GM's Marketing Solution to Profits Problem

18 March 2005

American car giant General Motors has pledged to ramp up its marketing effort as it faces the fallout from its latest financial bombshell.

The Detroit-headquartered company saw shares plunge to a 10-year low as it delivered a profits warning for the first quarter and for the whole of 2005.

In response, ceo Richard Wagoner says the company will strengthen its advertising message. Earlier this week, GM put its $2.8 billion media buying account up for review. [WAMN: 15-Mar-05].

Wagoner says the company is trying to find better ways to promote its new products, including extending the life of advertising campaigns.

However, Peter DeLorenzo, founder and publisher of believes GM's advertising budget is spread too thin. He says the company would do better cutting its brands and promoting a smaller number more heavily.

He says: "They spend the most on advertising of any car company. Can you imagine if they spent the same amount with a third fewer models? They could actually promote those models properly."

GM expects an operating loss of around $850 million (€633m, £441m) in Q1. It also expects earnings of between $1 and $2 per share for the year, less than half initial forecasts.

The company blames its woes on high oil prices, increased labour costs and stiffer competition.

GM's main problem lies in the domestic market where sales and production are down and heavy discounting has failed to tempt customers. GM's market share in the US has dropped to 25% from a 1960s zenith of 52%.

Data sourced from; additional content by WARC staff