Automotive News - December 1, 2008 - (Page 49) DECEMBER 1, 2008 • 49 MARKETING Ad budgets shrivel as crisis worsens continued from Page 1 In the first six months of this year, ad spending by auto dealerships fell 12.5 percent. Ad and subtract Automakers cut their ad budgets in all major U.S. media in the first half of the year – and the slashing has accelerated since then. Factory ad spending, in millions Jan-Jun 2008 % chng. from 2007 Savings? At Ford Motor Co., the money for dealer ad groups will be considerably less in 2009, said Jim Farley, Ford group vice president of marketing and communications. “Dealer ad groups make their money based on revenue from the car sales. If (sales) go down 30 percent, they are going to have 30 percent less to spend,” Farley said during the Los Angeles Auto Show last month. “I think all of us have figured out in a 10-to-11 million-unit (per year) industry, you can’t save your way into success,” he said. “But the way we spend money may be a little bit different in ’09 than we normally would.” In 2007, 16.2 million vehicles were sold in the United States. Said Deborah Meyer, Chrysler’s chief marketing officer: “We’re reviewing every marketing dollar. At Bowl or Hollywood’s Awards ceremony. Academy Meltdown Many of the industry’s mediaspending gauges lag the market by a few months, so they aren’t capturing the severity of the current cuts. During the first eight months of this year, combined ad spending by the Detroit 3 totaled $2.53 billion, down 14 percent from the same period of 2007, according to TNS Media Intelligence. Chrysler’s $498 million spent during the period was down 35 percent. TNS data say Chrysler chopped more than three-fourths of its newspaper ad spending. TV Magazine Newspaper Radio Internet Outdoor TOTAL 2,768.2 637.6 236.8 111.4 263.9 65.4 4,083.3 –9.6 –18.1 –6.0 –10.8 –0.9 –11.1 –10.4 media buys are under “more scrutiny and more justification.” Andrews declined to predict automotive ad spending levels for digital media in the fourth quarter or 2009. But, he said, automakers “are challenged to do more with fewer resources.” At Hyundai Motor America, 2009 budgets are being completed for meetings in December, Dave Zuchowski, Hyundai vice president of sales, told Automotive News. “We have not backed down in the fourth quarter,” he said, although he admitted that spending might be down by a “single digit.” Source: TNS Media Intelligence Tone it down the same time, we can’t just go in a hole and not communicate with our customers.” Paul Andrews, who sells Internet advertising as automotive category development manager at Microsoft Corp. in Santa Monica, Calif., said Hyundai has been advertising the new high-end Genesis sedan aggressively, as well as supporting its yearend sales event. “We’re trying to protect our marketing budgets as best we can,” Zuchowski said. “We are still trying to grow in a tough market.” Hyundai brand’s U.S. sales were down 7.8 percent through October, better than the total market’s 14.6 percent plunge. Some automakers are changing the tone of their advertising, steering away from an overt sales pitch. American Honda’s annual holiday season marketing campaign, called “Happy Honda Days,” “communicates a warm, simple seasonal greeting,” said Executive Vice President Dick Colliver. The TV campaign runs through Jan. 4. The campaign is “taking into consideration the troubled economy,” Colliver said. The TV spots refer viewers to Web sites so they can participate in charitable activities. Similarly, Subaru of America has dialed down the hype of its year-end campaign, called “Share the Love.” The Subaru ads tell viewers that a $250 charitable donation will be made for each new-vehicle sale or lease. c Rick Kranz contributed to this report BAILOUT Bond: My measure has a chance to pass continued from Page 1 Tick, tick, tick Timetable for congressional action on Detroit 3’s plea for $25 billion in emergency loans Tuesday, Dec. 2: Deadline for automakers to file viability plans Wednesday, Dec. 3: Senate Banking Committee hearing on plans Friday, Dec. 5: House Financial Services Committee hearing on plans Monday, Dec. 8: Congress could return to session to consider loans pects from the UAW. But during the congressional debates, many GOP lawmakers singled out the Jobs Bank as a wasteful Detroit 3 practice. The UAW was notably missing from a list of stakeholders that congressional Democrats expect to make sacrifices in return for emergency loans. Those sacrifices were detailed in a Nov. 21 letter from Senate Majority Leader Harry Reid, DNev., and House Speaker Nancy Pelosi, D-Calif. Republicans seem certain to address that oversight in a Wednesday, Dec. 3, Senate hearing. The House is scheduled to discuss the bailout Friday, Dec. 5. The Bush administration supports Bond’s bill, which is co-sponsored by Sen. Carl Levin, D-Mich. Administration officials said last week that the companies’ viability plans must address “labor, management and legacy costs.” Democrats control both houses of Congress, but Senate Republicans could block an aid bill with a filibuster. Bond and other Republican Senate moderates — some of whom already have endorsed Bond’s bill — seem certain to be crucial “swing” votes. And during hearings last month, Republican senators asserted that MIKE THEILER/REUTERS Sen. Carl Levin is the co-sponsor of Sen. Kit Bond’s bill to aid the auto industry. The Bush administration supports the legislation. union givebacks are fundamental to any Detroit 3 aid plan. “The enormous costs in union-required benefits are unsustainable,” said Sen. Elizabeth Dole, R-N.C. “Renegotiating these contracts would be essential if there were to be hope of keeping these companies afloat.” Added Sen. Robert Bennett, RUtah: “Hourly workers are going to have to have their contracts renegotiated, and some of them are going to lose their jobs.” Bank shot The Jobs Bank costs the Detroit 3 automakers $478 million a year, estimates Mark Perry, an economics professor at the University of MichiganFlint. Even if that program is eliminated, the union may be asked to accept additional concessions to fulfill Congress’ notion of shared sacrifice. Himanshu Patel, an auto industry analyst with JPMorgan, calculated the concessions necessary for GM to break even at an annual industry sales rate of 13 million vehicles. Patel assumed that financial con- cessions would be split evenly between GM’s unions and creditors. With that in mind, he concluded that average wage-and-benefit costs would have to drop from $60 an hour to $44. On Nov. 10, GM CEO Rick Wagoner told Automotive News that he was not inclined to reopen the company’s labor contract. Last week, company spokesman Greg Martin said GM’s plan will reflect “shared sacrifice,” but he declined to comment on labor provisions. The union did not respond to a request for comment. ‘Only game in town’ Democrats have a 50-49 advantage in the Senate, counting two independents who generally vote with Democrats. Sixty votes are needed to avert a Senate filibuster and pass controversial measures. Bond told Automotive News his aid proposal is “the only plan that has a chance to be signed into law.” It would convert a pool of $25 billion already approved for factories to retool for fuel-efficient vehicles into emergency loans for the Detroit 3. The compromise would replenish the retooling program later. In addition to Bond and Levin, the bill is co-sponsored by Democrats Debbie Stabenow of Michigan, Sherrod Brown of Ohio and Robert Casey Jr. of Pennsyslvania, as well as Republicans George Voinovich of Ohio and Arlen Specter of Pennsylvania. Voinovich calls the measure “the only game in town,” an aide told Automotive News last week. A senior congressional staffer close to the issue predicted the bill would get more than 60 Senate votes. The bill could come to a vote as early as next week. Democratic congressional leaders object to a diversion of the retooling money. Instead, they want to carve out $25 billion in loans to the Detroit 3 out of the $700 billion bailout fund for financial institutions. The Bush administration rejects that approach. The Senate Banking Committee and House Financial Services Committee have scheduled hearings this week on the Detroit 3 plans. If Congress accepts the plans, lawmakers would consider aid legislation next week. c Jamie LaReau contributed to this report RISK Companies feel the vise tightening continued from Page 1 of Lake Forest, Ill., says: “We don’t think that’s the right way to go. You start doing that and pretty soon you push everyone over the cliff.” Beyond GM The problem has spread beyond GM to other U.S. and Asian automakers and Tier 1 suppliers — and beyond the United States. Neil De Koker, CEO of the Original Equipment Suppliers Association, says the loss of insurance is ratcheting up the pressure on suppliers and automakers. “It’s creating quite a problem,” he says. One insurer is the Canadian government’s Export Development Canada. Last month the insurer said it was refusing new requests by parts On Nov. 8, Andersson and GM COO Fritz Henderson held a conference call to reassure the carmaker’s 325 largest suppliers that they will be paid, says a supplier executive. Andersson has stepped up his meetings with individual suppliers as GM’s outlook has worsened. So far suppliers appear to be heeding the appeals. Asked whether he is seeking shorter payment terms from the Detroit 3, Gregg Sherrill, CEO of Tenneco Inc., makers to insure payments due from Chrysler LLC. The agency said the action against Chrysler was taken because of higher risks at the automaker. A Chrysler spokesman declined to comment. Britain’s Financial Times newspaper reported Nov. 14 that Euler Hermes and two other large European credit insurers — Atradius and Coface, which together control more than 80 percent of the world’s credit insurance market — are refusing to write policies for suppliers to GM or Ford Motor Co. Ford spokesman Todd Nissen says, “At this point we are only aware
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