GM Strike Expected To Disrupt Ad Spending, Especially For TV

by Joe Mandese, Mar 30, 2006, 8:00 AM

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Predicting a "ripple effect across most mediums," a top Wall Street analyst Thursday warned that a looming labor action against General Motors Corp. could disrupt ad spending patterns, accelerating the auto giant's shift from traditional media toward online media. Such a strike, the report said, could further destabilize an already troubled Interpublic Group, but would likely benefit digital shop Digitas.

"Looking back historically, GM did cut domestic ad spending during the last strike in 1998, but spending eventually caught up," cautioned Merrill Lynch ad industry analyst Lauren Rich Fine. "Therefore, while we believe there could be risk near term should a strike occur, it would likely prove ephemeral."

Fine nonetheless said Interpublic was at risk, because it handles brand assignments for some key GM brands, and the marketer represents an estimated 8 percent of Interpublic's revenues.

The report did not address the impact on Publicis, whose GM Planworks unit handles media planning and buying for GM, but it did predict that Digitas might actually benefit from the disruption in traditional advertising plans.

"GM accounts for 22 percent of Digitas' revenues," wrote Fine, adding, "We believe the move to more cost-effective advertising essentially means that Digitas will likely benefit since online advertising is deemed a more cost-effective medium than traditional mediums such as TV and print."

As for media outlets, the report predicts a labor action would "clearly be a negative" for TV and print media, noting that GM spent about 55 percent of its budget on TV, 20 percent on newspapers and 17 percent on magazines in 2005.

GM is estimated to have spent only 4 percent of its budget in online media, though Fine termed those estimates "low" and implied online was the least vulnerable medium to strike-related cutbacks.

"Auto as a whole typically represents 25 percent of a TV station's revenues," Fine noted.

The Television Bureau of Advertising is poised to hold its annual marketing conference April 20 in New York during the middle of the New York Auto Show.

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