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The strikes that have shut down production lines and ad budgets at the nation's largest measured-media advertiser, General Motors Corp., are sending significant reverberations through media companies and ad agencies.

Some of GM's agencies could be forced to lay off staffers temporarily if the strikes continue for too long, executives at those shops said. And magazines, TV networks and local stations stand to lose hundreds of millions of dollars in revenue.

Last week, GM and two auto workers' unions went into arbitration aimed at resolving the strikes.


Network TV executives said GM's spending cuts are reminiscent of those made by Johnson & Johnson's Tylenol during the contamination scare in the early '80s. But the networks are in a stronger position in the current economy and said they are having little trouble selling time booked by GM to other advertisers.

"We're going to be completely sold out in the third quarter," said one network TV executive, who asked not to be identified.

He predicted GM's strikes would have "some sort of residual effect in the fourth quarter," but said he doesn't believe it will impact the stock prices of publicly held media companies or that the ripple effect will spill over to next year.

Local TV executives are less optimistic; GM spent more than $200 million on spot TV buys in the second half of last year, according to Competitive Media Reporting. In the same period, the automaker spent $420 million on network TV and $297.7 million on magazines.


"There's no money in the pipeline from GM and very little from GM dealer associations," said Bob Sliva, general sales manager of ABC affiliate WXYZ-TV, Southfield, Mich. "It's scary stuff."

Magazines, already hit hard by cuts in GM's print budget this year, are also feeling pain. Because of long lead times, GM started cutting ads last week in October and November issues of some monthlies, media sales executives said. Weeklies will lose the business more quickly.

"The strike is unfortunate, and if it continues it will in the long term have an impact through the remainder of the year and possibly into the next model year," said David Ferm, publisher of` Business Week.

Time Inc. stands to lose "several million dollars," said Dave Long, VP-corporate sales and marketing for the publisher, parent of Time, People and Sports Illustrated. The longer the strikes last, he added, "the more severe it will be. It's a tough situation for everybody."

Media companies could benefit if GM rivals take advantage of the strikes by stepping up their own ad spending.


Mitsubishi Motors Sales of America said the time made available as a result of the GM strikes allowed it to book more time on top-rated cable and broadcast programs for the launch campaign for its Galant sedan.

"We owe some gratitude to GM. It certainly has improved our media plan," said Peg Dilworth-Hunt, director of marketing communications at Mitsubishi.

Network executives said they have not seen other carmakers increasing ad spending nationally. But several dealers and regional dealer groups have stepped up advertising in hopes of wooing customers away from GM dealerships.


GM spent $2.2 billion in measured media last year, making it the nation's biggest advertiser, CMR said. It began significant cuts in ad spending across all media in June, though it isn't completely dark. The automaker rolled a $5 million, 10-day TV blitz July 23 to let buyers know showrooms have inventory.

Philip Guarascio, VP-general manager, marketing and advertising for GM's North American Operations, said media spending may resume at the end of this quarter.

"We're trying to give the media as much lead time as we can," he said. "Every contract we have has a strike clause that gives us the opportunity to cancel or postpone media. There could be penalties to us if we don't fulfill our contracts."

GM also risks losing volume discounts it has earned with some media companies. Mr. Guarascio said the automaker plans to "protect our relationships on our major deals. . . . I don't foresee us giving up any of our major franchises."

Even if the strikes are settled soon, GM probably wouldn't jump-start ads for about six weeks, after restarting nearly all 29 of its plants and restocking dealerships, said Susan Jacobs, president, Jacobs & Associates. The strikes open "a lot of windows of opportunity for GM's competitors."

Contributing: Michael Wilke

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