Should the Taurus Have Stayed Dead?

May 23rd, 2007

Ford Motor will announce that it’s renaming the Ford Five Hundred sedan at this week’s Chicago Auto Show. As first reported in BusinessWeek.com’s Auto Blog on Jan. 4, the 2008 model will be renamed the Taurus.

Ford (http://www.businessweek.com/ticker/) stopped production on the original Ford Taurus last November. The sedan, at one time the best-selling car in the U.S., had become primarily a rental car for Ford by the end of its production run. The auto maker had two plants dedicated to making the Taurus, giving it far more supply—more than 400,000 cars annually—than the retail market demanded. In the last year, Ford consolidated assembly to one plant before closing production all together a few months ago.

Ford CEO Alan Mulally last December told BusinessWeek that he believed abandoning the Taurus name, which had built up so much recognition and awareness in the marketplace “was an incredible waste of an investment.”

What to call its cars has been a vexing problem for Ford, as well as for General Motors (http://www.businessweek.com/ticker/) and DaimlerChrysler’s (http://www.businessweek.com/ticker/) Chrysler division. All three companies have worked hard the last few years to improve vehicle designs and close the quality gap with Toyota (http://www.businessweek.com/ticker/) and Honda (http://www.businessweek.com/ticker/).

In Ford’s case, it sold the Lincoln Zephyr sedan for a year, and then decided to rename it MKZ on the belief that its American luxury brand should have alpha-numeric names along the lines of BMW, Mercedes-Benz, Acura, Lexus, and more recently, Cadillac. In GM’s case, some executives have expressed marketer’s remorse at abandoning names like Deville and Seville for alpha-numerics like CTS, STS, and SRX, which confuse a lot of consumers. Bulbous Blunder

Then there’s the question of negative brand legacy. As GM has dramatically improved its Chevrolet Impala and Malibu sedans, there has been much internal discussion about whether consumers will embrace the substantially improved designs since they bear names that are associated with rental-agency cars and past banal designs. Chrysler recently launched a newly designed sedan, the Sebring, after much deliberation inside the company about whether the car should have an all new name. “I think you can revive interest in an old name with an excellent design,” says AutoNation CEO Mike Jackson.

In the case of bringing back the Taurus name, Ford has another issue. The Five Hundred sedan has been much criticized for its bulbous exterior design. Even Ford President of the Americas Mark Fields last December called it “the much-derided Five Hundred.” Sales of the Five Hundred last year reached just 84,000, down 22% from the year earlier. That’s substantially below Ford’s sales goal. By the admission of Ford’s own managers, the Five Hundred was abandoned, from a marketing standpoint, after its 2004 introduction as 2005 model.

The problem for Ford was that the reviews by most in the auto press were so scathing that the car lost all momentum after its launch. Taking the most heat was the dated exterior design, which many compared to a 1990s Volkswagen Passat, as well as an under-powered engine. Ford solved the engine problem by putting a 3.5 liter V6 engine in the sedan to replace the 3.0 liter engine. The 2008 model will also be updated with Ford’s now-signature three-bar front grille. From Bricks to Mush

Only time will tell if the Taurus name still has some magic in it. “The Taurus was an excellent name when the car launched in the 1980s, and it has great awareness, which is important,” says Max Richards, a Seattle-based independent marketing consultant who often helps companies with product naming. “Now, Ford can just worry about advertising the vehicle’s benefits without having to pump the market just to recognize a name that has no awareness.”

Rolls-Royce Pulls Away From Sudan

May 23rd, 2007

(AP)For groups hoping to stop the violence in Darfur with economic pressure, Rolls-Royce’s announcement that it was withdrawing from Sudan was a milestone.

Rolls-Royce PLC was high up on a hit list drawn up by activists who believe that foreign money is fueling a crisis that has killed more than 200,000 people and driven 2.5 million from their homes. The company, which supplies diesel engines to the oil and gas industry in Sudan, announced last month it was starting a gradual pullout.

Armed with the kind of tactics that helped end apartheid in South Africa a generation ago, the Sudan divestment campaigners believe they will succeed where politicians have failed. It is part of a growing movement to bring citizen pressure to bear that saw protests around the world on Sunday.

The campaign, focusing on the lucrative oil industry, is pressuring certain companies to leave Sudan, where the government is accused of arming militias known as janjaweed who are blamed for widespread rapes and killings of Darfur civilians. Campaigners also are encouraging investors across the globe, from banks to retired teachers with pension funds invested in companies doing business in Sudan to take their business elsewhere.

In the U.S., officials with the Save Darfur Coalition unveiled Tuesday the Divest for Darfur campaign, urging Fidelity Investments and Berkshire Hathaway Corp., based in Omaha, Neb., to cut off their relationships with PetroChina Co., China’s No. 1 oil producer. PetroChina is known to be a major investor in government-owned oil exploration in Sudan.

Anoushka Marashlian of Global Insight, an independent market analysis firm, said Rolls-Royce’s decision shows that companies are worried about the negative publicity of doing business in Sudan.

“I think at a private level (Sudanese government officials) are worried this could produce a ripple effect and deter others from Sudan,” she said. “It doesn’t necessarily mean they are going to amend their conduct.”

The U.S.-based Sudan Divestment Task Force started its campaign in 2005. The idea has come more recently to Europe. The new global edge, activists say, has helped give it powerful momentum.

“It is four years since the beginning of the Darfur crisis,” says Nick Donovan, head of policy and research at the U.K.-based Aegis Trust, an independent organization that campaigns against genocide. But the international community’s approach of peacekeeping and prosecutions in the International Criminal Court has failed to stop the violence, he said.

“The government of Khartoum has never felt under sufficient pressure,” Donovan said.

During the anti-apartheid movement in South Africa, the African National Congress and other campaigners called for an international boycott of South African products as a form of protest. Donovan said campaigners want something similar for Sudan, but also want to be careful not to hurt ordinary Sudanese.

Instead of a broad boycott, the Sudan Divestment Task Force has drawn up a list of around 50 companies to pressure to withdraw from Sudan. Most are in the oil, energy and construction sectors.

According to Donovan, between 40 percent to 60 percent of Sudanese government revenue comes from oil.

From 1999 to 2005, the government’s oil revenue rose from $61.1 million to $2.3 billion, according to the Aegis Trust. In the same period, the Sudanese government’s military expenditure rose from $248 million to $452 million, according to figures from the International Institute for Strategic Studies in London.

Rolls-Royce was one of the “top dozen” targets of the divestment campaign. The British company has not publicly acknowledged that the campaign spurred it to withdraw, but cited “international humanitarian concerns” in its decision.

“We just felt that this was the time to review the position and that prompted the decision we made,” said Martin Brodie, a company spokesman.

French oil services company Schlumberger Ltd., another on the activists’ hit list, was discussing the nature of its involvement in Sudan with the Sudan Divestment Task Force, according to Schlumberger spokesman Stephen Whittaker.

Maria Hamilton, spokeswoman for Lundin Petroleum AB, a Swedish company on the list that is involved in exploratory drilling in Sudan, argued that oil revenues were helping to rebuild the country. She noted that war-battered southern Sudan, just emerging from its own war with Khartoum, depended on oil revenue for reconstruction.

Helped along by the involvement of celebrity actors George Clooney and Mia Farrow, and links between evangelical churches in the United States and southern Sudan, to date, 10 U.S. states and more than 40 universities have agreed to divest their funds from Sudan, according to Adam Sterling, Task Force director.

Sudan Divestment U.K. started in November 2006 and since then campaigns have been initiated in Australia, South Africa and Italy, and are being developed in Brazil, France, Germany and Malaysia.

“There is an increasing awareness on the part of institutional investors of what is going on which comes from investors in the U.S. approaching investors in the UK,” said Ebba Schmidt, spokeswoman for the U.K. Local Authority Pension Fund Forum.

Smuts Ngonyama, a spokesman for South Africa’s ANC, said divestment was a powerful weapon against apartheid, but could not say whether it would work in Darfur.

“Divestment is an important tool in any struggle to put pressure,” he said. “But it is applied when all other means have been exhausted.”

A Roadmap for an Entrepreneurial Economy

May 23rd, 2007

There are a wide range of views about what the U.S. can do to keep its edge in today’s global economy, but no consensus (see BusinessWeek.com, 1/18/07, ).

The Kauffman Foundation, the nation’s largest foundation to promote entrepreneurship, recently released a working paper titled http://www.kauffman.org/items.cfm?itemID=770 which offers a new take on keeping the U.S. competitive. It’s based on input from entrepreneurs and academic researchers on the biggest challenges we face and their assessments of issues tied to U.S. competitiveness.

I was asked for my feedback, and the foundation offered to support the work my team is doing at Duke University after it reviewed our research on skilled immigrant entrepreneurs (see BusinessWeek.com, 1/3/07, ). The Big Four

Bob Litan, Kauffman’s vice-president for research and policy and the lead architect of the roadmap, believes America’s future success will be achieved through the efforts of its entrepreneurs and innovative small businesses. Just as technologies that changed the world—the telephone, automobile, airplane, and personal computer—were all introduced by entrepreneurs, it’s the current and future crop of entrepreneurs who will create and commercialize the innovations that keep the U.S. competitive. Litan says, “It’s time to think big, if we want big results.”

Here’s a summary of the four top issues the roadmap identified, along with its proposed solutions.

1. Ensure a skilled workforce. One of the biggest constraints for the formation and growth of successful enterprises, large and small, is finding skilled individuals with an entrepreneurial bent. A solid education in math, science, and technology is critical, but these skills must be balanced with reading, understanding history, and appreciating culture. School curricula are failing to foster not just excellence in science and mathematics but also creativity and entrepreneurial mindsets among students.

The roadmap says fixes should include fostering entrepreneurship in the way the education system is run, allowing families to choose which public schools their children attend, nurturing entrepreneurial skills from middle school through college, devoting more federal support to science and engineering, and forging an “entrepreneurial” immigration system.

2. Reform health care. Escalating health-care costs are a major concern for entrepreneurs and U.S. businesses in general. Fear of losing health insurance compounds workers’ anxieties about job loss and deters some from leaving their jobs to launch new enterprises.

The roadmap says one solution is to untether health insurance from employment, as recently proposed by President Bush in his State of the Union address (see BusinessWeek.com, 1/23/07, ). This would involve extending tax deductibility of health-care insurance to those who purchase it on their own, and could be funded by a cap on the tax deduction for employer-provided health-care coverage.

3. Promote innovation. Entrepreneurs launching new businesses are responsible for a disproportionate amount of truly radical or transformative innovation—the disruptive products and technologies that affect U.S. competitiveness.

The roadmap suggests three ways to capitalize on innovation and expand it: First, improve university-research commercialization by freeing faculty to negotiate their own deals, and make federal research grants dependent on tangible results. Next, streamline the patent system and limit what can be patented. Finally, provide small businesses the same advantages as big corporations in following research and innovation abroad. The federal government could help by translating international publications and communicating useful knowledge developed abroad to U.S. entrepreneurs.

4. Limit regulation and litigation. Because of their small size, entrepreneurial businesses often bear a disproportionate cost of regulation and liability litigation. Reforms are needed to ensure that major federal and state regulations are implemented only if their estimated benefits exceed costs. Reforms in liability laws are also required.

Kauffman’s roadmap presents bold new ideas and solutions. It shows remarkable insights into the issues entrepreneurs face. Yet it demonstrates a surprising lack of understanding in certain areas. For example, one of its recommendations for boosting entrepreneurship is to increase immigration by removing the caps on H1-B visas. Th is proposal misses a key point—skilled immigrants who enter the U.S. on these visas can’t start businesses or develop deep roots (see BusinessWeek.com, 2/8/07, ).

Also, in advocating increased graduation and immigration rates for scientists and engineers, the roadmap fails to recognize the negative impact that haphazard increases in supply can have on industry salaries, and how this can discourage Americans from entering these professions (see BusinessWeek.com,7/10/06, ).

Even though it’s a work in progress, the roadmap is a good starting point. Rather than debating the problems of U.S. competitiveness, it’s time for us to start debating solutions. Kauffman has added some useful ideas to the conversation.