General Motors To Cut US$800m From Advertising Budget

Written by Jose Perez

Domestic - GM

Transformers 2

Bail out money was not enough for General Motors, Advertising gets the cut back, will it make or break GM?

If Optimus Prime was looking to General Motors to fund his GM-heavy Autobot army in the upcoming Transformers sequel, he’s got another thing coming.

The General (Motors, not Optimus) has announced it will cut a further US$800 million (a cool $1.26b in Aussie dollars) from its advertising budget – an extra US$200m on top of the US$600m the company already planned to cut by 2010.

This budget slashing won’t only affect GM’s print, TV and film advertising, but also its vehicle purchase incentives – which in turn will impact on its dealers ability to get buyers in the door.

As for poor old Optimus and the Autobot crew, GM isn’t likely to repeat its huge Transformers advertising spending that it undertook for the first instalment in the franchise, given that a large chunk of its purse comes courtesy of the tax payer bailout.

Advertising is a powerful part of selling cars, and while it may seem excessive (the figures mentioned here are only for North American advertising), the massive amount carmakers spend on television, print and internet advertising does make a significant difference.

In a way, it’s like war. If Country A increases its air and naval presence, Country B has little choice but to do the same if it is to remain ‘competitive’ in battle.

But like nations at war, an army with smaller numbers can still win a war through better strategy and more intelligent use of its resources.

This is what GM – and its peers – will now need to do.

GM slashing its advertising budget will no doubt save the company some money, but it could also prove to be a risk when people are seeing Nissan, Toyota and Ford ads, and thinking of those companies the next time they start thinking about a new car.