FORT WAYNE – General Motors has shifted its marketing strategy into overdrive.
Less than two years after emerging from bankruptcy, the Detroit automaker is spending millions to advertise during premier sporting broadcasts, including Super Bowl XLV and the 2012 Olympic Games in London.
The hope, advertising professionals say, is the events' prestige will rub off, buffing up the carmaker's image and driving shoppers to Buick, Chevrolet and Cadillac lots. The expense is appropriate, they say, because GM needs a bit of swagger to sell vehicles worldwide.
But some consumers say GM, which employs more than 5,000 in the region, shouldn't be committing big bucks to advertising campaigns until it has paid back the remaining $36 billion owed from a $49.5 billion federal bailout.
Every major corporation can expect some carping over strategic decisions. But GM has to contend with its backseat driver being the typical taxpayer, who has never created a major marketing campaign and gags over the idea of spending millions on just about anything.
Major retooling
Today's GM is as far removed from the 2008 version of the company as a new Cadillac luxury sedan is from a rusted-out, stripped-down Chevy pickup.
The once-bankrupt automaker shed four car brands, 14 of 47 plants, responsibility for union retirees' health care costs and $38 billion in debt. The 103-year-old manufacturer even shed the General Motors Corp. name in the bankruptcy reorganization process.
Renamed General Motors Co., the automaker has evolved from losing about $4,000 on every vehicle in pre-bankruptcy days to making about $2,000 on each now that costs have been squeezed.
The bottom line: GM reported $4.7 billion in profit for 2010. The gain followed on the heels of $3.8 billion in 2009 losses from the company's July 10 bankruptcy exit through Dec. 31.
The buying public has responded to the impressive rebound. GM reported February U.S. sales were 49 percent higher than last year. The automaker sold 8.39 million cars and trucks worldwide last year, just 30,000 less than top-selling Toyota.
Bold, not bashful
The best way to build on that recovery, some say, is to unfold the marketing map and hit the gas.
Tom Borne, president of Asher Agency, applauds the company's U-turn. The local executive said GM has turned problems into opportunities.
"If things continue to improve, they have to be bold. And why do it quietly?" Borne said. "I can see why people would be critical of that kind of spending, but they have a product to sell."
Bob Floyd, president of Floyd & Partners, said the issue of government ownership is separate from marketing decisions.
"They turned a profit last year. That's a good thing," he said. "Promoting themselves is a good thing."
GM bought six Super Bowl ads to promote its Chevy brand. Five were 30-second commercials, including one that featured a heavy-duty Silverado pickup truck that mimicked beloved collie Lassie by alerting its owners that their son Tommy had fallen down a well.
The sixth commercial was a one-minute tribute to the Camaro. Advertisers paid $3 million for a 30-second spot during the game.
Although it didn't pay for the ad, Detroit-based GM could have also benefited from Chrysler's homage to the Motor City, a two-minute ad that featured rap star Eminem.
GM's decision was proportionate to the company's scale and reach, Floyd said.
Considering that GM executives are marketing four brands to millions of customers worldwide, "they have every reason to go big," the local ad executive said. "When you're the size of GM, there's no such thing as modesty."
In January, GM signed on as the exclusive domestic automotive sponsor for the 2012 Olympic Games in London. Both men agree with that decision.
"I'm sure it was a boatload of money, but it's all about proportion," Floyd said, adding that the company's Olympic advertising will reach a broad audience.
Borne called the Olympic and Super Bowl deals strategic because both attract male and female viewers. Women buy more than 46 percent of all new vehicles and influence more than 80 percent of auto sales, according to a CNW Marketing Research study.
Everybody's doing it
Sponsorship deals are an increasingly common way for companies to promote themselves.
William Chipps, senior editor with IEG Sponsorship Report, said the increasing popularity of cable programming and use of TiVo and iPods to watch programs have eroded the effectiveness of traditional TV advertising. His organization tracks and analyzes corporate sponsorship spending in the U.S.
Sponsorship deals of local interest include Parkview Health's 10-year, $3 million deal for the naming rights to the Fort Wayne TinCaps' baseball stadium announced in 2008 and Lincoln National Corp.'s 20-year, $139.6 million contract for the naming rights to the Philadelphia Eagles' football stadium announced in 2002.
Companies looking for non-traditional marketing opportunities created a steady increase in corporate sponsorships that faltered only when the recession hit, Chipps said.
Sponsoring a sporting event allows companies to reach consumers while they're having a good time and probably more receptive. Often automakers partner with sporting teams, which gets the message to consumers who are reluctant to enter a showroom and endure an aggressive sales pitch, he said.
All car companies, including GM, pulled back on sponsorships during the recession, he said.
GM announced in August 2007 that it was ending a $900 million, multi-year Olympic sponsorship agreement that included $500 million in advertising time on five NBC telecasts of Summer and Winter Olympics and $400 million in cash and vehicles to support U.S. team training.
That deal, the New York Times reported when it was announced in 1997, was "the largest long-term sports-marketing program ever."
As an economic recovery starts to gain steam, so have sponsorship deals.
GM announced in November its Cadillac division would resume sponsoring golf tournaments after taking a two-year hiatus. Financial terms of the six-year deal were not disclosed.
"The floodgates have definitely opened up again," Chipps said.
But not all sponsorship deals are created equal – even when they include the same two parties. Various levels of sponsorship are available.
So even though GM's previous Olympic deal was valued at $900 million, the new pact could be much less extensive.
Even without details, though, it's safe to assume this sponsorship deal would cost millions of dollars, Chipps said.
Not every company should invest in sponsorships, Chipps said. But he believes the strategy works for automakers, especially when the event is elite and ties the brand to the idea of achievement.
"The fact that GM is back with the Olympics makes sense," he said.
Ownership rights
But some folks don't like the fact that GM is committing millions to advertising while taxpayers still own about one-third of the company.
Jim Bonifas, a retired sales manager for a metal chain manufacturer, is among them.
"I don't understand why they're spending all this damn money when they still owe the government, which is the taxpayers," he said. "That seems to me a little out of line."
Shirley and Jim Reinert think GM should pay off the government – with interest – before sinking millions into sponsorship deals.
"I would be excited if you paid me back," Shirley said, speaking as a taxpayer.
The Fort Wayne natives, who moved to southern Indiana two years ago, said car prices would be lower if automakers didn't spend millions on advertising and roll those costs into the sticker price.
GM's vehicle prices – and federal debt – would be lower if it didn't reward workers, too.
Bonifas was incensed last month when GM announced plans to pay employee bonuses averaging more than $4,000 per hourly worker.
"This thing has upset me for a long time," the Huntington man said.
Bonifas thinks if Ford Motor Co. could survive without a government bailout, GM should have been able to pull itself together, too.
Floyd, the advertising executive, isn't crazy about the government being in the car business, either.
But the remedy, he said, doesn't involve choking off GM's advertising stream. The only way GM will make enough money to pay back its debt is by selling more cars, he said.
Joe Schenkel, president of Consumer Credit Counseling Service, said the idea of millions of dollars is staggering to the average person. But that's the scale that executives of major corporations deal with, he said.
"Sometimes you take those gambles in business to position your company," he said.
The company's leaders need to always remember the shareholders whose stock became worthless when the company filed for bankruptcy, Schenkel said.
"That was real money" lost, he said. "Hopefully, they're sweating the decisions of where to spend the money to make the business successful."
