GM's Woes Could Affect Newspaper Advertising

By: Jennifer Saba Labor problems at General Motors and its supplier Delphi could impact advertising spending and start a domino effect with other auto makers, according to a report released by Merrill Lynch today.

A strike involving Delphi labor would cripple GM's production ability, which in turn, could cause a drop-off in ad spending. GM is the nation's second largest advertiser (behind Procter & Gamble). The auto maker spent $2.8 billion in advertising in 2005.

"We believe the near term impact to traditional media (TV and newspapers) would clearly be negative if shifts are made to online or across the board reductions are made," wrote Merrill Lynch analysts in the report.

GM spent 20% of its overall ad budget in newspapers in 2005.

Merrill Lynch estimates a strike could cost GM $7 to $8 billion in the first 60 days, noting that cuts to marketing and advertising would be likely. The last time GM underwent a strike in 1998, ad spending decreased about 5%. However, analysts note that spending quickly bounced back as GM was eager to catch up. In 1997, GM's ad spending grew 31%; in 1999, it advanced 35%.