Exclusive: Auto industry slashes Q1 ad spending

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Ad spending for the auto industry, the country's largest advertising category in 2003 at $18.2 billion, took a nose dive in the first quarter as Detroit's Big 3 increasingly turn to alternatives from events to interactive marketing.

Media executives report a dramatically diminished print outlay in the first quarter. Through February, automotive ad pages in magazines were down 11.4% to 2,345.6 according to the Publishers Information Bureau. In February alone, automotive ad pages sank 18.5%.

And while measured figures for total media spending aren't yet available for the quarter, an analysis of January by Nielsen Monitor Plus shows that although the auto industry spent more in measured media vs. the same month in 2003, their dealer groups spent less. The carmakers shelled out $820 million in the first month of the year vs. $694 million in January 2003; dealer groups spent $172 million in January 2004 vs. $223 million the prior year.

"Budgets are being tightened everywhere," said Liz Vanzura, advertising and sales-promotion director at General Motors' Hummer brand. "There's a huge trend toward experiential marketing."

Indeed, GM has declared the "old marketing model dead" and canceled an estimated $40 million in upfront TV buys for the second quarter (AA, Feb. 16). GM "likely will also cut for the full year, putting a damper on the year-to-year growth prospects within the auto category," Goldman Sachs said in a March 19 report. A GM spokeswoman said only there would be no overall drop in the company's 2004 spending.

slow start

The first quarter also appears to be off to a slow start for Ford Motor Co.'s Ford division and Chrysler Group, which, together with GM account for three-fifths of the auto industry's total spending. Although Chrysler Group said its 2004 ad budget would jump $250 million and Ford Division said it will spend 10% more this year, those bullish forecasts haven't been borne out in the first quarter. Ford did not return calls for comment.

"There's a tremendous amount of ... discounting, with $4,000 or up to $5,550 cash-back," said Ed Abramson, group publisher of Hachette Filipacchi Media U.S.'s Car and Driver and Road & Track. "That's affecting national advertising. All of that goes right into [local] newspapers and into radio to promote those." In fact, stung by profit pressure from rising incentives, GM is undergoing a marketing restructuring (See story P. 8).

"There's a lot of incentives and lease deals and we hear the money is being pushed down to retail" to the regions and to the dealers, said a magazine representative, adding that Chrysler's spending is "way down" in the first half.

A Chrysler Group spokeswoman acknowledged a "nominal" first-quarter drop in print, including newspapers, but said the automaker's overall ad spending didn't decline in the first quarter vs. a year ago. "It took us a little longer to get the Chrylser brand's broadcast spots done and we are working on print," she said.

Goldman Sachs reported advertising growth in measured media by the auto category up 7.8% in 2003 vs. 2002, outpacing total U.S. advertising, which grew 6.6%. But the auto segment is slowing from 13% ad growth in 2002 vs. 2001.

Publishers and industry insiders also maintain spending will trend up as automakers back-load buys for later in the year to support a slew of crucial model launches. "At the beginning of the second quarter, you're going to start seeing an increase in ad spending for new or refreshed vehicles," said a media executive.

contributing: jon fine

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