AB in 1990. SaabAutomobile AB was placed under the exclusive management

of General Motors Europe in Zurich (Switzerland).However, both joint venture partners subsequently claimed

continuous disappointment with company performance andcorporate governance. By the end of 1998, Saab Automobile

ABs cumulative deficit had reached $2 billion, and additionalinfusions of capital and loans from its two shareholders

totaled $1.45 billion. In January 2000, GM decided toexercise its option to buy the remaining 50 percent share. The

acquisition was completed for $125 million, which indicatesjust how sharply the companys value had dropped when

compared with the first half bought by GM for $500 millionten years earlier. GM, as a new owner, chose to target a new

kind of customer. GMs idea was to build another BMW, but18 months after acquisition, GM admitted that Saabs would

never be like the vehicles from Munich (Flint, 2002). Instead,it decided to ramp up production, from 1990s 100,000 to atarget of 250,000 annually.Under GM ownership, the Saab 900 was introduced in

1994, based on the Opel Vectra. It handled clumsily,

suffered alarming quality lapses and was later reported to havedone poorly in Swedish crash testing (Kitman, 2004). A

refurbished Saab 900, designated Saab 9-3, was introduced in1999 with over 1,100 improvements and changes in reaction

to the previous non-Saabish model. The 9-5, introduced in1997 and still being manufactured in 2005, is based on Opel

platforms as well. The 9-5 retained the companys classiccenter-console ignition switch which some critics scoffed

was the sole remaining distinctively Saab characteristic in thismodel.Hopes to lift annual production were voiced several times

during the GM era. In 2001, Saab predicted an annual output

of 230,000 to 250,000 vehicles by 2006 (Burt, 2001b). In2002, GM revealed 135,000 to 200,000 as an optimal target

for the next five years. However, annual production remainedsteady with an average of 124,000 units assembled annually

from 2001 to 2004 (International Organization of MotorVehicle Manufacturers, 2005).With reduced R&D expenditure, Saab introduced fewer

innovations since 1990 (seats with active head restraints andinternal fans, with the Alcokey alcohol-sensing ignition system

being tested). In 2003, GM eliminated the 1,300 engineersand designers at Saabs headquarters. The engineering

department merged with GMs Opel-Vauxhall operationsand was relocated to Russelsheim (Germany). As a result,

Saabs head designer quit, joining Porsche (which remained

an independent, performance-focused, luxury brand). GM

Europe confirmed integration of its sales and marketing

offices for Opel, Vauxhall, and Saab in several European

countries at its Zurich headquarters in mid-2004.The entirely new Saab 9-3 was designed mainly by Opel,

and released in 2003; it shares a common platform with the

Opel Vectra, Pontiac G6, and Chevy Malibu. The 9-3 sedan

features a unique rear suspension which makes driving

sportier; this seems to be a substantial engineering

differentiation, but within GM it is treated as an example of

how things should not be done (Simister, 2004b). GM shifted

production of the Saab 9-3 Convertible from Finnish

Uusikaupunki to Austrian Graz, where Magna Steyr AG &

Co KG became responsible for the entire development and

production process. This was the first convertible produced

by Magna Steyr, which had purchased the production facility

in Graz from DaimlerChrysler just a few months earlier. The

plant also assembles Jeep Grand Cherokee, Chrysler PT

Cruiser and Voyager, and Mercedes Benz E-, M-, and G-class

automobiles for DaimlerChrysler.Saabs lineup was traditionally limited to sedans, station

wagons, and convertibles. Like most luxury brands, it had

never offered sport utility vehicles (SUV) or four wheel drives

which are driving demand in the U.S. Because that market

is the most important one for the Saab brand, the small four

wheel drive Saab 9-2X was introduced to the US market in

June 2004 as a reaction to the similar Audi A3, BMW 1

series, Volvo S40, Mercedes A-class, and Jaguar X-Type, the

entry-level models of otherwise upper-class manufacturers.

The 9-2X is a slightly upgraded Subaru Impreza WRX sedan

and wagon built in Japan by Fuji Heavy Industries (of which

GM owns 20 percent). It is a good example of a car that Saab

might have offered today if it had had enough finances in the

1990s light weight, quiet, high powered, with excellent road

holding capabilities and firm handling. Journalists promptly

relabeled the new model Saabaru it has a Subaru engine,

a Mitsubishi turbocharger, and a five-speed manual

transmission, yet manages to maintain a kind of Saab

solidity and style (Ford, 2004).Broadening Saabs brand appeal (GM, 2004), the 9-7X

SUV joined the Saab fleet in the USA in 2005. This model is

a restyled Chevrolet TrailBlazer built in Ohio; it cannibalizes

other GM SUVs such as the Buick Rainier, Cadillac Escalade,

GMC Jimmy, GMC Envoy, and Isuzu Ascender. The 9-7X

features a non-turbo-charged six- or eight-cylinder engine and

the obligatory Saab-style center ignition. Saab Cars USA

recorded sales success in 2003 with 47,914 Saab 9-3 and 9-5

sold. It was the best year in Saabs history in the US auto

market, surpassing the previous best year of 1986. Although

2004 sales declined significantly, 2005 rebounded, heading

for figures similar to 2003 (Auto Channel, 2005). In 2004,

Saab Cars USA head office relocated from Norcross, Georgia,

to GMs world headquarters in Detroit (Atlanta Business

Chronicle, 2004). The president of Saab Cars USA

commented:

As is true for Cadillac or Hummer, Saab will retain its unique brand identityand heritage, and continue to provide its customers the same excellentownership experience.

Under GM, Saab Automobile AB has recorded almost only

losses (except for 1994 and 1995, when small profits were

achieved). In 2002, GMs estimated total bill for Saab was

around $4 billion (Flint, 2002). In September 2004, GM

Brand corrosion

Pavel Strach and Andre M. Everett

Journal of Product & Brand Management

Volume 15 Number 2 2006 106120

114

announced further downsizing of its European operations,

with the most vulnerable plant identified as the Saab plant in

Trollhattan. When the knife finally fell in March 2005,Russelsheim (Germany) won manufacturing of all mid-sized

Opels and Saabs, with a reduced Trollhattan factory retaining

other Saab models and gaining a new model Cadillac (BBC,2005b; Deutsche Welle, 2005).

Discussion

Building on the notion of luxury brands, it can be concluded

that all three of the examined brands lost part of their luxury

as a result of a merger or acquisition among companies withdivergent administrative heritages. All three marques

encountered overwhelmingly negative effects on two of theobjective luxury dimensions of conspicuousness and

uniqueness identified by Vigneron and Johnson (2004).

Luxury car brands and luxury car buyers cannot be treated asmass-market goods and consumers; the distinguishing feature

of both the cars and their purchasers is that they are not

average. While mass-market owners salivate at the potentialfor profiting from the de-customization of their luxury brand

acquisitions, the buyers of such vehicles reject any attempts to

impinge on the distinctiveness and quirkiness of theirbrands. Platform sharing is seen as one of the greater evils

(termed prostitution by one commentator (Kerwin, 2004)).Vigneron and Johnsons third objective dimension of luxury,

quality, evidently decreased at both Mercedes-Benz and Saab.

In the case of Jaguar, however, the sharing of engines andcomponent suppliers with other Ford brands has actually

increased Jaguars quality ratings in recent J.D. Power (2004)

annual new-car evaluations.The relationship between function and price has been

termed rarity value (Kapferer, 2001) or exclusivity (Nuenoand Quelch, 1998). Jaguar, Mercedes-Benz, and Saab all tried

to ramp up sales figures through models with a higher ratio of

function to price and the addition of some unusual models(e.g. the Saabaru, Jaguar station wagon, and the Mercedes-

Benz M Class), together with economically-grounded

platform and parts sharing, which increased theiraffordability. Increasing affordability has an inverse effect on

uniqueness and conspicuousness, thereby diminishingperceived luxury. The net effect of such strategic decisions

has been brand corrosion.From a brand management perspective, it is difficult to

justify acquisitions such as those of Saab by GM or Volvo by

Ford. Saab was a niche player and not regarded as a

worldwide luxury brand. With a lot of work Saab might breakeven. And can Ford expand Volvo enough to recoup all its

costs, and can it avoid encroaching on Jaguars customers?(Flint, 2004). Additionally, Ford has recently strongly advised

Aston Martin to switch from a boutique to a mass-production

strategy and increase volume significantly (Priddle,2004), while Fiat has called for greater parts sharing

between Alfa-Romeo and Maserati (Green, 2005), following

advice from Fiats erstwhile strategic partner GM. Althoughmaking perfect sense from the perspective of mass-marketers,

such prescriptions are anathema to the administrative

heritage and therefore the philosophy, strategy, andorganization structure of the established niche luxury

brand manufacturers.Combining mass and niche products would presumably

result in losing the niche image. In 1960, a brand new Mark II

(the smallest saloon produced by Jaguar at that time) was sold

at one-third the price of a Ferrari (sole model), while the 2004

X-Type is priced at less than one-fifth of the least expensive

contemporary Ferrari (the Modena). Devaluation of a brand

through a lower pricing strategy will result in image erosion

and will decrease the brands potential (Greyser, 1999). A

luxury brand will typically attract diverse buyers who are not

loyal to a particular marque over a sequence of purchases, but

who remain loyal to the luxury segment (Ehrenberg et al.,

2004). This leads to the potentially deceptive assumption that

attracting new customers while losing existing ones should not

necessarily be seen in a negative light. Perhaps Ford has seen

the light with respect to Jaguar, enhancing quality while

increasing sales to a potentially sustainable level, despite some

mis-steps (Kerwin, 2004).From tens (or even hundreds) of car producers in each

industrialized country at the beginning of the twentieth

century, only about a dozen global players remain today. The

manufacturer of the first patented automobile is still in

business, a survivor in a graveyard littered with once-famous,

once-profitable, once-independent symbols of industrial

power. Its Mercedes-Benz brand has traditionally been the

car of preference for heads of state, the rich, and the famous.

Nowadays, the Mercedes division accounts for the bulk of the

value of DaimlerChrysler, the fourth-largest car maker in the

world by value (sixth by volume). However, Mercedes-Benz is

in trouble. Quality and reputation difficulties have tarnished

the brand, and it is becoming conceivable that arch-rivals

BMW and Audi will surpass the three-pointed star in sales

volume in the near future. Much of the blame lies with after-

effects of the Daimler-Chrysler merger, in particular the

sharing of platforms, major components, and suppliers across

brands. The underlying reason for sharing is cost reduction

through enhanced scale and scope efficiencies, which appear

advantageous until examined from a luxury branding

perspective. Exclusivity and compatibility may well be

mutually exclusive.Sporting a similar administrative heritage to both Jaguar

and Mercedes-Benz, Saab focused first on innovation and

distinctiveness in design, with a side emphasis on safety.

While the first two rough edges have been smoothed out by

association with General Motors, the industry has responded

to a multitude of governmental requirements for enhanced

safety, making many of Saabs inventions standard practice.

Without the compassionate largesse of an abundant research

budget and an independent design facility, Saab will not

regain its traditional uniqueness, thereby corroding the brand

to the point where its continuation cannot be justified in an

admittedly overpopulated stable.

Limitations and suggestions for further research

The three examples presented here are not pervasively

representative, and therefore cannot claim to produce a

generalizable theory. These brief overviews do, however,

exhibit consistency with each other and among the notions of

luxury brands, administrative heritage, and brand corrosion.

Subsequent research, including examination of other brands

(both within the automobile sector and in other markets) that

have undergone similar and dissimilar transformations in

ownership, may serve to confirm or negate the directions

indicated here. Longitudinal studies with consistent empirical

measures would be particularly appropriate.

Brand corrosion

Pavel Strach and Andre M. Everett

Journal of Product & Brand Management

Volume 15 Number 2 2006 106120

115

The arena of competition among luxury automotive brands is

undergoing rapid change, both in terms of consolidation of

established marques and in the entrance of new ones,particularly from East Asia (which will doubtless be the

launchpad for a number of new premium badges in the next

decade). Reversals of fortune are by no means excluded;likewise, the current owners of the brands described here have

increasingly demonstrated awareness of the issues they mustaddress if they are to profit from their expensive purchases, and

some changes in strategy should be evident in the near future.

In a market as dynamic and economically dominant as theautomotive industry, no possibility should be excluded lightly.Numerous questions arise directly and tangentially from the

summaries presented here, affording multiple avenues for

further research. For example, why are the images of many

European premium brands languishing under the stewardshipof the American giants despite widely-acknowledged quality

improvements in makes such as Jaguar? Why do Japanesecarmakers prefer to develop their own luxury badges instead

of acquiring or merging with an established make? Why do

German car companies apparently excel at creating luxurymodels and brands? Why do the French the world

headquarters of luxury brands (Dubois and Paternault, 1995)

neither acquire nor offer any luxury automobile brands atall? Which path will the Chinese and Koreans choose, once

they stop emulating foreign models? Given the scale andtraditional leadership of the automotive industry, how far can

conclusions from this sector guide strategic decisions in

markets for other goods and potentially services? Thesequestions focus on the impacts of administrative heritage and

country-of-origin effects, and deserve investigation by

international business as well as marketing researchers.

Conclusion

The lump sum expenditure for a car forces customers to be

wise, to compare, and to distinguish among diverse marques

in the search for their desired ratio of function to price.Component sharing enhances production and purchasing

efficiency but dissipates uniqueness. This is threatening fordistinctive smaller brands, which are subsumed in the

portfolios of giants who intend to charge extra for little

more than image. Volkswagen customers have realized thatthey can buy the same features and quality for less money if

the car is branded as a Skoda or Seat (Stones, 2004). Thesame logic inherently applies to dyads such as Saab and Opel,

Jaguar and Ford, or Mercedes-Benz and Chrysler, where

some of the latter brands top models now sport the vauntedengines of the former (and are selling accordingly).Struggling between reaching a critical mass and still

appealing to customers as special, distinctive, and unique

poses a dilemma. Luxury brands must fascinate one group of

customers and give legitimacy to another (Dubois andDuquesne, 1993). As identified by the head of Fords

Premier Automotive Group, mass-market luxury is an

oxymoron (Kerwin, 2004). Premium car makes cannot betreated as average brands by mass-producers, since they

attract non-average buyers. Post-acquisition attempts bymass-market owners to adjust new models of a premium

marque to the prevailing platform- and parts-sharing logic

without due respect to their distinctive traditions andadministrative heritage constitute an attack on the very

nature of the brand, inevitably leading to brand corrosion.

References

Aaker, D.A. (1997), Should you take your brand where the

action is?, Harvard Business Review, Vol. 75 No. 5,

pp. 135-43.Aaker, D.A. and Jacobson, R. (1994), The financial

information content of perceived quality, Journal of

Marketing Research, Vol. 31 No. 2, pp. 191-201.Algesheimer, R., Dholakia, U.M. and Herrmann, A. (2005),

The social influence of brand community: evidence from

European car clubs, Journal of Marketing, Vol. 69 No. 3,

pp. 19-34.Andreassen, T.W. and Lindestad, B. (1998), Customer

loyalty and complex services impact of corporate image,

International Journal of Service Industry Management, Vol. 9

No. 1, pp. 7-23.A.T., Kearney (2001), Growth and Innovation: Key Challenges

for the Auto Industry, A.T. Kearney, London.Atlanta Business Chronicle (2004), Saab USA moving

headquarters from Norcross to the Motor City, Atlanta

Business Chronicle, 20 May, available at: http://atlanta.

bizjournals.com/atlanta/stories/2004/05/17/daily40.html

(accssed 11 August 2004).Auto Channel (2005), GM July 2005 Sales Climb 19.1

Percent, The Auto Channel, Inc., available at: www.

theautochannel.com/news/2005/08/02/139200.html

(accessed 19 August 2005).Bartlett, C. and Ghoshal, S. (2000), Transnational

Management: Text, Cases, and Readings in Cross-Border

Management, Irwin/McGraw-Hill, Boston, MA.BBC (2004), Jaguar ends car making in Coventry, BBC

News, 17 September, available at: http://news.bbc.co.uk/1/

hi/ business/3664850.stm (accessed 18 September 2004).BBC (2005a), Smart car dents DaimlerChrysler, BBC

News, 28 April, available at: http://news.bbc.co.uk/1/hi/

business/4494873.stm (accessed 6 August 2005).BBC (2005b), Saab chief goes after GM decision, BBC

News, 9 March, available at: http://news.bbc.co.uk/1/hi/

business/4332537.stm (accessed 20 April 2005).Bruce, D. (1998), Medium-sized sports Sedan from Jaguar,

Otago Daily Times (New Zealand), 31 October, p. 61.Burt, T. (2001a), Jaguar gears up for image makeover,

Financial Times, 15 July, available at: http://news.ft.com/ft/

gx.cgi/ftc?pagename View&c Article&cid FT3UCLA47PC (accessed 3 August 2001).

Burt, T. (2001b), General Motors invests to lift volumes at

Saab subsidiary, Financial Times, 28 February, available at:

http://news.ft.com/ft/ gx.cgi/ftc?pagename View&c Article&cid FT3USM5ERJC (accessed 21 March 2002).

Burt, T. and Lambert, R. (2000), The Schrempp Gambit,

Financial Times (London), accessed 30 October, p. 26.Business Week (2001), The global brand scoreboard,

Business Week, 6 August, available at: http://bwnt.

businessweek.com/brand/2001/ (accessed 10 May 2005).Business Week (2002), The global brand scoreboard,

Business Week, 5 August, available at: http://bwnt.

businessweek.com/brand/2002/ (accessed 10 May 2005).Business Week (2003), The global brand scoreboard,

Business Week, 4 August, available at: http://bwnt.

businessweek.com/brand/2003/ (accessed 10 May 2005).Business Week (2004), The global brands scoreboard,

Business Week (Asian edition), 2 August, pp. 68-71.

Brand corrosion

Pavel Strach and Andre M. Everett

Journal of Product & Brand Management

Volume 15 Number 2 2006 106120

116

Business Week (2005), The global brand scoreboard,Business Week, 1 August, pp. 90-4.

Chambers, M. (2003), Mercedes looks back to the future,Reuters, on XtraMSN, 13 November, available at: http://

xtramsn.co.nz/business/0,5007-2826417,00.html (accessed

19 November 2003).Chen, A.C.-H. and Chen, S.K. (2000), Brand dilution effect

of extension failure: a Taiwan study, Journal of Product &Brand Management, Vol. 9 No. 4, pp. 243-54.

Choo, S. and Mokhtarian, P.L. (2004), What type of vehicledo people drive? The role of attitude and lifestyle in

influencing vehicle type choice, Transportation ResearchPart A, Vol. 38, pp. 201-22.

Colombo, R.A., Ehrenberg, A.S.C. and Sabavala, D. (2000),

Diversity in analyzing brand-switching tables: the car

challenge, Canadian Journal of Marketing Research, No. 19,pp. 23-36.

Cooper, D.R. and Emory, C.W. (1995), Business ResearchMethods, 5th ed., Irwin, Chicago, IL.

Delgado-Ballester, E. and Munuera-Aleman, J.L. (2001),

Brand trust in the context of consumer loyalty, EuropeanJournal of Marketing, Vol. 35 Nos 11-12, pp. 1238-58.

Delgado-Ballester, E. and Munuera-Aleman, J.L. (2005),

Does brand trust matter to brand equity, Journal ofProduct & Brand Management, Vol. 14 No. 3, pp. 187-96.

Deshpande, R. (1983), Paradigms lost: on theory and

method in research in marketing, Journal of Marketing,Vol. 47 No. 4, pp. 101-10.

Deshpande, R. and Webster, F.E. Jr (1989), Organization

culture and marketing: defining the research agenda,

Journal of Marketing, Vol. 53 No. 1, pp. 3-15.Deutsche Welle (2005), GM to build mid-size cars in

Germany, DW-World.de, Deutsche Welle, 4 March, availableat:www.dw-world.de/dw/article/0,1564,1508385,00.html

(accessed 29 July 2005).DTI/SMMT (1999), Jaguar Cars. Auto Industry, Automotive

Unit of the Department of Trade and Industry,

Government of the United Kingdom, 1 March, availableat: www.autoindustry.co.uk/features/articles/article-JC?s -136wleknms4imd0r (3 November 2004).

Dubois, B. and Duquesne, P. (1993), The market for luxury

goods: income versus culture, European Journal ofMarketing, Vol. 27 No. 1, pp. 35-44.

Dubois, B. and Paternault, C. (1995), Observations:

understanding the world of international luxury brands:the dream formula, Journal of Advertising Research, Vol. 35No. 4, pp. 69-76.

Ehrenberg, A.S.C., Uncles, M.D. and Goodhart, G.J. (2004),Understanding brand performance measures: using

Dirichlet benchmarks, Journal of Business Research,Vol. 57 No. 12, pp. 1307-25.

Eisenhardt, K.M. (1989), Building theories from case study

research, Academy of Management Review, Vol. 14 No. 4,pp. 532-50.

Eisenhardt, K.M. (1991), Better stories and better

constructs: the case for rigor and comparative logic,

Academy of Management Review, Vol. 16 No. 3, pp. 620-7.Ewing, M.T., Fowlds, D.A. and Shepherd, I.R.B. (1995),

Renaissance: a case study in brand revitalization and

strategic realignment, Journal of Product & BrandManagement, Vol. 4 No. 3, pp. 19-26.

Feast, R. (1998), How Ford and GM manage their

European acquisitions, Automotive Industries,

Looksmart Ltd, April, available at: www.findarticles.com/

p/articles/mi_m3012/is_n4_v178/ai_20499968 (accessed

18 August 2004).Ferrari (2005), 2005 Ferrari showing off in Detroit,Motor

Cities, 10 January, available at: www.motorcities.com/

contents/05AAL313315551.html (accessed 12 August

2005).Fiske, N. and Silverstein, M.J. (2004), Trading Up: Trends,

Brands, and Practices 2004 Research Update, May, Boston

Consulting Group, available at: www.bcg.com/publications/

files/TradingUp2004ResUpdate51104.pdf (accessed

5 August 2005).Flint, J. (2002), Saab story, Forbes, 2 February, available at:

www.forbes.com/2002/12/02/ cx_jf_1202flint_print.html

(accessed 9 August 2004).Flint, J. (2004), Tarnished jewels, Forbes, 27 January,

Available at: www.forbes.com/2004/01/27/ cz_jf_0127flint_

print.html (accessed 6 October 2004).Ford, R. (2004), A Saab atop a Subaru heats things up, The

Boston Globe, 11 July, available at: www.boston.com/cars/

articles/2004/07/11/ a_saab_atop_a_subaru_heats_things_up/

(11 August 2004).Formula1 (2004), 2004 constructors championship,

Formula1, 24 October, available at: www.formula1.com/

archive/team/2004.html (accessed 2 November 2004).Garsten, E. (2002), (2002) Vehicle quality gains mixed,

The Detroit News Auto Insider, 8 November, available at:

www.detnews.com/2002/autosinsider/0211/09/b01-

5145.htm (accessed 21 October 2004).General Motors (GM) (2004), General Motor Corporation:

2004 Annual Report, General Motors, Detroit, MI.General Motors (GM) (2005), Shanghai GM completes new

plant, General Motors, 25 May, available at: www.gm.

com/company/gmability/workplace/100_news/120_news/

shanghai_053105.html (accessed 12 August 2005).Glynn, M.S. and Brodie, R.J. (1998), The importance of

brand-specific associations in brand extension: further

empirical results, Journal of Product & Brand

Management, Vol. 7 No. 6, pp. 509-18.Goodyear, M. (1996), Divided by a common language:

diversity and deception in the world of global marketing,

Journal of Market Research Society, Vol. 38 No. 3, pp. 105-22.Grant, J. (2002), Jaguar losses pose setback for Ford,

Financial Times, 28 September, available at: http://news.ft.

com/servlet/ContentServer?pagename FT.com/StoryFT/FullStory&c StoryFT&cid 1031119743363 (accessed30 September 2002).

Green, G. (2005), Exclusive Q&A: Alfa Romeo Chief Karl-

Heinz Kalbfell, Edmunds.com, Inside Line, available at:

www.edmunds.com/insideline/do/Features/articleId 106445(accessed 19 August 2005).

Greyser, S.A. (1999), Advancing and enhancing corporate

reputation, Corporate Communications: An International

Journal, Vol. 4 No. 4, pp. 177-81.Hammonds, D. (2004), Jaguar offers X-Type Wagon, New

XJ8, Pittsburg Post-Gazette, 13 October, available at:

www.post-gazette.com/pg/04287/394619.stm (accessed

23 October 2004).Henderson, T. (2005), What drives Detroit: the economic

and technological challenges facing the auto industry,

FACSNet, 19 January, available at: www.facsnet.org/tools/

biz_econ/detroit_auto.php (accessed 6 August 2005).

Brand corrosion

Pavel Strach and Andre M. Everett

Journal of Product & Brand Management

Volume 15 Number 2 2006 106120

117

Hickey, B. (2001), GM may bid for Mercedes Report,

Financial Times MarketWatch.com (Europe), 15 January.Homburg, C. and Bucerius, M. (2005), A marketing

perspective on mergers and acquisitions: how marketing

integration affects postmerger performance, Journal of

Marketing, Vol. 96 No. 1, pp. 95-113.International Organization of Motor Vehicle Manufacturers

(2005), OICA Statistics, available at: www.oica.net/htdocs/

Main.htm (accessed 19 August 2005).J.D. Power (2004), J.D. Power and Associates Reports: Korean-

Branded Vehicles Overtake Europeans and Domestics in Initial

Quality, 28 April, J.D. Power and Associates, Westlake

Village, CA.J.D. Power Consumer Center (2005), Performed Database

Inquiries., available at: www.jdpower.com/cc/index.jsp

(accessed 31 October 2005).Jaguar USA (2004), Jaguar USA Website: Company History,

available at: www.jaguarusa.com/us/en/company/history

(accessed 20 October 2004).John, D.R., Loken, B. and Joiner, C. (1998), The negative

impact of extensions: can flagship products be diluted?,

Journal of Marketing, Vol. 62 No. 1, pp. 14-32.Jordan Keane, M. and McMillan, Z. (2004), Above and

beyond (brand papers), Brand Strategy, No. 187, p. 30.Kapferer, J.-N. (2001), Reinventing the Brand: Can Top Brands

Survive the New Market Realities?, Kogan Page, London.Karolyi, G.A. (2003), DaimlerChrysler AG, the first truly

global share, Journal of Corporate Finance, Vol. 9 No. 4,

pp. 409-30.Kelly, K. (2003), Quality: Priority Ein, WardsAuto.com

Primedia Business Magazines and Media, 1 March, available

at: http://waw.wardsauto.com/ar/auto_quality_priority

_ein_2/ (accessed 8 May 2005).Kerwin, K. (2004), Ford learns the lessons of luxury,

Business Week (US edition), 1 March, pp. 116-7.Kim, C.K. and Lavack, A.M. (1996), Vertical brand

extensions: current research and managerial implications,

Journal of Product & Brand Management, Vol. 5 No. 6,

pp. 24-37.Kirmani, A., Sood, S. and Bridges, S. (1999), The

ownership effect in consumer responses to brand line

stretches, Journal of Marketing, Vol. 63 No. 1, pp. 88-101.Kiser, E. (1997), Comment: evaluating qualitative

methodologies, Sociological Methodology, Vol. 27, pp. 151-8.Kitman, J.L. (2004), For Saab, some see the beginning of

the end. others see the middle, New York Times, 24 May,

available at: www.nytimes.com/2004/05/24/automobiles/

24dt-autolog.html?ex 1092456000&en 14c996f0790f3aaf& ei 5070&8dt (accessed 9 August 2004).

Lambert-Pandraud, R., Laurent, G. and Lapersonne, E.

(2005), Repeat purchasing of new automobiles by older

consumers: empirical evidence and interpretations,

Journal of Marketing, Vol. 69 No. 2, pp. 97-113.Landler, M. (2005), DaimlerChrysler to scale back mini-car

unit, New York Times, 2 April, available at: www.nytimes.

com/2005/04/02/business/worldbusiness/02daimler.

html?pagewanted all (accessed 2 April 2005).Leong, S.M. (1997), Dominance and dilution: the effects of

extending master brands, Journal of Consumer Marketing,

Vol. 14 No. 5, pp. 380-90.Li, J. (2005), Shanghai gears up in the lane for luxury,

China Daily, 5 May, available at: www2.chinadaily.com.cn/

english/doc/2005-05/05/content_439625.htm (accessed

12 August 2005).Lienert, A. (1998), Brand management at the big three,

Management Review, Vol. 87 No. 5, pp. 53-7.Loken, B. and John, D.R. (1993), Diluting brand beliefs:

when do brand extensions have a negative impact?, Journal

of Marketing, Vol. 57 No. 3, pp. 71-84.Martnez, E. and Pina, J.M. (2003), The negative impact of

brand extensions on parent brand image, Journal of Product

& Brand Management, Vol. 12 No. 7, pp. 432-48.Mintel (2003), Auto Market Vol. 3: Sports & Luxury Cars US

January 2003, Mintel International Group Ltd, Chicago,

IL.Nueno, J.L. and Quelch, J.A. (1998), The mass marketing of

luxury, Business Horizons, Vol. 41 No. 6, pp. 61-8.Pauwels, K., Silva-Riss, J., Srinivasan, S. and Hanssens, D.M.

(2004), New products, sales promotions, and firm value:

the case of the automobile industry, Journal of Marketing,

Vol. 68 No. 3, pp. 142-56.Prabhu, J.C., Chandy, R.K. and Ellis, M.E. (2005), The

impact of acquisitions on innovation: poison pill, placebo,

or tonic?, Journal of Marketing, Vol. 69 No. 1, pp. 114-30.PriceWaterhouseCoopers (2005), Autofacts Executive

Perspectives 2005 Q3 Data Release, PriceWaterhouse

Coopers, New York, NY.Priddle, A. (2000), A marriage of convenience,

WardsAuto.com Primedia Business Magazines and Media,

1 May, available at: http://waw.wardsauto.com/ar/

auto_marriage_convenience/ (8 May 2005).Priddle, A. (2004), British auto making needs more than

charm, WardsAuto.com Primedia Business Magazines and

Media, 29 September, available at: http://wardsauto.com/ar/

auto_british_auto_making/index.htm (9 October 2004).Rao, V.R., Agarwal, M.K. and Dahlhoff, D. (2005), How is

manifest branding strategy related to the intangible value of

a corporation?, Journal of Marketing, Vol. 68 No. 4,

pp. 126-41.Reast, J.D. (2005), Brand trust and brand extension

acceptance: the relationship, Journal of Product & Brand

Management, Vol. 14 No. 1, pp. 4-13.Reuters (2005), Mercedes may drop goal to top quality

survey, chief says, Detroit News, 6 May, available at: www.

detnews.com/2005/autoinsider/0505/06/1auto-173641.htm

(accessed 9 May 2005).Richards-Carpenter, T. (2003), Forthcoming models

Jaguar X-Type Estate: the two-minute guide, Top Gear,

BBC, 24 September, available at: www.topgear.com/

content/news/cars_coming_soon/08/ (accessed 21 October

2004).Rosecky, R.B. and King, A.B. (1996), Perceptual differences

among owners of luxury cars: strategic marketing

implications, The Mid-Atlantic Journal of Business, Vol. 32

No. 3, pp. 221-40.Rugman, A.M. and Collinson, S. (2004), The regional

nature of the worlds automotive sector, European

Management Journal, Vol. 22 No. 5, pp. 471-82.Simister, J. (2004a), Saabs Future, 4Car Writes Series,

Channel 4 (UK), 28 September, available at: www.

channel4.com/4car/feature/features-2004/saab-future

(4 October 2004).Simister, J. (2004b), Is GM selling Saab short?, The

Independent, 10 August, available at: http://motoring.

Brand corrosion

Pavel Strach and Andre M. Everett

Journal of Product & Brand Management

Volume 15 Number 2 2006 106120

118

independent.co.uk/features/story.jsp?story 549737(accessed 11 August 2004).

Simon, B. and Mackintosh, J. (2005), Hyundai wins most

reliable ranking in US, Financial Times, 7 March,Available at: http://news.ft.com/cms/s/2cc10586-8eae-

11d9-8aae-00000e2511c8.html (10 March 2005).Smith, D.C. (1998), Is bigger really better? DaimlerChrysler

merger faces hurdles, WardsAuto.com Primedia BusinessMagazines and Media, 1 June, available at: http://waw.wardsauto.com/ar/ auto_bigger_really_betterdaimlerchrysler/

(accessed 5 May 2005).Smith, G. (2005), Daimler reveals collapse in Mercedes

profits, Financial Times, 10 February, FT.com, available atProQuest (accessed 8 May 2005).

Soubbotina, T.P. and Sheram, K. (2000), Beyond EconomicGrowth: Meeting The Challenges Of Global Development, TheInternational Bank for Reconstruction and Development/The World Bank, Washington, DC.

Srinivasan, N. and Ratchford, B.T. (1991), An empirical test

of a model of external search for automobiles, Journal ofConsumer Research, Vol. 18 No. 2, pp. 233-42.

Stones, J. (2004), Crushed under the weight of car giants,

Marketing Week, 23 September, p. 24.Sutherland, I. (2005), in Have your say on Jaguars about

turn, BBC Coventry and