Archive for May 6th, 2009

Does anybody really think that Chrysler will survive?

May 6, 2009

Ken’s Take: Let’s see …. a union controlled company, run by Italian automakers, cranking out inherently unprofitable clown cars.  Does that sound like a formula for success to you?  Call me cynical, but I’m betting under on this one.

Great editorial in WSJ today titled “Return of Le Car”.   Worth reading.  Hear are a few of the highlights.

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Last week Pres. Obama said that he hoped you would buy an “American car” — though apparently not one built in a red state in a plant owned by Japanese or German investors. He meant a car built by a company headquartered in Detroit, even if the car itself is assembled in Mexico or Canada. How confusing.

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Chrysler would be in deep yogurt in any case amid the market collapse, but its other problem is a decent franchise in Jeeps, muscle cars, minivans and pickups — and nothing to meet Congress’s stiff new “corporate average” fuel economy rules, and nobody to supply the billions to develop such vehicles and (inevitably) bribe customers to drive them off the lots.

Daimler, its previous parent, certainly had no desire to fund such profitless extravagance. The Germans took a lot of guff but they’re the ones laughing now. They sold their majority stake in Chrysler just months after Democrats took over Congress, and just weeks after President Bush began blathering about “oil addiction” and echoing Democratic demands for stringent new fuel-mileage rules (after opposing them for years).

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Not since Renault teamed up with AMC to bring you Le Car has an odder pairing been seen — or a less promising one.

Credulous media accounts insist the only challenge now is whether Chrysler can hang on for two years until Fiat begins churning out U.S. versions of its popular European models in U.S. factories. Goodness.  Unless gasoline prices go to $5 a gallon,no one can be so foolish as  to believe making and selling teensy eurocars in the U.S. is anybody’s route to salvation. Even in Europe…  a move to bigger, more powerful cars is underway. Motorists are getting fatter and older — and unwilling to contort themselves to get in and out of a car … which ought to caution against any hope that the pixie car will sell particularly well in the U.S.

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Trying to beat Toyota at its own game is a nonstarter. Toyota sets a standard of quality and technology that all must meet — that’s the price of admission. But “what we have that Toyota does not have ?”

Some [Obama auto] task force members acknowledge that the drive for profitability is likely to collide with Mr. Obama’s fuel-efficiency and low-emission goals.”

When will Team Obama explain exactly how Chrysler is supposed to make money building the “green cars” Mr. Obama wants it to build.   You already know the answer: You, the taxpayer, have not finished chipping in to keep Fiat-Chrysler alive.

Full article:
http://online.wsj.com/article/SB124157578117190427.html

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Posted in Autos - Travel, Environment - Green, Obama Administration | 1 Comment »

Some Brands Never Die: Liquidators License Bankrupt Brand Names

May 6, 2009

Excerpted from New York Times, “Brand Names Live After Stores Close”, by Amy Zipkin, April 14, 2009

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In the last year, a string of retailers have gone into bankruptcy — Sharper Image, Linens ’n Things, Circuit City and Fortunoff among them. But while the stores have disappeared, their names live on.

And the companies that have breathed new life into these brand names are, paradoxically, some of the same ones that had led the stores through their dying days — the liquidators.

Liquidators have bought the rights to use the names of Sharper Image, Linens ’n Things and Bombay, the onetime furniture retailer. The liquidators — who prefer to be known as asset recovery specialists — have also expressed an interest in buying the Circuit City and Fortunoff names.

Already, new merchandise with the Sharper Image name is available at retailers like Macy’s, J. C. Penney and Bed, Bath & Beyond. A new Web site for the Linens ’n Things brand, lnt.com, is up and running. In addition to the bedding and bath products the chain was known for, the site also carries toys, pet products and baby accouterments.

Liquidators spent about $175 million to acquire the Sharper Image, Linens ’n Things and Bombay names and predict a billion dollars a year in sales for Sharper Image and Linens ’n Things in each of the next five years.

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The value of brand names is being redefined, as “the liquidators are taking the definition of assets and extending them to the brands themselves.” 

The liquidators say they see themselves as brand licensing experts who will receive royalties for the products without the need to pay rent or a sales staff. “It’s not a capital-intensive business. It’s a royalty-driven business. It’s like an annuity.”

Those familiar with intellectual property rights say there is no guarantee that a revived brand will be successful after a retailer has gone under. The brands will compete with others that do not have troubled histories.  Still, with the recession continuing, merchandise with a familiar name may prove attractive to consumers.

Edit by DAF

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Full article:
http://www.nytimes.com/2009/04/14/business/14liquidate.html?ref=business&pagewanted=print

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Posted in Mktg - Brands | Leave a Comment »

Making Money in Magazines: Is It Time for a New Pricing Model?

May 6, 2009

Excerpted from New York Times, “In Switch, Magazines Think About Raising Prices”, by Stephanie Clifford, April 13, 2009

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Most big magazines’ subscriptions cost on average little more than a dollar an issue. But now, as they consider the decline in advertising and the success of magazines that have increased prices recently, some publishers are wondering whether they can raise their prices without losing subscribers.

“We’re realizing that the product is undervalued,” said the chief marketing officer of Hearst Magazines, which raised cover prices on more than half of its magazines last year and plans to raise subscription prices this year.

Publishers have long set low subscription prices and have even lost money doing so, assuming that the real money came from ads. Subscription revenue was gravy.

It is a “model where magazines essentially try to gain as many subscribers as they can and allow advertising to pay the bills.”

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“Think about the cost of a movie ticket. Think about the cost of your subscription for cable television. Think about the cost of going to a sporting event,” Mr. Clinton, the Hearst marketing chief, said. Those industries, he said, “have kept pace in passing on more of the cost to the consumer, and the consumer’s willing to pay for it.”

The Economist is leading the charge on expensive subscriptions, and its success is one reason publishers are rethinking their approaches. It is a news magazine with an extraordinarily high cover price — raised to $6.99 late last year — and subscription price, about $100 a year on average.

Even though The Economist is relatively expensive, its circulation has increased sharply in the last four years. Subscriptions are up 60 percent since 2004, and newsstand sales have risen 50 percent, according to the audit bureau.

“We get more money out of our readers than advertisers, and that’s a very different model,” said senior vice president for marketing in the Americas at the Economist Group. “We’ll never discount the kind of content we have.”

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The Economist’s readers, it could be argued, are professionals who can afford price increases. But one of the most popular and expensive mass magazines, People, has also been raising its prices without losing readers.

The subscription price for People has risen about 5 percent, to $104 a year, in the last four years. The cover price has risen 21 percent, to an average of $4.09 . In that time, People’s subscription and newsstand sales have both increased slightly.

“Our strategy right now is to maintain a premium price on both sides of the equation,” said the president and group publisher of Time Inc.’s (People’s) style and entertainment group.

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Interestingly, whether consumers pay $5 or $50 for a subscription does not affect their perception of the magazine, according to a study conducted four years ago by the media consultant Rebecca McPheters.

Given those findings, the price a consumer pays should not matter to advertisers, since it does not affect the reader’s attitude toward the magazine–“the fact is, the pricing comes as a result of what the consumer is willing to pay.”

Given the economy, it may not be “a propitious moment to launch this,” said Victor S. Navasky, chairman of The Columbia Journalism Review, but “to the extent that the publication is aimed at a segment of the population that can afford it, why not?”

Edit by DAF

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Full article:
http://www.nytimes.com/2009/04/13/business/media/13circ.html?ref=media&pagewanted=print

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