Just when car advertising was starting to normalize after three years of a pandemic-driven pullback, there is a new risk to one of the biggest ad categories. The United Auto Workers’ strike against Ford, General Motors and Stellantis could lead to reduced ad spending in the coming weeks as automakers face smaller inventories.
“Right now, the UAW strike is relatively narrow in scope, and we do not believe is having a material impact on automakers’ plans,” says Cox Automotive’s Mark Schirmer. “If the scope of the strike does expand, we might expect automakers to take action on advertising reach and frequency, but at this point, honestly, it is too early to make an assessment.”
Yet because of the strike, Jessica Caldwell, Executive Director of Insights at Edmunds, thinks automakers are keeping a close eye on their expenses, particularly advertising.
“If the strike continues to grow and impact more plants over a more extended period of time, costs will only increase – and automakers will have to be prepared for it,” Caldwell says. “The longer the strike goes, there will be less need for ad spend as there won't be as much product moving.”
Impact Not The Same For All Three Automakers
Radio typically gets most its ad dollars from regional dealer associations and local dealers rather than the Tier One manufacturers. But Caldwell says any pullback in advertising will have less to do with the tier of the auto market, and more to do with the make of the vehicle.
“The timeline of the impact won't be the same for all of the companies,” says Caldwell. She says Stellantis has larger inventory and can withstand a more prolonged strike, while Ford and GM have less inventory and will feel the bottom-line impact sooner.
“Currently, the strike is limited to midsize trucks, which isn't as significant as a strike against full-size trucks, which are a major source of profit for the Detroit Three. However, the UAW has stated that adding more plants to the strike is a very real possibility,” Caldwell says.
The big three Detroit brands represented 40% of the U.S. market in 2023 – General Motors had 17%, Ford had 13%, and Stellantis had 10% – with nine brands across the trio, led by Chevrolet, Ford, Jeep, GMC, and RAM.
Cox Automotive Chief Economist Jonathan Smoke says the three have had “varied and fragmented” sales performance in 2023, with sales up nearly 19% for GM, but only 9% growth recorded for Ford, and sales down one percent at Stellantis. As a result, Smoke says in a blog post that the total new-vehicle market inventory volume is up more than 60% year over year right now, with 53 days’ supply on average.
At the start of September, here’s how many days Cox Automotive says each of the nine brands had in the pipeline—
“GM dealers, clearly, are most at risk, especially Cadillac and Chevrolet, which are both tighter than the industry overall,” Smoke says. “However, even brands like Ford and Jeep have some model-level challenges.” He says Ford has just 18 days’ supply of the popular Maverick pickup and 47 days of Broncos. Chevy has 28 days’ worth of Tahoes. And Jeep has 62 days of Grand Cherokees. “If production of one of those products is disrupted, dealers could see shortages within weeks,” Smoke predicts.
Supply Hampers Rival Brands
Production delays could provide an opening for the rivals to Ford, General Motors and Stellantis. But Caldwell says that may not translate into bigger ad budgets in the near-term. “Under normal circumstances, other automakers could take advantage of the strike by targeting displaced customers from the Detroit Three; however, the inventories of other automakers are tight due to the ongoing chip shortage,” she says.
Radio Focused On Auto Category
Radio groups have been looking to make automotive one of 2023’s turnaround stories after struggling with the category the past few years. Cumulus Media CEO Mary Berner said it has been “an area of growth” for her company, with auto ad revenue increasing each month during the second quarter – April was up 2%, May was up 10% and June was up 14%.
“Our local sales force is exceedingly well positioned to capitalize on automotive advertising,” Berner told investors during a July earnings call, noting auto was a “top performing” ad category on the local level at Cumulus during Q2. In fact, the company was so bullish on the auto category that CFO Frank Lopez-Balboa said it would help the company turn in better results for third quarter.
Even with a strike, Schirmer thinks there is reason for radio sales managers to remain upbeat about the auto category.
“As new-vehicle inventory improved through the past year, the amount of advertising our team has seen has been increasing,” he says. “And we are certainly seeing more ‘deal’ advertising of late, as inventory and incentives have increased.”