DETROIT (AdAge.com) -- Marketing at General Motors Corp. is starting to resemble stuffing towels into the bow of the Titanic.
Last week the troubled automaker reduced its marketing and communications staff 20% -- an estimated 60 to 80 people -- as part of a wider 1,600-person reduction, and Automotive News is reporting that GM will announce this week that it's going to close Pontiac. Another brand slated for disposal, Saturn, is spending what appears to be millions on regional ads themed "We're still here," yet sales for the brand sunk 62% in the first quarter, and it seems unlikely consumers are putting too much store by Saturn's reassurances, given that everyone is anticipating the marque's demise.
According to GM, its similarly consumer-soothing "Total Confidence" campaign, which protects consumers for up to nine car payments up to $500 monthly in case of job loss, has raised traffic to dealerships. But so far, it hasn't converted that traffic into sales.
On top of all that, while GM intends to participate in the network TV upfront next month, when marketers reserve ad time for the upcoming season, it may be forced to do so on a "cash-only" basis.
The government is requiring GM to reach acceptable agreements with creditors by June 1 in order to avoid bankruptcy, and that deadline is fast approaching. It's also far from fortuitous for the media world, given that it occurs a month after the TV upfront. GM spent some $2 billion in total measured media last year, and media sellers worry that the marketer -- not to mention Chrysler, which spent $700 million last year -- won't be able to pay for time it corrals in the upfront.
According to one media-buying executive, there are discussions about forcing GM and Chrysler into a "cash-only upfront," standard practice in the event of a bankruptcy. In other words, while most participants in the upfront simply make commitments to spend money and approve their orders much later, a bankrupt marketer would have to pay for the time it wants to secure in the fall with cash on the table.
An executive familiar with both sides of the issue said the TV networks should be "very concerned" about doing upfront deals with GM, since there is a risk they would be unsecured creditors in a bankruptcy. But the networks would have time to resell the spots to other advertisers, the executive said. They should be more concerned about scatter, or ad time bought close to a show's air date, since they would be less likely to get paid for that and have less time to resell it should GM enter Chapter 11 proceedings.
Chrysler, meanwhile, might be forced to file for bankruptcy as soon as this week, yet it is continuing to toil on a new campaign slated to break next month. While the automaker has been trying to finalize a deal with Italian automaker Fiat, and the ads under way are not contingent on a deal, according to an executive familiar with the matter. The plan is to focus on Dodge, Chrysler and Jeep products coupled with a corporate message, changing the copy or narration depending on which of the automaker's two scenarios unfolds. Chrysler's shop, Omnicom Group's BBDO, Detroit and New York, referred calls for comment to Chrysler, which declined to comment.
A Chrysler dealer termed the company's current situation "a little bit frightening," since executives aren't communicating very well with the automaker's roughly 3,000 retailers, whose livelihoods are at stake. A second dealer said stoking demand won't help much, because auto buyers still can't get credit.
Traffic, not sales
GM's "Total Confidence" program is building dealer traffic, if not sales. Michael Maroone, president of AutoNation, the country's biggest dealership chain, said the program "is allowing GM to hold its own in a very difficult market," though he acknowledged, "Traffic is better than sales."
A company spokeswoman said the ads, from GM's corporate agency, Interpublic Group of Cos.' McCann Erickson, Birmingham, Mich., have generated increased traffic to both showrooms and GM websites, and the company expects its new-vehicle sales to be better in April than they were in March.
Despite all the negative news, GM research found that consumer opinion and consideration for its Chevrolet and GMC vehicle brands increased in the past six months through March, according to the company. Mike DiGiovanni, GM's director-industry analysis, said recently that Americans' consideration for the corporate GM brand is "way down," but "when you look at Chevrolet, Cadillac and our other brands, they haven't changed." He added, "It's hard to believe."
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Brian Steinberg contributed to this report.