By Nick Carey and Soyoung Kim
DETROIT, Nov 19 (Reuters) - General Motors Corp is
reviewing its contracts with ad agencies and other vendors to
see whether they should be renewed as the automaker battles a
liquidity crisis amid plummeting auto sales, sources said.
GM spent $1 billion on advertising in the first half of
this year, making it the third largest advertiser in the United
States, according to TNS Media Intelligence.
Most of GM's U.S. advertising is handled by units of
Interpublic Group of Co Inc and Publicis Groupe SA.
Sources close to GM said The Martin Retail Group, a unit of
Publicis, which handles advertising for Buick, Pontiac, GMC and
Cadillac dealerships, had been informed by the automaker that
it could not guarantee the ad agency's contract beyond Dec.
31.
Speaking on condition of anonymity, one source familiar
with the matter said the No. 1 U.S. automaker was reviewing all
of its advertising contracts.
"In this climate, it's obvious that (GM is) evaluating
every agreement with advertising agencies," the source said.
"(GM is) obviously looking at at all (its) business in this
volatile environment, and yes, (GM is) looking at every
contract as (it) comes to renewal."
"They (vendors) know the reality as well," the source
added.
A GM spokesperson said the company would not comment on
individual contracts.
Dave Martin, president of The Martin Retail Group, denied
that GM planned any changes when it came to his agency.
"It's business as usual," he said. "We have absolutely
nothing that indicates anything but business as usual."
Representatives of Interpublic did not return calls seeking
comment.
GM, Ford Motor Co and Chrysler LLC, which is owned by
private equity firm Cerberus Capital Management LP -- spent
about $2.8 billion on advertising in the first six months of
2008, down 17 percent, but was still one of the 10 largest U.S.
advertising categories.
Sales for all three automakers have plunged this year as
consumers have abandoned gas-guzzling sports-utility vehicles,
pickup trucks and minivans. The credit crisis has made it
harder for consumers to obtain auto loans.
The chief executives of all three U.S. automakers were in
Washington on Wednesday for a second day of testimony to the
U.S. Congress to plead their case for a $25 billion government
aid package.
SLASHING COSTS
In late October, when reporting quarterly results, Publicis
warned of a "marked slowdown" for the ad industry next year,
while Interpublic CEO Michael Roth cautioned that "the impact
of an increasingly unsettled and volatile business environment
on our sector... creates a risk to meeting our stated goals."
When Omnicom Group Inc, the world's largest ad agency,
reported quarterly results Oct. 21, CEO John Wren warned that
automakers and retailers -- both suffering from a slowing
economy and wilting consumer spending -- were scaling back
their advertising plans.
"We have seen an expressed cutback in some of the spending
plans for automotive and retail sectors," Wren said.
Earlier this month, GM outlined steps to cut costs by an
additional $5 billion through 2009, on top of the $15 billion
in cash-generating plans it announced in July as it warned of
rapidly falling cash levels.
Of the additional $5 billion in cost cuts, GM is slashing
$1.5 billion by cutting sales and media promotion spending,
reducing dealer network restructuring activities and adjusting
vehicle production schedules.
In testimony to the U.S. House Financial Services
Committee, GM CEO Rick Wagoner reiterated the company would not
run ads during this year's Super Bowl -- the single biggest
event on the U.S. advertising calendar.
In trade on the New York Stock Exchange, Interpublic shares
were down nearly 16 percent at $2.78, while Omnicom slid 4.6
percent to $23.70, and GM was down 15 percent at $2.63.
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