General Motors Planning To Cut US$800m From North American Advertising Budget

If Optimus Prime was looking to General Motors to fund his GM-heavy Autobot army in the upcoming Transformers sequel, he’s got another think 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 will not only affect GM’s print, TV and film advertising, but also its vehicle purchase incentives – which will in turn, you would have to expect,  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 funded bailout.

Advertising is a powerful part of selling cars, and while the budgets may seem excessive (the figures mentioned here are only for North American advertising), there are good reasons for thinking that those advertising dollars make a significant difference in sales results.

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. (Hmm... let's not hold our breaths waiting for the 'better strategies' and 'more intelligent use of resources'.)

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