Finally A Reason To Bail Out GM!
If you had the opportunity to watch the congressional Detroit 3 hearings last week, there was a very interesting comment made by Waggoner (GM CEO) that somehow went under everybody’s radar. When quarried about their 09 expenditures Wagganer very specifically stated "We will move a SUBSTANTIAL portion of our ($500 million) advertising budget to online (Internet). The way he said it (so adamantly and definitely) made me almost fall out of my chair.
Originally posted as a comment by AndyFinkle on A VC using Disqus.
Comments (Archived):
hmm I wonder if he reasoned how much of a percentage the ad budget is of the total GM expenditures before he opened his mouth? Is it even 10%
If they know it’s the right thing to do, why do they wait until a moment of crisis to do it?Also, why is it future tense? I realize the question is about 2009, and realize there is media planning to be done and commitments to fulfill, but why didn’t he say “we have moved a substantial portion of our advertising budget to online”? Or, “we are in the process of moving…”If I know something is going to have a material impact on my business, I do it now! ASAP. Especially if I had the resources of these companies, and especially if you were (supposedly) doing everything possible to save the business.They’re going under because the world has known this is smart for a long time and they’re still just talking about getting around to it. Enough talk, the time for them to act was long ago.
GM executives don’t live in the same world that you and I live in. And the CEO of Chrysler? Same guy who ran Home Debot into the ground. I think Ford has the only clueful management and they are ahead of the others in remaking their company – however I have a feeling its too little to late.(happy owner of a german made car)
I like the idea of having big oil loan them the money. Did a blog post on it here: http://is.gd/ausp Exxon-Mobile could actually buy GM and FORD with last quarter’s profits.
That’s pretty big news for our industry. Some people in the office were discussing the ripple effect of bankruptcy, and it turns out 3% of the ad industry works on auto industry accounts. A bailout and shift of ad spend online could be a further boon to the already powerful momentum of digital ad growth.
Thank god. I love hearing about how in debt they are and then seeing commercial after commercial on monday night football for GMC. Do car commercials even sell anymore? Are you going to just jump out of your seat to go drop 30k on a new truck?
I just saw an TV ad for a Cadillac Escalade that was at $60k sticker. Can’t imagine the slightest demand for something like that these days.
In the Spring of 2008 GM committed to spending $1.5 Billion of its $3B/year advertising budget online, to ramp up over a 3 year period.
think I’ll see a whole lot less portion of that $500M in ad spend than I will pay out in taxes to bail GM out, so this wouldn’t do it for me.
“It’s like shuffling the deck chairs on the Titanic.”In my opinion, this would not do anything to turn around GM. They, and the rest of the American automakers, will be back at the watering hole within a year asking for more money because the core problems of their business are not being addressed: concentration on trucks and SUV’s, incredibly large legacy payment liability, overpaid and paralyzing union workers and regulations. Until something substantial is done in these areas, Congress shouldn’t even let them into the hearing room. We would be rewarding mismanagement (again).
You’re leaving out that GM made their business focus financing the purchase of automobiles and not making cars. I think they should let Steve Jobs take over GM. It would be an incredible company in ten years.
One suggestion, STOP making suv, big trucks and any vehicle with a v-8 engine. Also ask the Union to cut their salaries in half in order to keep all workers on the job. One idea to have CASH-FLOW is to reduce all big car at 50% off the sticker price that will make a big sale and people like me could buy a truck or suv just for weekends or travel. And finally discontinued all big cars and trucks.
Screw ’em. Let them fail. This is not a good reason. Stop promoting the throwing of good money after bad.
You can’t just let them fail, when the issues are not the quality of the vehicles. When you have to pay workers $140 an hour vs $75 an hour (Japanese Companies) you have a problem. How can you compete this way? When you have the joke called NAFTA you cant compete. When you have 3 retired workers you pay pensions on for every 1 auto worker working, you have a problem. When you have cars that actually last longer, and there’s less of a need to buy a car more often you have a problem. Mismanagement? Yeah probably but the govt helped get them in this mess, they need to help get them out. 2010 when the UAW takes over the pensions, the wages can go back down to competetive levels, and you’ll see more of a free market system in place. The U.S. companies have what the Japanese companies don’t, and that’s better R&D and technology that’a ahead of the curve.It’s not a bailout, it’s a loan. It’s a loan where the money has already been approved, it just has to be appropriated.Online STUFF might be a great thing, but marketing has been the biggest problem of the big 3. That might be throwing in the wrong place based on history, but let’s hope it works. 6 million jobs effected is not something you just say let them fail.
Come on. This is not a loan in any conventional sense. The only way to loan these companies money right now is to provide the DIP financing as part of a bankruptcy proceeding. Otherwise you are below the Senior Secured creditors in the capital structure and underwater from day one. Congress isn’t looking at this as a loan either. They want to try some supply-push social engineering. More thoughts in this post (http://www.blunderingentrep…
please.this is a flawed decision on so many levels that it would take pages to identify them.The product is rubbish, (not even close to Jap or German – not even close), the workforce is highly uncompetitive, the distribution (the dealerships) is too powerful, and management is drifiting in the wind.I have many issues with private equity, and leverage, but putting this sorry mess in to a chapter, and re-engineering the balance sheet, the management, the unions, and the dealerships to give the entire industry some chance of competing (i mean some as i feel the train may have left already) is the only fair way to treat the other 290 million of us. To loan money to a failed mega corp running grandads business approach is plain wrong, unfair to all of us and a failure of free market economics.
1) Yes, like any other business, they should be able to fail.2) Yes, quality of their vehicles IS an issue, but there are quite a few things to correct first.3) Autoworkers are overpaid. 4) NAFTA actually helps the US companies remain competitive.5) Yes, when the first 2k of every vehicle goes to the UAW pension fund, there is a problem.6) How did the govnt HELP get them in this mess?7) US cars don’t last longer. I have owned one in the past and never will again. Many feel the same.8) Mismanagement? Yes, when the focus is on SUV’s when it should be on vehicles with better mileage. We would be rewarding poor choices if we bailed them out.9) US companies don’t have better tech and R&D.10) It is a bailout, otherwise they would fail.11) Marketing is NOT the biggest problem of the big 3.Frankly, I understand 6 million jobs is a lot. However, the horrible effects of rewarding failure are scarier. They should fail and be split up, reorganized, and rebuilt. It is painful, but it needs to happen.
“One suggestion, STOP making suv, big trucks and any vehicle with a v-8 engine”Giovanni: Clearly you don’t understand the customer. Here’s a better idea: Make an engine (be it V8 or not) that makes the performance requirements that customers want – meaning horsepower/torque/mpg requirements.It’s not that they can’t do it. It’s that they haven’t focused enough to do it profitably. They’ve not tried.