GM Opts Out of Q2 Upfront Buys

Carmaker looks to cleave TV costs

General Motors has thrown the transmission in reverse, exercising options to cancel a substantial portion of its second-quarter upfront commitments.

According to several sources, GM has pulled out of nearly 50 percent of its Q2 upfront buys in broadcast and cable, the maximum allowable under the terms of network ad contracts.

GM employed a similar tactic three years ago when the industry as a whole saw cancelations run around 15 percent. Procter & Gamble also pulled out of half of its Q2 2009 commitments.

Unlike the earlier period when the advertising market was harried by a global recession, this year’s contraction appears to be far less devastating. Ad sales executives say that GM is an outlier and that its decision to pull out of the national TV market is not indicative of a broader trend.

GM’s pullback comes on the heels of a global media review that saw the No. 1 automaker consolidate its $3 billion account at Carat. Previously, the business was split regionally among many shops, including Publicis Groupe’s Starcom in the U.S., Universal McCann in Latin America and Carat in Europe.

The consolidation of GM’s media-buying and -planning account was designed to reduce expenses to the tune of around $10 million. Long before it finalized the review, GM also concluded that it had overextended itself in the 2011-12 upfront.

Having beat a retreat from a good chunk of its upfront buys, GM will lean heavily on two high-impact sports franchises. At least four GM commercials are expected to air in NBC’s Feb. 5 broadcast of Super Bowl XLVI, including three Chevrolet ads (for Camaro, Sonic and either Silverado or Volt) and a lone Cadillac spot.

GM already has released the Sonic spot and a user-generated :60 for Camaro

As an NCAA corporate partner, GM’s Buick marque will be well represented throughout the CBS and Turner Sports joint coverage of the 2012 March Madness tournament. Last year, Buick initiated a three-week marketing blitz tied to its NCAA hoops sponsorship, which it assumed after GM discontinued its Pontiac brand. Buick not only signed on as the presenting sponsor of a new TNT/truTV postgame show that aired throughout the tourney, but it also rolled out its new brand positioning in conjunction with the April 3 tip-off of the Final Four.

GM historically has been one of the tournament’s biggest spenders. Per Kantar Media, the automaker in 2010 led all comers with an investment of $47.2 million in 30-second in-, pre- and postgame spots. That same year, GM committed some $1.2 billion to TV time.

Despite the pinch that comes with such a high-value defection, ad sales execs say GM’s pullback isn’t a harbinger of a more generalized contraction. “It’s an isolated incident,” said one sales boss. “It’s obviously not ideal, but it’s not as if they’re the first lemming off the cliff.”

Cable still has two weeks before its Q2 deadline, but execs say they aren’t too concerned about another automaker following GM’s lead. “Maybe P&G will pull back a little,” said one sales chief. “They did it in 2009, but that was during the worst part of the recession. But right now, yeah, the market’s a little softer than I would like, but we’re not panicking.”

Like any marketer that exercises cancelation options, GM will almost certainly come back to the networks in scatter. While there’s no faster way to chop marketing expenses than pulling back on TV spending, major cancelations often can lead to steeper prices over the long haul. Moreover, the networks are no longer obligated to honor ratings guarantees on replacement inventory.

GM sales in January fell 6 percent to 167,962 units. Buick sales dropped 23 percent, while Cadillac was down 29 percent. Chevrolet enjoyed the best performance of all GM brands, moving 123,864 units for a year-over-year decline of just 1 percent.

Agita over GM and a rather soft scatter market notwithstanding, analysts suggest that dollar volume generated in the 2012-13 upfront should still be comparable to the $18 billion in advance commitments booked in the year-ago bazaar.

In a note to investors, Pivotal Research Group analyst Brian Wieser said he expects this year’s upfront volume will be “essentially flat when compared with the 2011-12 upfront,” with CPM premiums likely to max out at 8 percent.

Wieser notes that early estimates are based on historical data rather than any conclusive evidence on client budgets. A more clear picture of the marketplace should begin forming in late April or early May. The preliminary media planning process begins this month.