Adweek, August 17, 2008

(Not So) Green Machines

They hoot about their hybrids. They fawn over flex-fuels. But automakers are still cranking out more gunboats than ever. What gives?

'Car companies are putting out a conflicted message,' said Gary Stibel, who heads up New England Consulting Group.

At the 2008 Michigan International Auto Show in Grand Rapids last month, Doug Scheer stood on a small stage flanked by a couple of flat screens at the edge of the General Motors booth. Scheer, who lives in Detroit, is a magician-for-hire, and the b-list auto-show circuit is bread and butter for him. Scheer's paycheck for this gig will be drawn from GM accounts (no small part of why his delivery is richly woven with lines about the automaker's commitment to alternative fuels and its dedication to saving the planet). Plus, audiences of consumers who've been weighing sticker prices all day long no doubt wish they possessed Scheer's ability to turn a $1 bill into a twenty.

But there's one magic trick that Doug Scheer can't do, and that's conjure up an explanation for why, from Dayton, Ohio, to Davenport, Iowa, he's paid to talk about planet-saving technology on a stage surrounded by fat-radialed leviathans that weigh 6,000 lbs. "People wonder how these huge sport-utilities and powerful sedans are supposed to get great gas mileage," Scheer said.

This is hardly a road less traveled. In the late 1990s, U.S. automakers kept cranking out SUVs even as gas prices rose and public opinion began shifting amid environmentalists' superheated warnings about an ailing planet. Meanwhile, Toyota bet on hybrids and was hailed as a visionary. Now it's a few years down the road and while automakers -- Toyota included -- are covering their rear bumpers with eco-themed pr efforts and a few flex-fuelers, it's pretty clear that spotlight never really left the metallic glitter coats of six-passenger gas guzzlers.

"Car companies are putting out a conflicted message," said Gary Stibel, who heads up Westport, Conn.-based New England Consulting Group. "But no more conflicted than the one [from fast-food chains] that say we're supposed to eat healthy, but give us a 2,000-calorie sandwich."

The fast-food analogy is actually a very good one. If SUVs are the equivalent of the triple-decker sub sandwich, hybrid vehicles would be the salads -- and consumers would have to share part of the blame for what happens next. Much like you'll hear Americans preach about healthy eating but still order their Monster Thickburgers, you'll also hear them talk about global warming even as they tool down the interstate in their Lincoln Navigators.

By continuing to stamp out gargantuan vehicles, are automakers merely reflecting the solipsism of the market, or should the industry be taking more of a leadership role and nudge consumers in a responsible direction? And what if Americans really do end up embracing environmentally friendly cars en masse? Will that leave the industry -- Detroit especially -- behind the 8-ball yet again, losing what's left of its market share to smaller, more agile makers who really can see the future?

They Like 'Em Big and Round

Visit any auto show today and you'll see the evidence of all the recent eco-talk: nearly every automaker has a "clean diesel," hydrogen, electric or hybrid product on display. Yet much of what's parked on all that industrial polypropylene carpeting might also make you wonder whether last decade happened at all: Everywhere are massive, 8-cylinder machines drivers have favored since the 1990s, when the SUV buried the minivan.

Shockwaves from the SUV earthquake are still rumbling underfoot now, especially in the sedan line. While the Honda Accord is now a leading mid-size seller, few recall that it came into this world as a hatchback. Chevy's tiny Aveo has, like most Americans, watched its waistline swell. For its part, Toyota's RAV4 has grown like an adolescent. The 4-door sedan has, depending on model, gotten up to 6.3 inches wider and 19 inches longer since its 1996 debut.

To a degree, makers of these ever-girthier machines are only doing what the free-market bible preaches: following demand. No matter what people might say about global warming and alternative fuels, many of them don't want any of it getting in the way of their nice, roomy cars. Figures from the Power Information Network, Westlake Village, Calif., show that consumers are not in a hurry to buy anything other than a gasoline powered engine. Last year, hybrid sales represented a mere 2.6 percent of the 16.1 million cars and trucks sold in the U.S. Diesels accounted for another 2.9 percent and flex-fuel vehicles, which can run on either gasoline or an ethanol blend, accounted for 6 percent. Meanwhile, gasoline-powered vehicles represented 88.5 percent of sales.



And truck sales? Driven by a collapsing home-builder market, pickup sales were off dramatically, but trucks overall represented 53 percent of all vehicle sales, per Autodata. That's a drop from 54.9 percent in 2005, but still up from 50.9% in 2001.

At the same time, consumers are warming -- if only about as fast as the planet itself -- to the idea of more environmentally responsible wheels. Overall, sales of large vehicles have dropped incrementally in the past two years. Edmunds.com reported in February that demand for V8 engines had slipped from the 19 percent share of car-shoppers two years ago to 15 percent today. According to Autodata, while consumers still purchased six times as many pickup trucks as subcompacts last year, sales of those dinky wheels were up 20 percent. And when it comes to hybrid vehicles, J.D. Power and Associates projects they'll account for 6 percent of overall market share by 2012 -- about 1 million units.

Mixed Messages

These numbers are hardly the stuff likely to prompt automakers to think small. As Jim Farley, group vp of marketing at Ford, told analysts during a February meeting, "There are a lot of SUV customers out there." Farley vowed that Ford would keep pushing its larger vehicles.

At the same time, interest in eco-friendly autos clearly is there, and it's growing, and that is what appears to be driving a certain degree of bipolar behavior from Detroit. It looks like this: Make one kind of car, but hedge your bet by talking about another.

Even at a time when the Lincoln Navigator's boasting a second-row console and a "cavernous interior" (their words exactly), automakers' spending on ads for hybrid vehicles rose a hefty 41 percent through November, per Nielsen Monitor-Plus, to a total of $215.6 million.

Ask Mark LaNeve, GM's vp of vehicle sales, service and marketing in North America, if it's more important to go big or go green, and he won't mince words: "Green," he says, "for the next five, 10, 20 years."

In terms of marketing, at least, LaNeve's not kidding. GM spent $39.7 million on ads for its hybrids last year through November, including the Saturn Vue Green line SUV, and the Chevy Malibu hybrid. GM also is spending millions on its "gas-friendly to gas-free" campaign, via Campbell-Ewald, Warren, Mich. Still, the GM roster is overwhelmingly packed with fuel-sucking monsters, from GMC's Yukon (which gets 13 mpg) to Cadillac's Escalade (which does slightly better, at 14).

LaNeve's dilemma is one that also belongs to the whole industry. Choosing between huge vehicles or green ones might not be as bad as a Hobson's choice, but it's not much better than one, either. Much of a green advocate as LaNeve might be, he knows why the market's where it's at right now. "The one thing these smaller vehicles can't do is tow heavy loads," he said, adding that drivers "like to sit up high. They like the flexibility."



Perhaps no one has been as blunt about the big vs. green quandary as Troy Clark, president of General Motors North America. Speaking at the Chicago Auto Show last month, Clark recalled attending a focus group in Los Angeles, sitting behind the mirror as consumers were quizzed over their desires for a so-called "green" vehicle.

"When questioned if they would like to have a 'green' vehicle, these L.A. folks responded, 'Of course, yes,'" Clark related. "And, what type of vehicle would that be? They went on to describe the equivalent of a Chevy Tahoe that gets 45 miles per gallon."

Which means, if auto brands are making a big mistake with their current strategy, it might be one they can't help making. It's hard to fault an industry for hypocrisy when it's following the whims of hypocritical customers, many of whom seem pleasantly untroubled by the fact they want what's technologically impossible.

Take, for example, this Web posting from one driver: "I celebrated last Earth Day by buying a new Volvo XC90 V8, but when is Detroit (and the others) going to give us the rechargeable electric and hybrid vehicles that we really want?"

Perhaps when it figures out how to divide by zero and turn lead into gold. The driver continued: "I want an SUV that I can charge in my garage and drive 500 miles a day." No doubt, top men are working on it.

P Is for Pickle

The big problem is that while it might be easy to understand -- maybe even sympathize with -- the automakers' dilemma, car brands could already be paying a high price for their strategy of playing both sides.

For example, shortly after moving into Ford's corner office in 2000, then-CEO Bill Ford made headlines when he pledged to boost his company's SUV mileage by 25 percent in five years -- a strategy that swerved off the road in 2003 when the company reneged. (That made for even bigger headlines.) The Sierra Club fumed to the New York Times that the automaker was "telling the American people that we can't trust Ford's commitments . . . Bill Ford's claims to being an environmentalist ring hollow."

Meanwhile, the lesson to other nameplates is clear enough: car companies that send out a green message but fail to back it up with real metal and rubber do a swell job of looking disingenuous. Worse, the resulting credibility problem might prompt consumers to wonder if other claims being made about the cars -- such as those about safety on the road -- are equally bogus.

But let's say a company didgo full-throttle with green -- both the product and the marketing -- it faces another problem that goes well beyond the risk of looking disingenuous. "Green makes it tougher for a marketer to deliver the performance message," said Steve Price, former president and CEO of Publicis, Mid America, Dallas. "The perception of being environmentally friendly sacrifices performance -- and that's the world automakers are playing in."



Witness the "Power of H," which is how Lexus presented its hybrid SUV in a campaign that broke in February. While the tag connotes power -- a key component to an SUV driver -- the 'h' portrays a vehicle with an electric component. In ads, the letter 'h' is removed from modern society, showing what will happen in a world without it. The campaign attempts to show that 'h' -- as in hybrid -- has power. Confusing? Just a bit. Until technology catches up with marketing, the idea of "hybrid = power" (especially compared to modern gas engines) is almost, by definition, ludicrous.

Ilana Bryant, chief strategic officer at StrawberryFrog, New York (the agency that Mitsubishi Motors Europe hired to make its Grandis minivan cool enough for men to actually buy), said the key for automakers is to create an added-and believable -- value to the environmental product.

"All brands are finding themselves in this area, because there are few products out there that are just green," she said. "The answer is not to be neutral about it. You can't have a foot in both camps. Those who have been successful with green messaging have taken a stance and made people understand it. People gravitated to the Prius because it set out a set of values. It's an aspirational area. The companies not leveraging that area are those who say, 'Let's just put the message on a background of trees.'"

Green Highway

Observers say that, short of government intervention, even higher gas prices aren't likely to get Americans out of their trucks and full-sized SUVs anytime soon. That also means that car manufacturers are just as likely to continue with some form of the current dual strategy -- paying some degree of attention to green, but only as much as feels safe.
Is that shortsighted? Maybe.

Already, there's evidence -- both regulatory and societal-- that fuel-efficient cars are moving away from a fringe offering to an asphalt standard. In December, lawmakers hammered out a deal on a piece of energy legislation, later signed by the President, that will mandate a 40 percent increase in fleetwide fuel economy by 2020 -- setting a standard of 35 mpg.

Plenty of boomers and echo-boomers out on the road today flinch over mandates like this. But remember that core car buyers of the near future grew up riding around in Honda Accords, not Chevy Chevelles.

"The Gen Y crowd is now getting into new car purchases and that green message will resonate," said Tom Peyton, senior manager of national advertising at Honda. "They will look for cars that are also more affordable. In the next few years you are going to see more affordable green cars. And green messages will be a tenet."

In terms of high-mpg messaging (the "Environmentology" campaign, though now discontinued, was a good example), Honda's been a leader, and has left many nameplates with a lot of road to make up.

Yet for other brands -- even those who've yet to get a set of green wheels rolling off the line -- there's an opportunity in marketing their enviro-sensitive side. That may be the way to go for those brands that may lack the resources and technology to play in the expensive green field, some say.

"Some brands are giving people a look at their operations as part of their green effort," noted Wes Brown, an analyst at Iceology, a marketing consultancy in Los Angeles. "Subaru had ads where it talked about some of the environmental practices in place at its Indiana plant. That was effective for this brand, which doesn't yet have a hybrid, a diesel or a flex-fuel vehicle in its fleet."

Now, all Subaru needs is magician Doug Scheer to pull a hybrid out of a hat.