In his first interview detailing wide-ranging cuts expected at the automaker, which lost $15 billion in the last quarter, Mark LaNeve, VP-vehicle sales, service and marketing, said GM "is going to pull back slightly in all media types" in 2009, noting that the company's U.S. media partners are helping it become more effective. In each of the last two years, he said, GM pulled back on TV spending and beefed up digital.
The moves come two months after GM Chairman-CEO Rick Wagoner announced the company would reduce and consolidate its sales and marketing budgets as part of a broader plan to right its struggling U.S. operations. At the time, Mr. Wagoner said GM planned to protect "launch products and brand-advertising" budgets.
Mr. LaNeve said last week that GM has already implemented more than half the ad spending cuts it planned for the remainder of 2008. When asked where the reductions were, he said, "It's 100 things. It's a consolidation of promotions and getting out of some. It's production, media, agencies, outsourcing contracts, structural costs and people."
GM had already slashed its 2008 U.S. measured-media outlay by the time Mr. Wagoner announced the cuts, spending $922 million in the first half of 2008 vs. $1.04 billion in the first six months of last year, according to TNS Media Intelligence. During those two periods, GM cut its total TV budget to $487 million from $519 million, while increasing online ad spending to $88 million from $74 million, TNS figures show.
Not ready for some football
Unlike in prior years, the automaker will not advertise during the Super Bowl, since Mr. LaNeve said the timing doesn't fit with any launches for GM's Cadillac brand. A month ago, GM dropped out of its longtime sponsorship of the 2009 Academy Awards broadcast on ABC.
Fran O'Hagan, president of consultant Pied Piper Management Co., cautioned that history shows advertisers that slash ad spending stop generating consumer demand. "It's a downward spiral unless your products are just brilliant and people are beating a path to your door." The former sales and product-strategy expert, who worked at Land Rover, Mercedes-Benz and Jaguar, lauded GM's "great product executions" in the past few years. "But GM had the rug pulled from under them in the past 12 months" as the nation's economic woes and volatile gas prices slowed down the entire U.S. auto industry, she said.
GM sold 2.13 million new cars and trucks in the U.S. through August, or 18% fewer than the same period a year ago, according to Automotive News. GM said it expects to trim North American production in the third quarter by about 10% to 920,000 vehicles -- 176,000 fewer trucks and 76,000 more cars. The automaker also plans fourth-quarter production cuts of about 16%.
Dan Gorrell, founder of consultant AutoStratagem, said GM's fundamental problem is that it still has too many vehicle brands to support. "Their overriding challenge is: How do you manage eight different brands?"
While GM is profitable in other parts of the world, the company's situation in the U.S. "is an albatross around its neck," Mr. Gorrell said. "GM needs to survive in the short term."