In decade before 2006, GM's ad spending soared

From '93 to '05, layout more than doubled, but market share nosedived

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bjohnson@crain.com

General motors Corp.'s estimated U.S. measured media spending tumbled in the first 11 months of last year, but that came only after a remarkable run-up in spending over the past decade.

GM's stated worldwide ad expense rocketed from $2.6 billion in 1993, the first year it revealed global ad spending, to $5.8 billion in 2005, according to Ad Age's analysis of GM financial disclosures.

How much did GM spend in 2006? TNS Media Intelligence estimates of media spending suggest a big drop, but GM's actual worldwide ad expense won't be clear till it files its 10-K annual report in March.

"We have not closed the books on 2006 yet and so cannot comment on ad costs for the year," a GM spokeswoman said in an e-mail.

mixed picture



GM's financial disclosures last year offered a mixed picture on advertising. The March '06 annual report and last year's quarterly reports discussing GM North America's restructuring plan said GM was increasing advertising "in support of new products and specific marketing initiatives to improve GM's sales performance in certain metropolitan markets."

However, the annual report cited advertising as one of the areas where GM North America would seek "cost efficiencies." The report said: "Advertising will seek more efficient and focused spending in line with brand focus."

There's no denying that GM's ad costs have soared in recent years, with ad spending growing far faster than revenue and unit sales. Worldwide revenue rose 44% from 1993 to 2005, according to Bloomberg data, while the number of GM vehicles sold grew just 17%. Ad costs shot up 125%.

That means ad spending per vehicle nearly doubled from $328 in 1993 to $632 in 2005. GM in 2005 spent a record 3% of revenue on worldwide advertising, up from 1.9% in 1993.

The analysis isn't precise because GM, like most public companies, makes only minimal disclosures on worldwide ad costs. GM's disclosure last March: "Advertising expense was $5.8 billion in 2005."

The company doesn't break out spending by region or product. Non-auto businesses did some advertising-General Motors Acceptance Corp., GM's financing arm, disclosed '05 advertising and marketing spending of $359 million-but most of the ad money was spent pushing cars and trucks. (GM sold 51% of GMAC last November to an investor group led by Cerberus Capital Management.)

If you factor out GM's non-auto revenue (largely GMAC) and subtract GMAC's ad and marketing spending from GM's worldwide ad-spending total, GM in 2005 spent about 3.4% of auto revenue on advertising.

GM in 2005 was the nation's No. 2 advertiser based on measured spending, behind Procter & Gamble Co., and the world's No. 3 spender, behind P&G and Unilever, according to Ad Age.

While GM ad spending has soared in recent years, its market share has tumbled in the U.S. and worldwide. Its share of the U.S. car and truck market plunged to 24.2% last year from 33.2% in 1993, according to an Ad Age review of GM sales figures. Its worldwide share fell to 13.6% from 16.8% during the same period.

outside the u.s.

GM is doing better outside its home market. Excluding the U.S., GM's share of the world market was 9.9% last year. It was the fourth year in a row GM gained share outside the U.S., though that still leaves GM's non-U.S. share about where it stood a decade ago. GM for the past two years has sold more vehicles outside the U.S. than at home.

The GM spokeswoman said ad costs have been boosted in the past few years by the introduction of some global brands into new markets, including Chevrolet in India and Russia and Hummer in Europe and South Africa. "You always see costs spike when you have a new brand/product introduction in a market," she said.

GM last year sold 9.1 million cars and trucks worldwide, down less than 1% from 2005. Toyota Motor Corp. expects its sales (including two half-owned ventures, truck maker Hino and carmaker Daihatsu) to grow from 8.8 million units last year to 9.34 million this year, most likely eclipsing GM as the world's largest automaker.
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