In 2016, GM ceased local manufacturing in Australia. Two months ago, after dismal sales in 2019, GM announced it would kill the Opel-based Holden Commodore and Astra to focus on Holden-badged trucks and SUVs. And now, Australians are forced to confront GM’s termination of the Holden brand.
The 17th of February, 2020, is a day that will go down in history for anyone involved in business within Australia and New Zealand.
Following a petition of retail ‘collapses’, as disruption hit the retail sector in 2018 and 2019, one of Australia’s most well known and oldest automotive brands announced their ‘retirement’.
Retirement? Let’s say it acknowledged its death. General Motors has announced the end of the Holden brand in Australia and New Zealand.
GM Is Shutting Down Holden
Holden announced Sunday that its parent company, General Motors, will be shutting down the sub-brand effective 2021. The news comes just three years after GM closed the Australian automaker’s last remaining assembly plant, turning Holden into a pure importer.
The decision to kill Holden was strictly financial, according to a statement by the company. From the release:
GM has taken this difficult decision after an exhaustive analysis of the investment required for Holden to be competitive for the long term in Australia’s and New Zealand’s new car markets. Regrettably, this assessment determined such an investment could not meet GM’s investment thresholds, including delivering an appropriate return.
Considering Australia and New Zealand make up less than one per cent of the global market, having to produce and ship region-specific right-hand-drive variants of cars was just too expensive to justify.
Holden says it will continue to support current customers by honouring all existing warranties and product support. It will also tend to recall or safety issues, should they arise. Spare parts and servicing networks will continue to be available for at least ten years.
According to a report from Australian site caradvice.com.au, General Motors still plans on selling niche vehicles from its lineup in the region and will replace the Commodore in the country’s Supercars series with the Chevy Camaro—though nothing’s been confirmed.
Holden is an iconic brand, and we’re sad to see it go. Though it may have only sold cars in Australia and New Zealand, its presence reached around the globe thanks to its production of exciting rear-drive, V-8-powered sedans, wagons, and utes.
How could this happen?
How could one of Australia’s most well-known brands get it wrong?
So wrong, they are prepared to walk away from a marketplace that sells over 1,000,000 new cars a year and transacts a further 2 to 3,000,000 used cars a year.
On a per-capita rate that’s a great car market, even though the volumes are small.
When big businesses close down, there will always be a complex web of reasons why. Journalists and commentators are going to be writing about Holden for decades.
As a brand experience consultant, my interest is in brand insight.
Here’s the big idea…. Holden failed to close the brand gap.
There might be a host of reasons why General Motors want to exit their capital out of Australia. Still, at the end of the day, all those reasons will fall under the simple principle – Holden failed to close the gap between brand promise and brand experience.
What’s a brand gap?
A brand gap is a difference in ‘who we are as a brand’ (brand character – internal culture, behaviours, systems), ‘who we say we are as a brand’ (advertising and communications), ‘who our customers say we are as a brand’ (customer beliefs, reputation) and who we need to become as a brand.
Somewhere in the vectors of who we are, who we say we are and who our customers say we are and who we need to be, is the truth of who we are.
This difference is what’s commonly known as the brand gap—a gap in beliefs, perceptions, thoughts, ideas, personality, principles, purpose.
Fast fact for the comfortable brand manager reading this. Every brand is in a brand gap, everyone. Yes, that means you too.
His is about Holden so, let’s go back into the story.
Holden in the 1990s
Let’s go back in time, not to the genesis of Holden, a saddlery in the 1850s but the loud, vibrant 1990s.
In the 1990s just as Wilson Phillips belted out ‘Hold On…..just one more time’ the car brand Holden was going from strength to strength.
Yes, thank you to all those that got the ironic pun.
In the 1990s, market share for the Holden brand rose from 21 per cent to over 28 per cent. Holden is manufacturing Australia’s best-selling car and exporting it in significant numbers.
By the end of the decade, and the turn of this century, the business was starting to go downhill for Holden. In less than 5 years, which seemed like a dominating position at the top of the car industry began to crumble. Market share had plummeted by 50%, down to 15% in 2006. When any brand goes into freefall with increasing price competition, panic is likely to kick in.
In my view, here is where the problems started. The first big brand gaps had their origins in the early 2000s as Holden took the view that cutting production costs was the key to maintain sales leadership.
- Cost of living pressures, especially the ongoing headline of rising petrol prices, was impacting the traditional V6/V8 passenger car sales, a segment Holden owned.
- New smaller, low-cost cars were appealing to youthful new car buyers. Asian brands like Hyundai and Kia were gaining market share, showing they were real competitors.
- New entrants in the marketplace were focussing on rising trends of mobility and were faster to market with technology integrations to allow younger buyers to connect iPods and emerging smartphones.
When market share falls, fix the product, don’t cut quality.
Unfortunately, General Motors appeared to take the view that production cost efficiency was the path out of sales declines.
In the early 2000s, Holden’s product development was a well-entrenched process of taking cheaper models out of Opel to feed a manufacturing engine. This then shifted to Daewoo when GM upped its investment to a 70% ownership of the South Korean brand.
This enabled a rapid, panicked product strategy in response to the decline of V6/V8 passenger cars and the rise of small cars and SUVs.
From 2005 to 2010, Holden:
- Rebadged the Daewoo Kalos as the Holden Barina
- Replaced the Viva with the Holden Astra
- Introduced the Holden Captiva, dropped the Frontera and Jackaroo
- Replaced the Vectra with the Epica out of the Daewoo product book
- Lost the Rodeo to Isuzu and relaunched it as Colorado
- Introduced the Holden Cruze as a direct import from Daewoo unchanged.
Within 5 years, and to set up this last decade of sales, Holden had assembled a hodgepodge mix of products pulled together with a focus on ‘cheap’ to compete.
They’ve also dropped two quintessential Australian names: Jackaroo and Rodeo, replacing them with a mix of European and American names. On its own, this sell-out of cultural connection is likely to have irritated many thousands of Australian buyers.
In Holden’s own words they believed success came from great service and cheap products;
“Australia has one of the most competitive new vehicle markets in the world, in both model proliferation and price. More than 50 brands with over 350 models combined are vying for sales of approximately 1.1 million vehicles per annum. In this strongly competitive environment, a brand will not survive if it does not provide excellent service to customers and offer competitively priced products.” – Holden, ‘New Car Retailing Industry – a market study by the ACCC 2016‘.
The cavernous gap of brand beliefs was being put into action as these models were hitting the streets under powerful national advertising campaigns.
The product strategy even left different models of the Holden brand with conflicting user experiences on items such as cabin fit-out. There was no consistent brand experience like customers were used to with VW, BMW or Mazda. Where in the world, Holden had ‘grabbed’ the product, determining how your cabin or steering column was set up.
Customers, now educated on UX (User Experience) as a function of the overall brand experience by new technology brands like Apple and Google are noticing this UX fail and social media was starting to light up.
At the same time that Australians were putting more and more cultural content and identification into Anzac Day, Holden was de-Australia Using the iconic Australian brand.
It became clear people weren’t buying Holdens, they were buying a cheap import with a Holden badge.
You are probably wondering, well, what’s the problem? Isn’t this what Hyundai and Kia and other Asian brands were doing too?
Aren’t cheap imports the secret to new car sales? Why can’t Holden? Aren’t they meeting the market? Yes, but no.
The first problem is the dealer network is not making money. According to Holden’s submission to the ACCC for the’ New Car Retailing Industry – a market study by the ACCC 2016′, dealers were making on average a 2% margin across the industry.
Let’s assume Holden’s market performance of average to below-average puts a lot of their dealers in the network on the wrong side of the ledger.
The second problem, and the primary topic of this review, comes when product development does one thing, and marketing does something else.
In this instance, a brand promise that oversold a product reality. The result, a gap appears and starts stretching out and out and out.
Marketing, sitting in an office in Australia needed to sell the Holden brand. So sell it they did, with enthusiasm, clarity and lots of money.
The problem is the mismatch—the brand promise conflicts with product experience.
A Holden brand, deeply connected to the highly successful Commodore brand had failed to leverage equity into the small car segments and the SUV and 4WD Ute segments – which by now were growing rapidly.
Satisfaction does not equal advocacy.
Disclaimer: Personal opinion
I didn’t think Holden was making my drive better when my Holden Cruze was on fire, on the side of M1, late one night driving home from Brisbane airport.
Kudos to Holden for replacing this at no cost. This was the kind of good customer service that saw the Holden brand topping the 2018 customer satisfaction surveys.
However, satisfaction does not equal advocacy. Care a lot about customer satisfaction. Care 10x more on customer advocacy. Solving problems, and doing the right things keeps the customer satisfied, delivering quality and value builds advocacy.
Satisfaction means I’m satisfied with the sale that just happened (a lagging indicator), brand advocacy means I’m going to recommend or buy again (a leading indicator).
Was I satisfied Holden fixed a quality problem on a near new Holden? Absolutely. Very grateful, very satisfied.
Would I buy another new Holden? Not in a million years. I loved Holdens, my parents had bought at least 8 Holdens over the years, and I grew up aspiring to have one, got excited when the neighbours got a new one…. 20 years after buying two, my wife and I were out.
Perhaps not everyone had this experience, but perhaps a lot of customers were starting to have smaller moments of ‘gap truth’.
The promise did not match the product.
To win, focus, niche, focus some more.
Holden made a big strategic marketing error in 2005 and then repeated it in 2017.
As a no. 3 brand, you’re not in a position of leadership. Leaders can defend with new products, expand market segments and grow the base. No 3 brands with falling sales need to think like a start-up.
You win back customers with a niche focus and deliver on the promise.
In October 2017, via AdNews, Holden’s director of marketing and customer experience, Mark Harland, made a series of statements.
“…we need to identify ourselves as not just a fantastic new Commodore, and we need to identify ourselves as an SUV company and a truck company and play in some segments that we may not have played in as much in the past.
“Buying a car is an emotional thing, and we need to evolve to be a lot more customer-driven marketing company…”
(Regarding that last statement, I would suggest anything less is business suicide).
“We’re using different properties to talk to different people. They may still love supercars, they may love their sport, and we still have those properties to talk to those people.
“Then there are other properties that we’re bringing on board. As an example, we are big supporters of women’s AFL.
“So starting to look at talking to more women, bringing more young people into the brand. That could be through sport, that could be sponsorship, that could be through different diversity initiatives that we’re doing”, said Mr. Harland.
Let me just say I think Mark Harland had one of the toughest jobs in marketing trying to turn around Holden.
Not only would he be fighting accountants ripping the quality out of cars but also feeling the immense pressure to rebuild Holden into the market leader it once was quickly.
Holden, at the end of 2017, had just committed to building and launching a new portfolio of 24 new vehicles by 2020.
So, Holden was talking to everyone, in almost every segment, with 24 new vehicle products, this time not in 5 years but now in less than 3 years.
It certainly does, 2005 to 2010 is history repeating itself from 2017 to 2020. Leaders acknowledge the corporate mistakes and learn from them, don’t let bad history repeat. Had Holden lost who they were, had they lost the human touch, the desire to be authentic, warm and deliver on the unexpected?
Will they still make Holden cars?
No. Production of the cars will have ended by June.
General Motors has said that the investment required to keep Holden alive is greater than the return it is getting, so it will no longer be making that investment.
But you can still buy Holdens that have already been built and are currently for sale. GM Holden’s interim managing director Kristian Aquilina said this process might take “several months”, with a few thousand cars either currently for sale or about to come out of the production line.
So if you want to buy a new Holden before the closure, the clock is ticking — they’ll all be gone by the end of the year.
What happens to Holden I already own?
GM says it will continue to support its cars with “warranty, spare parts, servicing and recalls for at least the next 10 years”.
Mr Aquilina says all of these services will “work in exactly the same way as they do today”.
GM says no current Holden owners will experience any changes, and the company will be keeping a number of staff in place to make sure the transition is smooth.
How exactly that will work remains to be seen — although Holden has said it will “establish a national after-sales network” to support existing customers — Daniel Gardner from WhichCar magazine told the ABC GM had a legal obligation to make good on its promise.
“If the words of the executive team are to be trusted — and they must be, because Holden is legally obliged to support existing owners for a number of years — Holden’s saying 10 years [ongoing support],” Mr Gardner said.
“If you own a Holden and have only just bought one, you’ll be able to service it, buy parts, and there’ll be after-sales care there for 10 years at least. Not a lot will change.”
How many people will lose jobs?
Of the approximately 800 people currently employed by Holden, around 600 will be out of a job by June. The rest make up the after-sales teams who will be required to fulfil the commitments made to current owners.
“Every individual is being thought of as part of this transition,” Mr Aquilina said.
“For those whose roles are impacted, we will provide an appropriate separation package, we will provide placement support, and we will provide transition support.”
There are 185 Holden dealerships in Australia and 31 in New Zealand. GM is holding a “Q&A session” with dealers today, and says it will formulate a transition plan and “treat them fairly”.
We must learn the lesson that in time, the truth of who we are will be known and that brand character matters.
The only way is to be true to who you are today and where you need to be tomorrow and the reality of what you do today.
The enemy is the gap.
Sadly, the billions the federal government spent on keeping Holden in the country have been wasted because the vision, strategy, market focus, product focus, and business model have been set by a small number of corporate executives who failed to listen to customers. They’ve pursued a strategy of cheap products with a highly valued brand image slapped on top.
It’s understandable, but it’s sinful. It shouldn’t happen, but it does.
Holden’s rot set in at the turn of the century. It took almost 20 years for the rot to destroy the 150-year-old brand. It was within the falling sales and the toxicity of rushed strategic thinking that the clarity of sound brand principles was lost.
The gap, the only enemy that existed, had won.
The General called the brand home to Detroit to sit in a cellar with a host of other gap beaten brands in North America.
Maybe one day, an entrepreneur will buy the name out and do something interesting to bring it back to life.
GM international operations senior vice president Julian Blissett said the decision was “dreadfully heartbreaking for the team back at Holden”.
Mr Blissett said there were “lots of tears, lots of hugs” among staff when the news was broken.
Mr Gardner said for the wider automotive industry there was sadness “but not a great amount of surprise” at the news.
“We have seen this writing on the wall for many years if I’m completely honest,” Mr Gardner said.
“It’s a very sad day. It is a great loss. But honestly, this is the latest — perhaps final — installation in what has been a downward decline for many years.”
With the discontinuation of Holden, Chevrolet plans to continue exporting the Camaro and Silverado to the Australasia region under a newly proposed formed entity, General Motor Specialty Vehicles, which would handle the distribution and conversion of key Chevrolet vehicles after Holden ceases operations, continuing under the HSV arrangement.