From Ad Age TV Upfront Special Report

AUTOMAKERS THREATEN TO PULL MORE AD SPEND FROM NETWORKS

Companies Recoil From TV Upfront System; Plan Shift to Cable, Online, Outdoor

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DETROIT (AdAge.com) -- Automakers have publicly drawn a line in the sand.

The marketers say they are tired of rising advertising rates for diminishing audiences, especially with the auto industry's ongoing pricing pressures and




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rising incentives on the vehicles rolling off their production lines.

Decrease upfront spending
Several major car marketers are vowing to move ad dollars elsewhere if national broadcast networks seek double-digit rate hikes in the upcoming upfront ad-selling period. Some say they plan to decrease upfront spending no matter what happens as they strive for a more targeted reach.

Steven Wilhite, vice president of marketing at Nissan North America, says that although his 2004 combined ad budget is bigger than 2003's for the Nissan and Infiniti brands, he plans to spend less in the upfront this year. Mr. Wilhite also expects to diversify his ad budget over a broader portfolio of media by moving dollars to cable TV, outdoor, online and events.

Mr. Wilhite, who moves to Japan July 1 as vice president of global marketing of Nissan Motor Co., earlier this year called 2003's broadcast TV upfront hikes "ridiculous," because the networks' audiences are losing key viewers for Nissan and Infiniti. He was referring to last year's broadcast TV upfront, which managed 15% price hikes that translated to a record $9.5 billion for the networks.

Symbiotic relationship
The relationship between the carmakers and broadcast networks is somewhat symbiotic, with the overall auto industry being the nation's biggest ad category. Nevertheless, automakers sliced ad spending on the national broadcast networks by 44.4% last year to $1 billion, according to TNS Media Intelligence/CMR. At the same time, car marketers hiked cable spending by 12.5% to $377 million, according to CMR. Their spot TV buys were flat at $882 million, $5 million less than in 2002.

Ford Motor Co.'s Richard Stoddart, marketing communications manager of the Ford division, says the automaker "has several scenarios for allocations" depending on what happens with rates sought in this spring's upfront. However, no matter what the rates are, Mr. Stoddart already plans to increase his Internet and direct-mail spending as he prepares for several crucial launches this fall. Ford division, which sells the most vehicles at the carmaker annually, is increasing its overall 2004 ad budget by 10% over the $793 million spent in 2003.

'Rape and pillage'
An executive at an auto media agency who asked not to be named says his client has already "sent signals" to national broadcast executives that it doesn't want to pay double-digit increases. If such increases occur, the marketer plans to shift more spending into cable and other, undisclosed "options in broadcast and outdoor." Still, the executive expects some sort of rate hikes because the demand is there, but "we don't expect the networks to rape and pillage."

Toyota Motor Sales USA's Toyota Division is "pushing" the broadcast networks for more value, says Deborah Wahl Meyer, corporate manager of marketing communications at the brand. She says the automaker is going into the upfront with the idea of keeping spending levels comparable with its 2003 outlay.

Toyota is increasing multicultural advertising by roughly 10% in 2004, along with more Internet spending. The brand has improved its recent presence in spot TV and could move more money there in 2004.

National broadcast spending by the Toyota division rose by $13 million, or 7.5%, to $187 million last year, but Toyota also increased spot TV buys by $13 million, according to CMR. The brand's cable spending fell by $10 million, or 18.5%, in the period to $44 million.

Still powerful medium
Ms. Meyer admits that "TV is still the most powerful medium out there," but "you're still seeing a fracturing of the marketplace and marketers have to be in more places." She adds that "the great thing about having 17 different [vehicle] models is we don't have to put all our eggs in one basket."

Although General Motors Corp. canceled an estimated $40 million in 2003 upfront TV buys for second quarter 2004, a spokeswoman for the automaker says there will be no overall decline in its ad spending this year. But GM marketing directors have been ordered to do more non-traditional programs and less broadcast network TV.

Gary Cowger, president of GM North America, took a potshot at the broadcast networks in a speech earlier this year, saying the automaker's ride-and-drive events provided better returns and that the "old marketing model is dead." He also signaled the auto giant would shift more money into non-traditional media.

But the auto media agency executive says he doesn't expect GM to back away from the broadcast networks because it needs to launch new models in 2004 and also let consumers know about incentive deals.

Kia considers other media
Up to 15% of Kia Motors America's 2004 budget is shifting from national broadcast TV because of "unrealistic inflation," says Peter Butterfield, president-CEO. The dollars will go instead into magazines, newspapers, radio and promotions.

Mitsubishi Motors North America will also move dollars out of national broadcast and into cable and spot, says Ian Beavis, senior vice president of marketing. He projects that the biggest jump in spending will go to events, an area Mitsubishi hasn't done much in but where the automaker wants to reach out to consumers.

"People are grazing across so many media you have to have total integration," Mr. Beavis says. "You have to have events."

Despite advertiser complaints about national broadcast networks' rates, these outlets still have "massive audiences," notes Eric Conn, assistant vice president of national advertising for Acura and Honda at American Honda Motor Co. "There are a lot of [other] cool media out there, but is anybody really reaching anybody with it?"

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