GM Leans on Agencies to Slash Fees by Up to 20%

08 August 2008

DETROIT: General Motors, flailing every which way to stay afloat after posting a massive $1.5 billion (€9.96bn; £7.85bn) loss in its second quarter, is leaning on its agencies to reduce their fees by up to twenty percent.

Among the shops squeezed are Campbell-Ewald, Leo Burnett and McCann Erickson, and insiders say the aggregated saving for GM could equate to over $20 million. Agency layoffs are seen as an inevitable consequence.

GM declined to quantify its 'request' for fee reductions, although a spokeswoman concedes the firm had "asked our agency partners to work with us to eliminate low-value work and find creative solutions to go to market more efficiently."

Symbiosis is a two-edged sword – especially in bad times – and other GM dependants are likewise affected by the automaker's cost-cutting frenzy. The media especially.

After featuring prominently for the last decade on the ABC network's annual Emmy Awards broadcast in September, GM has pulled its ad support from the widely-watched show.

Moreover, reports the Wall Street Journal, other media giants such as CBS, Viacom and NewsCorp have lost "significant" revenues – the extent of which can be gauged from the fact that auto advertising accounts for over 12% of total USA adspend. 

Says senior analyst Michael Nathanson at Bernstein Research: "The collapse in US automobile consumer demand will materially damage the advertising growth rates of traditional media owners."

He forecasts that advertising for the auto sector as whole will shrink to $15bn this year – compared with $18bn in 2007 and $24bn in 2004.

And from little-league TV a 'sign of the times' footnote ... 

Wayne Simons, vp/general manager at WINK-TV in Fort Myers, Florida, is a 41-year veteran of the business: "This is the worst I have seen it in my career," he says, adding that the only sector spending more on ads these days is lawyers.

"They are advertising like crazy, saying that they can help you with foreclosures."

Data sourced from Wall Street Journal Online; additional content by WARC staff