GM Dropping Ad Commitments

Feb 6, 2006  •  Post A Comment

General Motors, one of the two largest television advertisers in the nation, has been notifying networks that it is exercising its options to get out of some of its advertising commitments during the second quarter.

GM spends about $1.6 billion a year on television advertising.

GM’s strategy is unclear. Executives at some broadcast and cable networks said they were not affected by the cutbacks, while others said the automaker was canceling the maximum allowed under its upfront deals.

Most upfront deals permit the advertiser to get out of up to 50 percent of its spending commitments in the first, second and third quarters, 60 to 90 days before the start of each quarter.

“We don’t comment on the details of our media plan,” said a GM spokesperson. “We evaluate throughout the year what our media requirements are going to be based on our business needs, and that’s normal. There’s some shifting that goes on every year.”

But some network ad sales executives said they expect General Motors to unload expenses, including advertising commitments, due to the financial troubles gripping the U.S. auto industry.

Last month GM said it lost $8.6 billion last year, prompting speculation it might consider a bankruptcy filing. Late last year the automaker said it planned to eliminate 30,000 jobs and shut 12 plants by 2008.

The GM spokesperson declined to comment on whether the options were being taken because of the company’s overall financial condition.

Ad sales executives remained optimistic that they won’t be greatly hurt by GM’s move. For one thing, the scatter market, while not robust, appeared to be showing signs of life after marketers sewed up their Super Bowl and Olympics spending plans. In addition, because of the large amount it spends, General Motors commands relatively low prices when it buys ads. And sellers were optimistic that the ads GM dropped can be sold for higher prices to other clients.