General Motors plans to take control of local advertising, but some dealers fear the company's ad agencies will churn out generic - and ineffective - ads.
'It's absurd, as far as I'm concerned,' said Gordon Stewart, owner of Gordon Chevrolet in Garden City, Mich. 'It's taxation without representation. They're just taking our money.'
Stewart is upset because GM said last week it will take control next April of more than $500 million in annual advertising funds once allotted to GM's 954 dealer marketing groups.
The new system will affect advertising for every GM brand except Saturn.
Other dealers had muted reactions last week, preferring to withhold judgment until GM explains the program.
GM and some of its dealers are clashing over money and, perhaps more important, control.
The company, eager to broadcast consistent brand advertising, will ax the dealer marketing groups and the 60 advertising agencies that work for them. GM believes the agencies produce a mishmash of ineffective advertising.
'Everything we are doing in this reorganization is designed to drive our messages down to the local level,' said Darwin Clark, GM's vice president of vehicle sales, service and parts. 'We need to enhance the connection between our brands, the local market and our dealers.'
On the other hand, some dealers say their local marketing groups ensure a steady flow of advertising crafted to their cities' tastes. With GM in control, the company could shift advertising from, say, Chicago to St. Louis.
Next year, GM's five regional general managers will control local ad dollars currently spent by the dealer marketing groups.
The regional general managers, powerful sales executives in GM's new centralized marketing organization, will be based in Atlanta, Dallas, Chicago, New York and Los Angeles.
For each GM vehicle a dealer purchases, 1 percent of the sticker price is earmarked for those funds, which total about $500 million nationally.
As compensation for that loss of control, dealers will be offered an opportunity to join a new program dubbed GM Co-op.
Each dealer would contribute up to an additional 1 percent of the sticker price of each vehicle purchased. The dealer would have the discretion to spend that money on print, TV or radio ads for his or her own store. GM will chip in a matching donation totaling 25 percent of the dealer's contribution.
Under the old system, individual dealers earmarked up to 1 percent of the sticker price as additional ad funds for the dealer marketing groups. Typically, the dealer got a portion of that money back for store ads, depending on each division's policies.
Because the dealer marketing groups no longer will receive part of that money, the individual dealer has more ad funds to spend, noted Jon Agresta, owner of Agresta Olds-Pontiac-GMC in Williamston, N.J.
Agresta was one of a group of prominent dealers consulted by GM on the new local advertising system. He predicted most dealers will back the system when they realize how much money they will get.
'I'm pretty pumped up about it,' Agresta said. 'The individual dealer has made out great in this deal. I have money to buy network TV in Philadelphia that I couldn't afford before.'
But others say GM has tied too many restrictions to the GM Co-op money.
'We are disappointed,' said Bill Napleton, owner of Napleton Cadillac Inc. in Park Ridge, Ill. 'It's a 'Mother, may I?' program. There are a lot of stipulations.'
GM dealers in Chicago would prefer to stick with the status quo because they have a strong market share. The Chicago-area dealer marketing groups have crafted an effective local message, Napleton said.
For example, Chevrolet dealers signed basketball great Michael Jordan early in his career, when his endorsement was a relative bargain. Out of loyalty to his patrons, Jordan continues to work with the Chevrolet dealers at a substantial discount.
WILL GM LISTEN?
Under the new system, a new agency called R*Works will handle promotions and sponsorships. R*Works will open offices in each region. Likewise, all local ad purchases will be centralized under a company called Local Communications Inc.
GM's five regional general managers will coordinate the activities of those companies with advice from local dealer advisory councils representing each GM brand.
But Napleton and other Chicago dealers fear GM's regional chiefs will ignore dealer input.
Moreover, they worry that GM might divert some of the ad money generated by Chicago dealer purchases into other markets - say, St. Louis or Minneapolis - where GM might not be doing as well.
Dennis O'Keefe, an attorney who represents the Chicago dealer ad associations, said the dealers have not yet decided whether to sue GM.
However, many dealers in other regions are holding their fire, preferring to wait until they get more details.
'Basically, it's too soon to tell,' said Buck Rodgers, general manager of Chapman Chevrolet in Tempe, Ariz. 'If GM's advisory councils have a mix of larger dealers and dealers from the outlying areas, it could work - if GM listens.'