Automakers, TV Renew Vows

For all the prognosticator hand-wringing about the health of the automobile industry, auto executives discussing their business last week at the Television Bureau of Advertising conference in New York insisted that both the short- and long-term outlooks for the industry are good.

They also said that TV has been and will continue to be the primary medium they use to persuade consumers to consider their brands. That's the case even though they are annoyed that ad rates continue to go up as ratings go down.

Toyota Executive Vice President Jim Press said his company projects U.S. auto sales at 16.5 million this year, down from the previous two years but still the fifth-best year on record.

"TV has been a vital part of our growth in the U.S.," he said, noting that the Japan-based carmaker has spent $6.5 billion on TV advertising to U.S. consumers in the past decade. "We believe in the power of TV."

Other car executives agreed. Michael Lazarus, executive vice president of the Long Island Automotive Group, a major New York regional auto dealer, said that sales of the Saturn brand were "phenomenal" in March. "It's directly tied to TV. When they advertise, we sell cars; when they don't, we don't sell cars."

But there are differences of opinion on just how strong the economy is. Donny Deutsch, founder of the ad agency that bears his name, was the most downbeat of any of TVB's speakers last week, suggesting that the economy may just be in the middle of a "seven- to eight-year down cycle." But even he had good things to say about TV: "For brand folks, TV is king."

Press expressed a different outlook about the economy, which he described as "solid and strong." For the second half of this year, he projects a "dramatic improvement in car sales" and said Toyota will increase marketing and ad spending.

Unlike the domestic carmakers, which are currently in a price war, Toyota hasn't seen the need to spur sales with 0%-financing plans and other incentives. That means the company can "spend more on ads," said Press.

He considers the long-term prospects for the car business and the economy to be "fantastic." The market is steadily expanding, he said, noting that 63 million Americans will reach driving age in the next 10 years, disposable income is growing, and the two-car family is becoming a three-car family.

But several auto executives said the industry can't continue to pay higher rates for TV ads that reach smaller audiences. That's especially true now, when carmakers are under pressure to keep their own costs in check.

"Advertisers need TV to change," said Michael Lotito, president of Media IQ, the advertising consulting firm.

Jim Schrorer, executive vice president, global sales and marketing, DaimlerChrysler, says his company's assumption is that the prices of its cars will drop 1% a year on average for the foreseeable future. That means the company has to find ways to reduce costs whenever it can, he said.

TV executives need to come up with a business plan that figures out, as the carmakers are trying to figure out, how to make profits "on the assumption that prices [that is, TV ad rates] are going down," Schrorer said.

David Rooney, director of media operations at DaimlerChrysler, added that the auto industry is facing "tremendous cost pressures" going forward as it grapples with the issue of making profits on lower-priced vehicles. As a result, companies like DaimlerChrysler will demand greater evidence that its advertising is influencing consumers to at least consider buying their brand. The way to measure that is to count how many viewers are driven to a DaimlerChrysler Web site after viewing a TV spot.