Auto Is Up, But Toyota’s the Wild Card

Carmaker’s strategy to address recalls could make or break sector

Station managers are reporting that automotive advertising is finally chugging along once again, but local TV executives are anxious about how Toyota’s recent recall woes will affect advertising for both the Japanese auto monolith and the competition. In some extreme cases, rival auto companies are shining a light on Toyota’s troubles by encouraging viewers to trade in their Toyota for a Ford or Chrysler.

That’s been the case at WSYR Syracuse. While such spots challenge the unspoken rule about kicking the competition while it’s down, VP/General Manager Theresa Underwood says that’s simply how dealers move units these days. “In this day and age,” she says, “it’s called business.”

After the auto ad lockdown of the past few years, just about every general manager in America is singing a happy tune about the category. Managers speak of auto being up anywhere from 20%-50%. On its earnings call last week, Scripps reported automotive ad gains in the 40-50% range so far in the first quarter, while Sinclair Broadcast Group said auto was pacing 20% higher in quarter one.

While last year’s dismal auto advertising flatters the 2010 numbers, broadcast executives agree that auto is driving them into the rebound. “We believe we are being led out of the advertising recession on the backs of the automotive industry, which appears to be focused once again on growing its market share,” said Sinclair Executive VP/CFO David Amy on an earnings call Feb. 17.

Yet several broadcast bosses cited Toyota as a wild card that could make or break forecasts. Toyota has been going through an excruciating examination over safety-control shortfalls that led to the recall of 8½ million vehicles, an apology from President Akio Toyoda and a congressional investigation. Toyota’s use of the media to rebuild its image is an ongoing effort. The company has trumpeted its safety message on platforms as varied as Super Bowl spots and a full-page ad in the New York Times on Feb. 18.

Station staffs say Toyota is a vital ally, and vice versa. “They’ve been a great partner to the broadcast industry for a long time,” says WGCL Atlanta Director of Sales Jason Mullenix. “We want to work with them through this time, and moving forward.”

Southeast Toyota Distributors, which represents 173 dealers, surprised stations by yanking ads on several ABC affiliates, including those in Birmingham and Charleston, in response to reports from ABC News that were critical of Toyota. Southeast is said to have pulled buys for February and March, and affected stations are eager to see how the dealer group decides to proceed for the second quarter.

Southeast is shedding little light on its plans. “Southeast Toyota makes business decisions to allocate our advertising dollars so as to best serve our customers and dealers,” it said in a statement. “Southeast Toyota continues to evaluate its advertising spend on an ongoing basis.” The association also said it was shifting from product-based spots to ones featuring “customer-based testimonials.”

Affected ABC affiliates are hoping Southeast Toyota has made its point and will get back on their air. “We’re hopeful the second quarter won’t be an issue,” says one sales manager. “We want to move past it and get back on track.”

Station chiefs elsewhere report minimal cancellations related to Toyota’s strife, and are split about how they see the brand spending in the future. Some say the substantial sales hit Toyota has taken dictates a comparably decreased ad spend. “My guess is that second-quarter association buys will be down dramatically because of [weak] sales,” says one group sales chief who asked not to be named.

Others say the manufacturer— and its dealers—have little choice but to communicate the new message in a forceful way. “Toyota built its brand on safety and strong customer relations,” WSYR’s Underwood says. “They’re going to have to spend to support that message.”

The Sinclair bosses see it similarly. “The trump card here is Toyota and to see if they do step up significantly, which I really believe they will,” said COO Steven Marks on the earnings call. “I think it’s very clear that they’re going to turn this around, they’re going to use our medium and they’re going to use it extensively.”

The conventional wisdom says that as Toyota increases its on-air presence, the likes of General Motors and Ford will as well—whether or not they single out Toyota in their spots. “Other automotive groups might see it as a possible opportunity,” says WMC Memphis General Sales Manager Gary Macko, “and say, ‘Maybe we can get out there and tell our story, too.’”