There have been a lot of changes at General Motors in the wake of a bankruptcy filing, government bailout and plans for an IPO in the coming weeks. Since 2008, the company has shed some 900 dealers, about a dozen auto plants and a number of brands including Pontiac, Hummer, Saab and Saturn.
Though GM has purportedly pulled out of its tailspin and claims it has returned to profitability, that doesn’t mean there aren’t still big changes in the works. The latest business division on the chopping block is the car’s dealer service brand.
That’s right – after 37 years, Mr. Goodwrench is getting a pink slip.
The fictional mechanic – a symbol of GM’s repair and maintenance divisions since the 1970s – will be rebranded Feb. 1 in favor of “certified service” divisions for each of GM’s remaining nameplates: Chevrolet, Buick, GMC and Cadillac.
The marketing ploy is intended to connect the brands with their customers, and hopefully provide an uptick in service revenue for the automaker and its related dealerships. The move is coupled with a push for more service training and a renewed effort to improve customer satisfaction and keep motorists returning to dealers for repairs and tune ups. And more importantly, the branded service departments are meant to build a relationship with car buyers and keep them loyal when it comes time to purchase some new wheels.
But the real question is whether the move will actually move the needle or is just change as the illusion of progress for the once-dominant auto brand.
It’s true that in these tough economic times motorists are driving older cars longer and the demand for parts and service has increased dramatically. Just look at auto parts stocks – AutoZone (NYSE: AZO) is up +53% year-to-date and just reported its fiscal fourth-quarter same-store sales increased a hefty +7%, while Advanced Auto Parts (NYSE: AAP) is up +63% so far in 2010 and saw its fiscal second quarter earnings leap +40%! But at its core, this trend is a move towards being more frugal – and pricey dealership service may be passed over for cheaper repairs performed at local body shops.
And as for brand loyalty, that seems to be a bit of a myth in the current economic environment. Most cash-strapped consumers are looking for the best deals and best value right now, and that’s true for all items like dish soap to big ticket items like dishwashers.
The reality is that in the short term, the loss of Mr. Goodwrench probably won’t pay dividends. The branding move appears to be little more than posturing for the upcoming GM stock IPO.
Jeff Reeves is editor of InvestorPlace.com. As of this writing, he did not own a position in any of the stocks named here. Follow him on Twitter at http://twitter.com/JeffReevesIP.
