ACDelco Dumps DDG Program?

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Don H. Thomson
Member of Overthehillcarpeople.com

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August 20, 2008

Jack -
Who wrote this ?
It's an excellent summation of how we went down the toilet
C. A.
*****************
Begin forwarded message:
 
Subject: Fwd: GM's New Oldsmobile? ACDelco, Brand in Jeopardy

> ACDelco created the Dedicated Distribution Group (DDG) which 
> trimmed its distributor base to under 100 distributors nationwide 
> in order to maximize profit by reducing cost. Any potential gains 
> for General Motors appear to have been at the expense of ACDelco, 
> its product sales, it brand recognition and brand equity.

> Saturday, February 3, 2007GM’s New Oldsmobile? ACDelco, a Brand in 
> Jeopardy

> What’s happened to the once valuable ACDelco Brand Name? In the 
> eighties and nineties ACDelco was a preeminent brand and 
> organization serving as the automotive parts marketing arm for 
> General Motors. One might guess the name ACDelco would have had 
> considerable brand equity attached. By definition a brands equity 
> implies a promise of a products quality and allows a manufacturer 
> to charge more for a given product. This results in increased 
> profit.

   If nobody really cares, or knows there is a brand, then 
> there may not be any substantial brand equity or implied value with 
> a company’s product. With all deference to its marketing staff, 
> upper management and the General Motors Board of Directors, the 
> ACDelco Brand today appears to be in jeopardy. Recently while doing 
> research for a friend and client I stumbled onto some interesting 
> information that may suggest trouble for ACDelco. First, let’s lift 
> the hood on ACDelco and study the brands evolution.
>
> Brief History of the ACDelco Evolution
>
> 1901: Two brothers, Frank and Perry Remy, form the Remy Electric 
> Co., and begin building dynamos and magnetos.
>
> 1908: Albert Champion joins forces with Buick Motor Co. and makes 
> spark plugs in the AC Spark Plug Division. The AC of ACDelco is born.
>
> 1916: United Motors Corp. (UMC) forms United Motor Services Inc. 
> (UMS) to sell and service parts.
>
> 1926: Ten years later Remy Electric merges with Dayton Engineering 
> Labs Co. (Delco) and forms the Delco Remy Corp.
>
> 1971: United Motor Services changes its name to20United Delco 
> Division.
>
> 1974: The consolidation of AC Spark Plug Sales Division and United 
> Delco Division creates the AC-Delco Division.
>
> 1995: ACDelco creates a new logo to focus the consumer attention on 
> one unified Brand Image for its many product lines.
>
> 2002: ACDelco DDG (Dedicated Distribution Group) reduces national 
> distributor base from 2,500 to less than 100.
>
> Most of these organizational changes were non-controversial and 
> from a corporate view, necessary. Two organizations AC Spark Plug 
> and United Delco developed and grew separately until a 
> consolidation in 1974 as AC-Delco. They became ACDelco (no hyphen) 
> in 1995. Prior to this all of the various ACDelco products were 
> packaged and marketed as separate brands. AC Spark Plugs, Delco 
> Remy Ignition, NDH Bearings, Delco Shocks, Delco Batteries, Packard 
> Wire, etc.

   The intention of the renaming to ACDelco was to focus 
> the retail and trade customer’s attention on one single ACDelco 
> Brand. ACDelco began doing its best to improve on their new brands 
> recognition throughout this period marketing their products through 
> a distribution chain which at one point exceeded 4,000 automotive 
> distributors and mass-marketer customers.
>
> A Channel Conflict is a Channel Conflict is . . . A channel 
> conflict exists when there are two similar products competing for 
> the same customer. General Motors has had a long history of this 
> behavior and would seem to have all sorts of channel conflicts what 
> with Chevrolet, Pontiac and Buick all selling virtually the same 
> car under a different name. Like the 107.5’ wheelbase: 1988-1996 
> Buick Regal, 1988-1997 Oldsmobile Cutlass Supreme, 1988-1996 
> Pontiac Grand Prix, 1990-2001 Chevrolet Lumina, 1995-1999 Chevrolet 
> Monte Carlo were all made on the same platform. The 109’ wheelbase: 
> 1997-2005 Buick Century, 1997-2004 Buick Regal, 2000-2005 Chevrolet 
> Monte Carlo, 1998-2002 Oldsmobile Intrigue all the same. The 110.5’ 
> wheelbase: 2000-2005 Chevrolet Impala and 1997-2000, Pontiac Grand 
> Prix, again, the same.

    Finally the passenger truck and SUV lines of 
> GMC duplicated Chevrolet all be it with different names. Supposedly 
> these nameplates have produced Brand Loyalty each with their own 
> separate customer base and the consumer is none the wiser. GM had a 
> different sort of channel conflict with ACDelco and its sister 
> company, GM Parts, selling the same customer, the GM Car Dealer. GM 
> knew it could realize a higher profit selling the GM Car Dealer 
> direct than they could through the “middleman” ACDelco Distributor. 
> To eliminate this GM would create a plan for ACDelco’s future with 
> the Dedicated Distribution Group (DDG).
>
> ACDelco launched the Dedicated Distribution Group (DDG) in 2000. 
> The goal was to increase corporate profit by turning the GM Car 
> Dealer business over to GM Parts and let ACDelco concentrate on the 
> automotive aftermarket customer, service stations and independent 
> garages.

   GM Parts would form programs to capture most or all of the 
> GM Car Dealer sales while ACDelco would become more profitable with 
> i ts plan to increase sales while reducing its distributor base. 
> (By estimate ACDelco went from roughly 4,000 distributors in 1995 
> to 2,500 in 2002 before DDG. The number after DDG was 97) The 
> Corporation assumed that if there were fewer distributors then 
> those remaining would be more loyal and would want to stock and 
> sell the entire breath of the ACDelco product line due to 
> territorial exclusivity. They also assumed that the individual 
> DDG’s, with virtually no competition due to exclusive sales areas, 
> would become more profitable and add branch warehouses throughout 
> their distribution areas.

   At DDG’s inception ACDelco’s distributor 
> base consisted of car dealer specialists and aftermarket 
> specialists although many were a combination of the two most were 
> heavily weighted as car dealer specialists. Roughly eighty percent 
> of ACDelco DDG Distributor sales went to GM Car Dealers. With GM’s 
> corporate goal to sell the GM car dealer through GM Parts these 
> aftermarket distributors would now have to make their living 
> without the car dealer as a customer. One also wonders that with a 
> distributor base of 97 DDG’s nationwide would one of those 
> aftermarket customers, a service station or independent garages, 
> necessarily be able to buy an ACDelco part if they needed one and 
> most importantly, when it was needed?
>
> Autos become increasingly complex. With the advent of more 
> sophisticated emission controls, fuel and ignitions systems, the 
> traditional service station, or garage was less able to stay 
> abreast of the increasing vehicle complexity. Computer diagnostics 
> became the norm and simple service stations and garages could no 
> longer keep up with the technology. This forced many car owners to 
> return to the car dealer for reliable service. Due to new car sales 
> incentives there was also a marked decrease in vehicle age. New 
> vehicles need fewer repairs than older vehicles. Finally improving 
> vehicle quality kept vehicles from the need for repair and extended 
> warranties again sent vehicle owners back to their car dealer for 
> service. So to begin with the ACDelco DDG was left to deal with a 
> declining customer base.
>
> ACDelco’s mass marketer customer base was also trimmed. This 
> happened in different ways. ACDelco eliminated the mass-marketer 
> contract and went to one uniform contract for what was left of its 
> customer base. Secondly ACDelco reduced the number of product lines 
> offered to mass-marketers from the thirty or so lines sold to 
> traditional warehouse distributor customers to six product lines. 
> Mass marketers also lost what was referred to as a “meet comp” 
> program where ACDelco priced their products at the levels 
> competitive to other mass-marketer suppliers. ACDelco claimed that 
> they were not realizing any profit on sales to its mass-market 
> customers. The result of all of this was that ACDelco lost much of 
> its mass-marketer business. They also lost their visibility to the 
> average consumer who no longer would see ACDelco Products at their 
> favorite retailer.
>
> ACDelco’s approach to advertis ing also changed. With the sales 
> focus on the automotive installer, not the consumer, ACDelco 
> dropped its consumer oriented advertising and focused on trade 
> advertising. Without visible consumer advertising the public no 
> longer would hear or be reminded of ACDelco’s existence. Out of 
> site is out of mind, so it goes with brand names.
>
> Promises, Promises. When pitching the DDG, one of ACDelco’s 
> requirements was that in return for controlled trading areas, each 
> DDG would be responsible for establishing branch locations. These 
> new branch locations would theoretically offset ACDelco's loss of 
> some 2,400 distributors. When DDG became effective, written into 
> each individual DDG marketing plan was a schedule for adding the 
> branches throughout the DDG’s primary areas of responsibility.

   The one problem was cash! Where would these Auto Parts Warehouses come 
> up with the money for the rapid expansion that was required of 
> them? It had been promised to them, although not in writing, by the 
> ACDelco representatives who had been responsible for selling the 
> DDG. It was said that GM would make sub-prime money available to 
> finance branch expansions. There must have been a reason why GM 
> didn't write this into the DDG contract because it was never made 
> available. Many DDG's would try to adhere to the DDG contracts by 
> adding the required branches would soon find themselves wi th 
> liquidity issues requiring them to raise prices which made them 
> less competitive.

   These were exceptions. The majority of DDG's 
> never bothered to add any branches. In short, no money, no branches!
> So much for history here’s what started me on this rant: I was 
> doing research for a client, looking for keyword phrases around 
> which I would design their website. To do this I use tracking 
> software to find the most popular search terms. I’ll enter a word 
> or a phrase, the software scans the internet and returns 
> information on the number of daily global internet searches and the 
> number of web sites that use that particular word or phrase. It’s 
> not necessarily scientific since I pick which phrases to scan. You 
> may be able to think of several other phrases I could have added. I 
> only entered thirty but I was dumbfounded by the results. The once 
> lofty brand name of ACDelco was right there at number twenty-eight 
> just below “kia parts”.

Author Unknown

*****Overthehillcarpeople.com has no knowledge of the source of this information or its accuracy. It is merely provided for your reading interest!

 

April 24, 2007

E-Mail: DDG Program Mon, 23 Apr 2007 Paul: Did you know Duane Miller and the Regional Manager went into Pat Young's in Cleveland and signed them on Delco Batteries and AC Spark Plugs ONLY!!!!  What happened to "FULL LINE DISTRIBUTION" ( The DDG Program) or you were out of  the ball game?  That didn't last long.       Next thing they will be back into the Mass Marketers trying to sell plugs, batteries and filters.   I don't think it will work this time.       I know you weren't one to save paper, but at one time we had a history of ACDelco in the front of the Policy Manual.  Do you still have a copy?  The GM retirement club wants me to a presentation next week at their luncheon.  Let me know.  Regards, JKH

 

March 21, 2007

Here is an interesting blog about ACDelco and the DDG program:

Click Here:http://www.acdelcobrand.blogspot.com/