GM plans significant increase in ad spending

By Kevin Krolicki

MILFORD, Michigan (Reuters) - General Motors Co GM.UL plans to increase its advertising budget for the rest of 2009 and 2010 to challenge consumer perceptions on quality and fuel economy that the automaker believes are out of line with improvements in its vehicle line-up.

Executives attending an event at the automaker's proving grounds declined to specify how much new spending would be earmarked for marketing now that GM has exited a fast-track bankruptcy under U.S. government sponsorship.

"It's going to go up materially," Chief Financial Officer Ray Young told reporters. "The customers are telling us that you guys need to shout a lot more."

Because GM is dropping its Saab, Hummer and Saturn lines, the spending on the remaining core brands led by Chevrolet and Cadillac will be up even more than the overall budget, Young and other executives said.

"You won't see advertising on behalf of GM. All advertising will be brand-focused," GM Vice Chairman Bob Lutz told Reuters Television. "No one can buy a GM, anyway. They can buy a Chevy."

The U.S. auto industry has traditionally been one of the biggest spending sectors on advertising in magazines, billboards and on television and the Internet.

But the slide to bankruptcy by GM and Chrysler and the sharp contraction in industry-wide auto sales that began in late 2008 put unprecedented pressure on Detroit's advertising budgets.

GM, for example, decided against running an ad during this year's Super Bowl, the most-watched event in American television with the most expensive advertising slots.

The automaker has also slashed its sponsorship of events like racing and dropped its financial backing for the Buick Open golf tournament.

Lutz said GM was readying a new advertising campaign that would challenge consumers to reconsider their assumptions about its cars and trucks similar to the marketing credited with helping Chrysler bounce back from its own financial crisis under the leadership of then-CEO Lee Iacocca.

Iacocca, who became one of the first celebrity CEOs, took to the airwaves in the early 1980s in ads that featured the tag line, "If you can find a better car, buy it."

Lutz said GM would run more ads in coming weeks that play up the features of its vehicles in head-to-head comparisons on fuel economy against rival automakers such as Honda Motor Co. (7267.T)

"Many people will be surprised to see some of the claims because they're so far from the conventional wisdom," Lutz said. "I think we will shock people."

Lutz, who shelved plans for retirement to take charge of GM's marketing efforts as it emerges from bankruptcy, said the automaker's previous ads had too often lacked any edge.

Past GM ad campaigns were weighed partly on their success in not offending anyone or causing complaints from potential consumers and were not vetted by senior management early enough in the process, he said.