AIG Rebrands Itself, But at What Cost?

(MoneyWatch)  The much-maligned American International Group (AIG) took a major step toward reinventing itself this weekend when it removed a sign on its downtown Manhattan offices, and renamed part of itself "AIU Holdings Ltd."

Pundits could take advantage of this with a little gallows humor, such as "AIU? Not so good, but thanks for asking?" But the more serious should ask the question that begs to be answered, "We've already paid millions for their bonuses. How much is this name change going to cost?"

And the answer could be quite a lot. Rebranding is big business in America, particularly for damaged corporations, and the price isn't cheap. Among the companies that have "rebranded," usually after a collapse or public smear: Enron, WorldCom, Philip Morris and, to widen the scope, France's Vivendi. Some of the companies that do this for them are Igor International (not the best name itself!), Brand Logic, Landor and Lippincott.

And their services don't come cheap. In 2002, PricewaterhouseCoopers Ltd. said that it would spend $110 million to advertise its new name. In addition to advertising, think image consultants, new letterhead and business cards, email and replacing those AIG signs, even the ones on the Manchester United jerseys, AIG's football team in Britain. Put it all together and you've got a hefty bill, 80 percent of which comes back to the U.S. taxpayers who own AIG.

Did anyone ask Treasury Secretary Timothy Geithner whether he knows about this, or what it will cost? Probably not. So to help out; let's do a cost/benefit analysis.

AIG's strategy, as outlined by Chief Executive Edward Liddy in the grilling he took from the House Financial Services Committee last week, is to sell off pieces of AIG. He can't do this with its current image problem. So AIG is changing the name of its AIG Direct unit (a competitor of GEICO) back to its old handle of "21^st Century." AIU Holdings is the name of its global property-casualty unit, which operates in Hong Kong and the Far East. And so on.

Is it going to work? Does anyone remember that CrossCountry Energy was once Enron or that Accenture was once a big piece of Arthur Andersen, the disgraced accounting firm? Then there's tobacco giant Philip Morris. After a $10.8 billion judgment against it, it rebranded itself as "Altria," a Latin word meaning "reach higher." This might be good advice for AIG.