Hand it to Hyundai.
You can sell anything to some people some of the time (think Hummer), but sooner or later, if you value corporate survival, you have to market a truly competitive product. Staying competitive, especially in industries with long lead-time R&D or complicated and expensive manufacturing tooling, requires attention to those new product ideas that may dramatically change the marketplace. Excepting those rare, unchallengeable patents that create altogether new industries (e.g., Xerox’s plain paper copier, Polaroid’s instant photography, etc.), the big guys don’t have to be first. Even if they trail the garage innovators, their financial and market clout can be used to copy or buy the new ideas.
But when the big guys, even those protected by marketing muscle or a patent’s impregnable castle walls, ignore the dust clouds that signal hordes approaching, obsolescence or obliteration may follow.
Xerox once owned the copier industry. Now their most valuable asset is a near-generic term (“I’ll xerox a couple of copies.”). Polaroid changed the way the world took pictures, but underestimated the digital camera threat and went bankrupt.
Today we witness the lumbering Detroit giants, wallowers in reactionary thinking for decades, asking for bail outs as they strive pathetically to catch up with the fleet, adept, forward-thinking foreign auto makers. While Detroit garnered short-term profits from fuel-inefficient SUVs, Toyota’s new idea, the Prius (disclosure: I own one. See post.), captured attention and market share. Now Hyundai, a Korea-based company caught in the downward spiral of the worldwide economic recession, has come up with a novel marketing idea: Hyundai Assurance.
Hyundai states:
Finance or lease any new Hyundai, and if in the next year you lose your income, we’ll let you return it. That’s the Hyundai Assurance. Starting today you can feel good about buying a car, despite these current times. If you find that you cannot make your payment because of a covered life changing event, we’ll allow you to return your vehicle and walk away from your loan obligation – and in most cases we will cover most, if not all of the difference.”
Here’s Hyundai’s offer. You buy any new Hyundai, make at least two on-time payments on your auto loan, and then you become:
• involuntarily unemployed;
• physically disabled so that you cannot work;
• deprived of a driver’s license due to medical impairment;
• transferred to a job in another country;
• bankrupt (and you are self-employed); or
• dead of accidental causes.
You (or your estate) may then return the vehicle, have it valued (the average of the dealer’s appraisal and the values from industry guides), and pay nothing if your negative equity is less than $7,500. There is no other financial obligation or negative impact on your credit.
Bad news abounds. Consumers are cautious. Nobel Laureate Paul Krugman warned this week of a possible second Great Depression.
Auto sales are dreadful. Year-over-year December sales were down 36%, with Chrysler down 53%. Toyota is suspending production at all 12 of its Japanese plants for 11 days over February and March. Companies are desperate. Hyundai, down 48% in December, may be be one of the desperate, but its no-risk “stimulus package” is innovative.
The big problem is that an auto purchase is postponable in most cases. And with more bad news every day, prices falling, and deals getting better, consumers are on the sidelines.
