The much improved global TIV seen through-out 2009-10 appears to be somewhat undermined in the short-term by the fiscal contraction moves of China. Whilst long-term optimism is undiminished and large CapEx projects adding to (or indeed re-filling) global capacity continue, a planned slowing of Chinese growth has obvious consequences for not only the domestic demand - which had hitherto off-set the previous Western slowdown – but also commodity exporting EM regions own car-markets given that their economies rely so heavily on Beijing's economic decisions.
As such the growth trends of global TIV will slow and auto-companies must re-play (though to a far lesser degree) the corporate re-alignment exercise. An exercise which must re-balance: production capacity, factory & dealer inventory levels, the client-supply rate and residual pricing. The slackening of demand-pull then has a knock-on effect through the supply chain which must be orchestrated in an orderly manner so as to maintain revenue and earnings traction.
Whereas the Western economic rebound allowed manufacturers to 'ride the wave', boosted by the previoulsy heavy round of cost-cutting, the short-term requires greater 'nuance and fettle' both internally and externally; as opposed to the previous need for swathes of change to ensure previous survival and upturn reaction.
Every BoD well recognises that the enlarged pie of the marketplace will consequentially shrink, thus must either try to maintain market-share or seek bold expansion, and consequentially every BoD and their managers will be re-assessing and re-defining the core of their 'competitive spirit'.
Exactly how that translates is dependent upon the company's own cultural personality, highly influenced by that of its senior individuals. Yet the ever raised stakes of corporate success or failure typically sees a stretching of the moral-code of competitive action, this witnessed especially so in the arena of tactical initiatives intended to undermine a competitor large or small, and argued internally as on the 'supporting-fringe' of the overall corporate strategic ambition.
Hence today, with automakers facing still distressed consumers, a buyer's market in the fleet sector and cautiousness in new-car plans amongst company directors, both volume manufacturers, intermediate manufacturers (such as Jaguar and Aston Martin) and niche producers are having to rely ever more so on marketing and PR to do much of the 'heavy-lifting' required to maintain unit sales.
Marketing and PR are essentially about broadcasting messages, and more often than not a very singular message, to external audiences and various stake-holders. These messages cover a broad span of requirement and intent: from the filing of company activity reports to regulatory bodies or stock exchanges as legal obligation, to the construct of ethereal value-systems that underpin the brand, to the sphere of hard-hitting, contentious issue-based messages that seek to engender an emotional reaction.
Such messages rely upon a mix of pertinence and boldness, but can be separated by their ultimate intent: whether to positively bolster one's own company or to negatively undermine that of the prime competition.
The act of 'antagonism' seems to have been part of the conflict psyche since the dawn of time, part of the pre-human condition which in its more sophisticated form has unfortunately become an unfortunate staple of the modern society and so corporate world. This psychological tool honed by some from the school playground all the way through to the environs of middle-management, in a belief that corporate life reflects war-like conditions. The teachings of Sun-Tzu and other war-craft gurus become the prevailing attitude; dramatising the corporate arena that of a Roman arena.
Hence, the use of contrived antagonism should be considered deeply beforehand, since the underlying implicit messages sent to the competitor is that of creative bankruptcy and self-regarded weakness; let alone the less than virtuous moral and ethical stance.
Of course 'antagonism' per se comes in various forms, all of which sit at varying positions along a broad grey-scale spectrum, from the application of the light-hearted message to that of the dark-hearted.
The following provide four examples where antagonism – at varying points of that grey-scale - has been intentionally deployed to varying degrees of ultimate 'success':
- Audi's confrontational poster campaign versus BMW
- Jaguar's 'hostile-bid' launch of the new XF diesel
- Aston Martin's use of the 'JOTA' moniker
- VW Group's stated desire to acquire FIAT's Alfa Romeo
In its least extreme guise antagonism is conveyed as light-hearted banter within peer-company advertising, local advertising standards panels the arbiter of advertising standards rules. A well known American example being the poster/ bill-board-battle between Audi and BMW previously located on Santa Monica Boulevard. Audi used a regular sized bill-board for its then new A4 campaign which posited “Your move BMW”.
Recognising the locational importance of the site, prime for stationary rush hour drivers, BMW 'replied' by temporarily installing a neighbouring bill-board five times the size of Audi's, answering with the strap-line “Checkmate”.
In reaction again, Audi stated “Chess? No thanks, I'd Rather be Driving”. A lacklustre and frankly embarrassing response.
The initial antagonistic strike therefor back-fired heavily.
Since the provision of corporate life-support from TATA Motors in 2008 (with its £2.3bn acquisition of JLR & £1bn injection) Jaguar Cars has been under mounting pressure to demonstrate its mettle, especially so as the smaller sibling to Land-Rover but with larger potential market-share, and even more since the announcement that an annualised average of £1bn of investment will be ploughed-into JLR over the coming 5 years. JLR is touted to have been TATA's bread-winner in 2010, contributing £1.04bn to its FY2010 results. JLR margins were announced as comparable to that of the German trio – even that of Porsche - but of this, the major contributor was very probably Land Rover given its ASEAN sales success and level of amortised cost. Also, investment-auto-motives suspects that this level of turnaround would have been internally supported to boost JLR's net financial figures as a precursor to the notion of a 2012 IPO, as reported by India's 'Economic Times'.
Beyond Jaguar's restricted 3-car product range, which is far smaller than the segmentally broader & deeper German marques, it also faces the challenge of trying to rebuild its innate 'brand equity' to match its historic 'brand profile'. Jaguar then has no alternative but to be seen to fight hard, by both its paymasters TATA, and for realistic survival in very competitive premium car segments.
As part of this demonstration of worthiness is decided to 'press launch' its new face-lifted '2012' XF in BMW's hometown of Munich – a very considered and intentional display of antagonism. The car was driven wearing its 'camouflage coat' of black-and white, so as not to give-away exacting visual cues, which could, but that camouflage on German soil also conveying its 'war paint'. This idea for Jaguar to assert itself in the German 3's backyard will have been agreed by JLR's TATA supremo Carl-Peter Forster and the company's CEO Ralf Speth. Thus goading their previous employers.
Yet whilst an interesting stunt, generating press-coverage and buoying internal sentiment amongst, it is doubtful that BMW's Reithofer, Daimler's Zetsche or VW-Audi's Winterkorn will be distracted nor quaking at Jaguar's provocation.
However, the innate 'message' was primarily directed not toward the German 3, but toward the investment community and German car buyers. This then will provide 'split-returns'. Whilst the former may recognise the late sector-entry into IL4 cylinder diesel technology as advantageous for Jaguar by opening up an important new sub-segment, the latter will no doubt remain resolutely nationalistic in car-buying habits. This espousing a form of 'Germany unity' vis a vis the EU's Grecian crisis – thus presently seen as innately unpatriotic to buy a foreign brand of vehicle.
The provocative 'Munich Munch' then may provide a useful temporary PR story, but such stances of 'showing one's teeth' must be backed-up by the true ability to compete. And that relies upon a powerful, prurient and very visible translation of that £5bn investment plan.
A recent FT article quoted an Indian consultant as stating that Jaguar's “product range [was] designed by Ford”...”concern now would whether TATA could step up to the mark with the next generation of models”. It should be noted that Jaguar has always maintained an in-house design and development capability, it simply previously used FMC available design-hardware, FMC platforms / components and FMC production facilities to reduce cross the board costs. However, as the consultant rightly points out the onus is now on TATA to provide the technical strategy plan backing.
This investment-auto-motives believes will partly be derived from FIAT-Chrysler given Ratan TATA's close links with FIAT and the 'sporting platform' interplay between Jaguar-Maserati-Alfa Romeo, with Chrysler and a possibly re-emergent Daimler able to derive a 'comfort platform'. (See previous blog-posts conveying this vision in 2008-9). Another Italian-tie being the Jaguar b99 concept produced by Bertone.
The obvious question then is “if Jaguar has such faith in itself then why the constant – and seemingly age old – self-comparison to the Germans?” In nature, a Jaguar sits alone at the top of the predatory hierarchy, it knows its station and has no need to postulate.
Aston Martin Racing -
AMR is the factory racing team and special-edition model developer for Aston Martin; itself formed from AML's desire for race-win kudos and technical-supply capabilities of Prodrive. Since 2005 AMR has participated within the four GT classes (1,2,3,4) running coupe cars and the Le Mans Prototype (LMP1) through a Lola JV in 2009 & 2010. With varying successes AMR has become an increasingly high-profile particpant in European and US motorsport.
In 2010 it created an alliance with JOTA Sport, the race-team arm of the JOTA group of companies, itself only recently created from the race interests of its co-owners, one a well-known businessman with 'fast-track' amateur racing status, the other an AMR factory driver.
However, the JOTA name was not borne from a whim, though no doubt unstated, automotive connoisseurs will now that the name 'Jota' originally applied to a race-edition of Lamborghini's 1960s Muira, then latterly applied to a Diablo in 1995 and more recently in 2008 notionally applied as a moniker for the Murcielago replacement or possibly a Ferrari Enzo type halo-car.
Undoubtedly AML and AMR have been watching the impressive progress made at Lamborghini over the last 10 years, and well know that if the VW-owned Italian firm were to formally return to track racing with a factory-backed team, it would in all probability be called 'JOTA' given the pedigree.
Thus, investment-auto-motives believes that JOTA racing (and possibly the JOTA group of companies) was infact intentionally created as part of a preceding plan so as to take perceptional ownership of the 'JOTA' name (on the race track) and place it squarely into AMR's hands. This then helps to hinder both any plan VW-Lamborghini may have for factory-backed entry into 21st century motorsports, and furthermore hopes to reduce the sales potential of the 2012 'Enzo-type' product produced by the Sant' Agata Bolognese company.
An alternative 'take' on this is that JOTA Sport also seek to actually gain business from VW-Lamborghini, by offering an 'off-the-shelf' racing outfit which could manage its tentative racing affairs, effectively outsourcing the work, and thereby for AMR avoiding the potential of facing a VW-factory created race team, which would possibly piggy-back upon the experience of the Audi LMP team and the Porsche GT teams.
In short, AMR's alliance with JOTA is one of both obvious antagonism but also about 'damage limitation' regards its potential for future motorsports success. For JOTA, there is the possibility of a later-day sell-out to VW-Lamborghini if it can prove its performance as an 'outsourced-outfit'; one that AMR today knows very well.
An interesting case where the antagonism created is done so with the hope of a greater strategic pay-off. How this will be received by the Italians & Germans remains to be seen.
As such, investment-auto-motives believes that AML/AMR should have instead developed its own secondary supportive identity, the pre-planning of such perhaps incorporating another great name of the past from the broad stable of race identities which span man and machine. Just as Audi re-emphasises its Auto Union heritage with the Rosemeyer & Nuvolari names on concept cars, could that race team JV been alternatively creatively developed instead of targeting the jugular of Lamborghini. It may now recognise just how big a threat AML/AMR imagined it to be, and steer a new course head on.
[NB If this scenario plays-out positively - highly debatable – the JOTA outsourcing scenario could feasibly open-up a future strategic alliance between AML and VW-Lamborghini in a post 2016 era, this when the now renewed Ford technical agreement ends. This then adds potential for a 3rd party to join in technical offering to AML alongside Ford and a presently tabled alliance with Daimler. Though it should be noted that VW's interest would very probably only be crystalised as that of an active shareholder - to initially affect competition restrictions versus Porsche, Audi & Lamborghini and be part of an intricate plan of long-term synergies. This scenario still yet long-away].
VW Group -
The foundations of Germany's industrial success has typically been laid by generations of family businesses, few more revered than the Porsche and Piech families. Their members have from birth been moulded to undertake their roles and responsibilities to the company and the country itself.
This necessary attitude – depending upon personality type and standing - can however become overtly brusque, blunt and intentionally antagonistic toward competitors
Volkswagen's Chairman Ferdinand Piech holds high regard, and tends to be pragmatic in outlook and frank when communicating expectations.
So was the case when he claimed that FIAT's ultimate long-term survival and stability lay in liquidating the value of Alfa Romeo, these funds deployed to solidly construct FIAT-Chrysler. It is no secret that Piech has eyed Alfa Romeo for years and the statement was an implicit sell recommendation of Alfa Romeo to VW Group. FIAT's Sergio Marchionne's simple reply was that “it is not for sale” recognising the ploy for what it was, preferring to gain funding from the de-coupling of FIAT's Cars and Industrial divisions and the intended 2012 IPO of Chrysler.
Piech & Marchionne know all to well that the future of FIAT-Chrysler would be boosted enormously if Alfa Romeo could add product quality and corporate operational efficiency to its possession of strong styling and emotive brand – elements that Piech knows VW AG can offer. But Marchionne knows that Alfa is key to supporting the brand ladder, volume pyramid and group technical strategy, the crux of the matter is the need for Alfa to provide both consistent unit margins year-in year-out and stable-growth volume levels.
Piech's antagonistic 'press piece' antagonism was wholly intended to explicitly sway public and investor opinion, deride his competitor when under operating pressure and indeed to keep the notion of an Alfa sale on the theoretical table by always 'planting the seed'. It was a cheap shot but with very broad resonance and possible / eventual implications.
Whether such antics are 'part and parcel' of a successful chairman's method is debatable, but in this instance not unusual given Piech's style and ambition. And it was no doubt the case that the content of his words played well with his executive team, VW Group en mass, the national public pysche and politician's desire to further Germany's industrial reach and economic certainty.
As seen, intentional antagonism appears in various ways, used for various ends. Its use is believed to be part and parcel of the 'corporate game' and seemingly accords to teachings of Sun-Tzu's 'Art of War' philosophy. It is used in connection with desire for either a specific issue conquest or as part of the long-game in supposedly wearing-away a competitor's resolve.
But unlike armies in the theatre of war, corporations exist in far more complex environments which can in-turn dilute the intended effect, create an unwanted reaction or in this age of corporate responsibility induce negative sentiments from the ever-widening stakeholder community; a community aided by IT and the media-sphere in which the once separate perceptions of investors, consumers and competitors are becoming more aligned and more concentric.
As the West needs to desperately re-build its economic foundations the opportunity for seizing the moment is indeed tempting, but a new era of informal, but well defined 'co-opetition' would be better to assist the prevailing fortunes of most companies, and as a consequence deliver greater stability bolstering corporate valuations, so improving the atmosphere for long-term investor commitment and the stable growth of bond and stock markets.
Now on the verge of a possible global slowdown that could put the West into another reverse gear, the leaders of Western companies should simultaneously try and move the economic gear-lever from 'PARK' to 'DRIVE'. Our mixed-market economies are of course at the behest of capital markets and the volatility still endemic and risk-premium demands means that resurgence will not be automatic. But setting the right ethical business tone will help to ensure it doesn't stall quite as easily as could be the case otherwise. At least in the short-term, such a refreshed positively attuned tactical attitude is one Chairman and CEOs could and should adopt.
In stark contrast to such 'antagonism' comes Ford's decision to retract advertising with the News of the World newspaper given its involvement in numerous phone-hacking cases.
Ford has be seen to have 'done the right thing', though it well recognises that its actions will play-out positively in the eyes of its middle-England customers by 'seizing the moral high-ground'.
Whether a case of good CSR, brand and reputational damage limitation or cynical opportunist PR is open to debate, but it does provide - at least on a surface level – an example of positive corporate leadership, and the very antithesis of being an antagonistic.
Furthermore, it also appears that Rupert Murdoch's closure of the NOTW paper should permit NewsCorp to 're-right' its slipped moral standing, ahead of its UK expansion aims. Aswell of course a re-structure of HR & IT resources within its media, print, web & TV channels.
However, at least the topic of commercial ethics is spotlighted.