AIG brand, once golden, is now a liability

In a recent TV ad, a little boy walks into his parents' bedroom in the middle of the night, unable to sleep. But it's not bad dreams that are keeping him awake.

"I'm worried about this family's financial future," he announces.

Don't worry, his dad assures him, "we're with AIG."

The problem for American International Group Inc. these days is that many current and potential customers are worried about its future. Public outrage over huge bonuses paid to AIG employees merely highlights the fact that the financial service giant is staying afloat only with the help of tens of billions of taxpayer dollars.

The deluge of bad publicity -- which AIG's regulatory filings delicately call "headline attention" -- is gnawing at sales in the company's core insurance businesses, and may be making it harder to get a good price for some of the units AIG is trying to sell to raise cash.

The bonus brouhaha also makes it likely that the formerly well-regarded AIG brand name will one day disappear from the marketplace, even if the company itself survives.

"There are a lot of people angry out there who don't want to do business with them anymore," said Barbara Casey, founder of Los Angeles public relations consulting firm Casey & Sayre. "Their ads say, 'Trust us,' but spin is not what they need to be doing right now. They need to take responsibility and make sure what happened doesn't happen again."

Even that may not be enough, said Peter Sealey, adjunct professor of marketing at Claremont Graduate University, who said AIG's PR crisis rivals the Tylenol debacle of the early 1980s, when tainted painkillers killed seven people.

"The only solution," Sealey said, is to "re-brand the company and move on."

Company executives appear to agree.

"I think the AIG name is so thoroughly wounded and disgraced that we're probably going to have to change it," Chief Executive Edward M. Liddy said at a congressional hearing this week, noting that the process had already begun.

For instance, Woodland Hills auto insurer 21st Century Insurance, renamed aigdirect.com after AIG bought it out in 2007, went back to its old name in November.

AIG's near-collapse was triggered primarily by huge losses at its Financial Products unit, which lost billions when complex bets it made on the housing market went bad.