The state of the U.S. auto industry is bleak with, two of the Big 3 automakers filing for bankruptcy protection despite having received billions in federal bailout money. General Motors Corp.'s Chapter 11 filing last week—the largest industrial bankruptcy filing in U.S. history—came less than five weeks after competitor Chrysler's April 30 announcement of the same.
Auto industry suppliers have also suffered significantly in the industry-wide crisis, with many clamoring to stay in business. Still, those that can successfully tout their product's benefits and value to the right buyers could be positioned to survive—and even thrive—as the industry changes.
In the meantime, suppliers are seeing increasing global competition for declining volumes, said Steve Rose, practice lead-automotive and heavy duty at Kotler Marketing Group. “You're looking at a 30% or 40% drop in car sales and 50% drop in production, and all of these suppliers who are running with single-digit profitability are faced with shutting half the plant down or the whole plant down for half the time,” he said.
Such dire circumstances have taken their toll on suppliers' marketing budgets. “There have been some Chapter 11s and some mergers,” said Peter Brown, associate publisher and editorial director of Automotive News, which is published by BtoB's parent company, Crain Communications Inc. “None of the really big companies have gone under, but there are a lot who are now violating their bank covenants and doing very dramatic things to try to cut costs. And one of the first things is to whack the marketing budget.”
As a result, suppliers have cut back on advertising and events, said Brown, who was chairman of this year's Automotive Golf Classic, an annual golf tournament that benefits the Boys & Girls Club of Southeastern Michigan. In previous years, the tournament, which has many auto suppliers as sponsors, raised $500,000 in one day, Brown said. This year, it will generate less than half that amount, he said. “We even think that's good given how bad things are,” he said.
It's a mistake for suppliers to assume they can stop marketing, said Jim Cain, senior VP-strategic communications at the Quell Group, an integrated brand communications agency with auto industry clients (see case study below). Instead, they should look at the current situation as an opportunity to position themselves for the future. “The reality is that the economy will recover, volumes will recover and you need to make sure you're viewed as one of the survivors,” he said.
As the industry recovers, Cain said, suppliers may find opportunities that didn't exist before—such as event sponsorships that were previously unavailable because they were taken by other companies. “You may have an opportunity to go back into the market and acquire some new platforms for communications,” he said.
The key, Cain said, is for suppliers to position themselves as a long-term player. “You may not be able to do as much [marketing] as you like, but if you're not out there with a message, you might as well be invisible,” he said.
Rather than going dark completely, suppliers should consider cost-effective communications channels, said Rich Donley, VP-industry leader for the green/industrial technology group at Airfoil Public Relations, a company specializing in the automotive, high-tech and manufacturing industries. They could, for instance, write bylined articles for industry publications, apply for awards so their innovations are recognized, and take advantage of speaking opportunities at events, he said. They can also consider repurposing existing materials or media coverage, he said—anything to contribute to the conversation.
Social media is an ideal way to reach audiences during tough times, Donley said. “It really is a two-way discussion,” he said. “You're interacting directly with that decision-maker and keeping them up to date on what you're doing.”
Marketing communications in any form should be honest and not attempt to hide anything, Donley said. “If you're cash-strapped, it's worth acknowledging; the truth will be told,” he said. “What are you doing to fix it? What steps do you have in place? Are you going to be around tomorrow? It's important to address that.”
Airfoil recently worked with a major automotive supplier facing bankruptcy and plant closings. The agency assisted with internal communications, Donley said, notifying managers and employees about the situation and what to expect, and handled external communications once the news went public.
“The client knew they were going to be in a financial situation that they weren't too happy about,” he said. “But they took advantage of that opportunity to say, "Look, we're going to invest in this, because we have to manage through it and need to get in the driver's seat. We have to communicate where we are and where we're going; otherwise, someone else is going to tell our story and we'll be in a total reactive mode.' ”