Auto Bailout Won't Mean More Advertising Buys

GM, Chrysler Still Plan to Scale Back Spending Despite Rescue Loans

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DETROIT ( -- General Motors Corp. may finally be getting its loan from the federal government, but that doesn't mean it's going to resume its former marketing-spending levels.

Mark LaNeve
Mark LaNeve
Mark LaNeve, VP-vehicle sales, service and marketing North America for GM, which spent some $3 billion last year and is the country's fourth-largest advertiser, indicated that the company has been downsizing its ad efforts since industry sales virtually seized up in October. He said in an e-mail to Advertising Age that Friday's loan announcements "have no effect on our ongoing efforts to scale our marketing activities and spend to a level consistent with our viability plan submitted to Washington and the low level of the overall automotive market."

The country's leading automaker actually increased its U.S. ad spending in all measured media in the first nine months of 2008 -- to $1.6 billion vs. $1.38 billion in the same period a year ago, according to TNS Media Intelligence. But it was in the fourth quarter that auto sales really began falling off a cliff and automakers cut spending sharply.

Fewer first-quarter buys
GM confirmed that it has trimmed an undisclosed portion of its first-quarter TV buys. But a spokeswoman told Advertising Age, "We have not made any decisions beyond the first quarter."

Chrysler, two media executives said, also cut its first-quarter buys, but the company did not return calls for comment at press time. The fact that it also eliminated the top marketing slot, held by VP-Chief Marketing Officer Deborah Wahl Meyer, indicates that Chrysler doesn't consider marketing as high a priority as it once did.

GM, which told Congress earlier this month it would focus on four of its eight vehicle brands, has been in discussions with potential buyers for its Hummer truck brand and expects to have an announcement in the first quarter, Chief Operating Officer Fritz Henderson said at a news conference Friday. He said evaluation of the Saab brand is being handled on the other side of the pond, since as much as 75% of its sales volume is in Europe. GM has started talking to its U.S. Saturn dealers about "evaluating our options" on what to do with the brand, Mr. Henderson said, but he did not offer specifics.

Supporting four brands
The auto giant told a congressional panel in early December that the four brands it plans to support are its top-volume brand, Chevrolet; luxury marque Cadillac; all-truck GMC; and the premium Buick line. GM also said Pontiac will become a niche brand with a reduced lineup, maybe just a single model.

GM COO Fritz Henderson said the Chevy Volt project hasn't been killed, just delayed.
GM COO Fritz Henderson said the Chevy Volt project hasn't been killed, just delayed.
Mr. Henderson said GM has not killed the Chevrolet Volt electric vehicle, which it initially planned to launch in late 2010. In the past week the company said it was putting plans to spend about $350 million to build an engine plant for the Volt electric car on the back burner. But Mr. Henderson said that project is merely delayed. "We have every expectation of completing that project," he said, although he did not reveal any new timetable.

In the same news conference, GM Chairman-CEO Rick Wagoner said the company has a "huge amount of work to do in the next 90 days" to comply with the terms of athe federal bridge loan from the Bush administration. He revealed that GM has also applied for an undisclosed loan from a separate federal fund, dubbed Section 136, set aside for the development of fuel-efficient vehicles. Under that program, automakers or suppliers must spend the money first, then apply for federal paybacks of their outlays.

Long-awaited announcement
President George W. Bush made the long-awaited announcement about the $17.4-billion auto bridge loans Friday morning, saying, "By giving the auto companies a chance to restructure, we will shield the American people from a harsh economic blow at a vulnerable time, and we will give American workers an opportunity to show the world, once again, they can meet challenges with ingenuity and determination and bounce back from tough times and emerge stronger than before."

Joel Kaplan, deputy chief of staff for policy at the White House, said the plan calls for GM to get $9.4 billion in December and January and Chrysler to get $4 billion. GM can get another $4 billion in February. The companies must come up with viable plans by March 31, or they will be required to repay the federal loans.

Jesse Toprak, senior analyst at auto info site, said Detroit needs more than money right now: It could use a stimulus from Washington to motivate hesitant car buyers to re-enter the marketplace. He said Edmunds forecasts that the industry's U.S. December sales will clock in at a seasonally adjusted annual rate of 9.8 million vehicles. "No automaker can survive as a viable business in the United States if fewer than 11 million vehicles are sold annually industrywide," he said.

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