Yeeow... A-yip-i-o-ee ay! MG Is Headed to O.K.

Special From Marty Bernstein
AIADA Contributing Editor

It’s not new news to anyone in the automobile business, but the iconic, heritage laden, prestigious British motor car brands are now part of global companies with varied successes.

Ford started it when they bought Jaguar several years ago. As this column is being written the Wall Street Journal reported Ford is investigating whether to sell some assets including Jag and possibly Land Rover which it bought from BMW a few years ago… but I digress.

The next Brit brands in play were Bentley and Rolls-Royce, both of which had fallen prey to sagging economies, limited sales and quality problems. In the infamous corporate, high stakes, $600+ million poker game between Volkswagen and BMW, Bentley was acquired by VW and BMW won Rolls-Royce and Mini.

This was well detailed by David Kiley in his book, Driven. At this time, it’s difficult to say who won. Bentley has a wider range of vehicles and has outsold Rolls-Royce, but the Mini, albeit much less expensive, has been a phenomenal success.

And recently, the fortunes of other British automobiles, Rover and the famous MG brand had fallen on bad times and were in the UK equivalent of Chapter 13. Rover was never a success in America, but at the end of WWII, returning GI’s brought home a really cute little MG sports car, the TC model.

Over the next years, other models were introduced including the MG-A, MG-B and MG-Midget, and sales for MG totaled over 500,000 vehicles until 1980 when MG left the American marketplace. This was a sad departure for many MG enthusiasts including, yours truly, who owned a red MG-A.

To the astonishment of many auto pundits and analysts, a Chinese automotive manufacturer, Nanjing Automobile Group, bought the remnants of both companies – tools, dies, plans and factory – for almost $100 million USD. Brits were shocked and appalled, but that’s only part of the story.

Less than a month ago at a media conference in Oklahoma City, Oklahoma (yes, Oklahoma just like the musical), officials of the Nanjing Auto Group announced the formation of MG Motors North America as well as plans to build a factory in Ardmore, OK.

The goals? To revive, resuscitate and resurrect the MG brand in North America. And to head the new global venture in the UK, Europe and North America, Duke T. Hale, a veteran automotive executive, was named president and CEO.

This was all the fodder I needed to have a lengthy telephone conversation with Duke as he was about to board an airplane.

The new look of MG Motors

MB: Duke, first of all, congratulations on your new assignment. DH: Thank you. It’s the culmination of over 25 years experience in the automobile industry with Mazda, Volvo, Isuzu and Lotus. It’s an opportunity I aggressively went after.

MB: It’s a quarter of a century since a new MG was sold in America, what is left of the brands’ equity except those in a certain age group?

DH: Most people of that age remember the MG-A, MG-B and the MG Midget, but we see two audiences for the MG. The one just mentioned is built-in because there are a lot of people in that group including boomers who recall MG’s. We think there will be strong appeals here, especially, the thousands of members of MG Cars Enthusiasts’ Clubs in North America.

MB: How will you reach a younger buyer? Will you follow the model established by Mini?

DH: We’re not opposed to taking a page or two from the Mini Cooper book. I’ve studied that closely. They did it very well and were very targeted in their approach. They were not blasting all over television – it was not a shotgun approach. A lot of event marketing, Internet, former owners and club members, bill-board, print and public relations and publicity. We will not copy their pattern exactly, but will pick the best and marry it to some of our own ideas.

MB: How will you determine effectiveness and impact potential?

DH: We’re about to find that out. We will do extensive research in North America and some has already started with focus groups. The goal is to find out what drives them -- including social interaction sites like My Space – to a brand. It will help us target that younger group of potential MG buyers. We need to generate and resonate in their minds that MG is cool or whatever the current term is to express cool.

MB: Mini used extensive pre-launch public relations and publicity, a new strategy at the time to introduce an old brand in a new way. Does MG have the same opportunity?

DH: Glad you mentioned that because you’re 150% accurate. Public relations and publicity will be one of the pillars of my marketing plan. As a matter of fact, one of the first people who joined MG was Kim Custer who heads our public relations and publicity area. Since our press media conference in Oklahoma a couple of weeks ago we’ve had over 300 different articles appear about the reintroduction of the brand.

MB: News coverage for Chinese auto manufacturers coming to America has been mixed; from positive to downright negative. What reaction has the MG news generated?

DH: Most of it was very positive. I did not read all of them; journalists being journalists, sometimes there are negatives, but the majority of them were positive.

MB: What have been the negative perceptions and reactions?

DH: The question in some has been -- “Can they produce and present a quality product built in China?” – which is a fair question. I have no issue with the media asking that. The proof will be in the pudding. I’m going to tell you we’re going to build a quality product and they’re going to continue to question it, but until the independent quality awards (IQ and CSI) first come out nobody is really going to know.

MB: Nanjing is one of China’s oldest, but smaller automotive manufacturers, isn’t it?

DH: There are some misconceptions about Nanjing being small, but not quite true. Nanjing has a joint venture with Fiat and Iveco truck. They are building cars of their own brand and also build commercial trucks. So, while some have slanted the news saying they [Nanjing] are “a small maker of cars” in my view they are not telling the total story.

MB: What is the total story?

DH: In addition to the JV’s, they bought MG for $97 million USD, a buy many people questioned. And by the way, they are building a new, technologically advanced production facility just outside Nanjing at a cost of $1 billion USD, exclusively for MG. They are also building a powertrain facility at a cost of $400 to $500 million, and an all new $100 million headquarters for MG. Are they committed? If you’re writing checks for over $1.5 billion for new facilities and that’s before the cost acquisition of MG and the assets they bought at auction from the old MG Rover Group and other expenses for product upgrades.

MB: That’s lot of money on a new venture with a brand that had not done that well over the years. Obviously, you and they believe the future has great potential, right?

DH: They’ve got to be at least $2 billion plus into the project right now. That’s not stuff they’re going do, that’s what they are doing. It’s not just a plan; they are building the buildings as we speak. I don’t know how much more commitment can be made than that.

MB: Several companies have talked about making cars in China and selling them in America, what is the opportunity you see?

DH: We have the opportunity as well as other Chinese manufacturers and some from Korea and India to produce vehicles at a lower cost. And since Nanjing will produce our powertrains, engines and transmissions at a low cost this gives us an advantage.

MB: But cost alone does not sell a new car, there are many other factors in the equation. What advantage does MG have as a Chinese car company?

DH: We are a European car! I am not positioning us as a Chinese car. MG is a recognizable European brand – research proves it still has positive equity. It’s European designed, that’s a fact; European engineered, that’s a fact; and they’re not going to be built just in China.

MB: Where else will MG’s be built or assembled?

DH: There are three sedans from China and there will be two sports cars – the roadster from the Longbridge factory in England and a coupe in Oklahoma. We think this positions us as a global brand as opposed to just another Chinese car. We have the opportunity to get a lot of mileage and power out of the brand and its European heritage; we are a global car company not just another Chinese car company.

MB: I don’t mean to be a geographic snob, but Ardmore, Oklahoma?

DH: There are several advantages to Oklahoma that most have not quite figured out yet. Our financial partner, Michael Davies, head of a company called Sovereign Oklahoma Development and others, has leased and owns close to 3,000 acres that will be a global airfreight hub. It’s just unbelievable – fully loaded 747’s can and are landing, and after the runway is extended, it will be take-off fully loaded; there’s a rail-head that comes into the site; surface carriers have a hub for freight; the site is not that far from the Port of Houston for sea transports that need to be brought to the new factory; and there’s a good labor supply nearby. MG will have 575 jobs in Oklahoma including, the new factory, corporate headquarters in Oklahoma City, and research in Norman, Oklahoma.

MB: Who are other partners?

DH: One of our partners down there is the Chickasaw Nation. People have not started to figure this out, but if we decide to put/build something on sovereign land the tax situation is quite different.

MB: That’s called almost negligible, isn’t it?

DH: (Laughs) Yeah, exactly. We are doing feasibility studies relative to the advantages of building on sovereign land. It could be that we could assemble a vehicle practically at the same price level as one could build one in China. And, this will come as a big surprise to the rest of the world.

MB: And to most of the readers… Is it going to be a good business for Oklahoma too?

DH: Yes, it’s good business. If we can help expand the business and commerce in that area and provide more jobs, that’s a good thing we bring to the economy. And having the headquarters in the same state as the factory appears to be a growing trend. A company can be run and managed far more effectively and efficiently when it’s near the factory.

MB: What are you doing to set up operations and an infrastructure?

DH: We’re going to start in Europe: I’m relocating there in August. We are now making offers to bring talented, experienced people to the new team, many of whom people will know. There will be Americans, Brits, Europeans and Chinese. We want to get the UK and Europe operations up and running in the spring of ’07, which includes when we start to build cars in the UK.

MB: When will you come to the U.S.?

DH: As soon as we’re up and running in Europe we will start putting a limited team in the U.S. during the first quarter of ’07. This group will be responsible for early planning, marketing, PR, setting up the dealer network, agreements – all the things that have to be done to launch a new brand. And we have basically a year and a third to get all this done.

MB: Overall, what has the reaction been – especially from potential dealers and consumers – to the news of the revitalization of MG?

DH: I’m overwhelmed. We are getting bombarded with requests for employment and dealer requests. The Oklahoma Chamber of Commerce has been getting calls from people who want to buy the car. I’ve launched a lot of new cars: Mazda, Volvo and Isuzu, but I don’t think I’ve ever had such an overwhelmingly positive response.

MB: Recently British auto brands are doing well here. Why will MG do well?

DH: We’ve got a lot of advantages we did not have before. Obviously, price and quality; and for the first time in the U.S., we will have a full line of products – the sports car, coupe, and small, medium and large sedans. That’s not a niche player selling 25- to 30,000 a year; we expect to sell a whole lot more. We’re going to surprise the world.

MB: How will you recruit and establish the dealer organization?

DH: Our dealers will be established the old fashioned way. Research will determine the best markets and the right locations, how many dealers we will need; the criteria for selection will include: real-world experience, existing facilities and their CSI ratings. Not all will be exclusive, but we will want dedicated showroom space. We want our dealers to have great return on their investment because profitable dealers put money back in the business and that’s how they will grow … and how we will grow.

MB: You’ve set a lot of goals for the brand, are there other business and personal objectives you’d like to see realized?

DH: I established three goals in addition to being a world class company manufacturing and selling world class cars. I want us to be in the NADA’s Top Ten ranking for CSI (Customer Service Satisfaction), in the top third of J.D. Powers IQS (Initial Quality Study), and want to be recognized as one of the Top 100 companies to work for in the world.

If Duke, his new associates, and partners are able to pull this ambitious business venture off in the limited time they’ve set for them selves, the bosses in Nanjing will be delighted they said hello to a good buy.

Aug 3, 07:40 AM 2006