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SINGAPORE, Nov 18 (Reuters) - Carmakers are the driving force behind some of the world’s most lucrative golf tournaments but nose-diving demand and anaemic earnings amid the global financial crisis has put the brakes on sponsorship spending.
Car sales have plunged and the 'Big Three' automakers in the United States, General Motors GM.N, Ford Motor Co F.N and Chrysler LLC, may need a financial lifeline from the Federal Reserve to weather the storm.
GM, which has warned it will run desperately short of cash by early next year without support, spends heavily in golf mostly through its Buick brand but deep cuts in its advertising and promotional budgets means that money could soon dry up.
“Everything is fair game right now and we’re taking a hard look at it all,” Larry Peck, Buick and Pontiac promotions manager for GM, said in a telephone interview.
“Obviously, we are looking to reduce our overall marketing expenses and our advertising and promotional budgets have been reduced, and there’s continual pressure on that.”
GM is the title sponsor of two PGA Tour events, the Buick Open and Buick Invitational. Both tournaments are on the schedule for 2009 and their contracts run through 2010.
“We’re certainly trying to spend our money more efficiently there. In particular the Buick Invitational that’s upcoming in February, really we’ve trimmed back all the back-of-the-house kind of stuff... no dealer contests, no hospitality, all that is cut back,” said Peck.
“You’ll still see products on television and advertising that will promote the products through the broadcast, but any of the entertainment, hospitality type of activities have been cancelled.”
Peck said that despite the current hardships, the automaker was still committed to promoting itself through golf.
“We have still a very large involvement in the sport of golf from a General Motors standpoint, specifically from a Buick standpoint.”
America’s world number three Phil Mickelson acknowledged that carmakers’ woes could have a trickle down impact on sponsorship.
“I think the biggest impact for the US PGA tours is more with the auto manufacturers. As we have seen, General Motors has been hurting and has reported that they may run out of cash by the end of the year,” he said ahead of last weekend’s Singapore Open.
“We have so many sponsors in the automotive industry, that we will start feeling it shortly. Certainly when our next contract is up, we will have to find new sponsors unless there’s a turnaround fairly quickly.”
BMW BMWG.DE, which pumps millions of dollars into golf tours worldwide, has slashed production and scrapped earnings forecasts this month as quarterly profits tanked 60 percent.
The carmaker sponsors several big-money events in the United States and Europe but the BMW Asian Open, which was founded in 2001 and co-sanctioned by the European and Asian Tours, is a notable absentee from the 2009 schedule.
Japanese carmakers, also heavy hitters in the sponsorship world, appear set on a prudent approach.
Shares of Toyota Motor Corp 7203.T plunged this month after the carmaker warned its profits this year would hit a 13-year low amid the global economic downturn, while Honda Motor Co 7267.T is also suffering as wild fluctuations in the Japanese yen make business extremely volatile.
A Toyota spokeswoman said that given the current financial climate, sports sponsorship would be under review. Toyota spends millions of dollars to support the Lexus Cup, an annual ladies event between Asian and International teams.
Chris Higgs, senior vice president of the U.S. women’s tour, told Reuters he was unsure whether Lexus would be continuing their sponsorship of the event after the current contract expires.
Honda, which sponsors the Honda Classic on the PGA Tour, said sponsorships were determined on a region-by-region basis and they did not have a system under which headquarters would put out a blanket directive to cut back spending. (Additional reporting by Chang-Ran Kim in Tokyo and Ben Klayman in Chicago) (Editing by Alan Baldwin)
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