TV & The Big Three

The big three U.S. automakers failed to panhandle Congress this week, and TV industry ad executives are bracing for the potential fall-out.

“The thought of losing that base is almost inconceivable,” said one veteran of TV ad sales. “Then again, there were many things that happened in the past few months--Lehman Bros., Fannie & Freddie, etc--that also held that never say ‘never’… The loss of auto spending could force some stations to drop local news in some markets.”

The health of the auto industry is symbiotic with television. Spending by the Big Three automakers--General Motors, Ford and Chrysler--contribute as much as 6 percent of total ad revenues for the top four TV networks, according to Advertising Age. The publication puts the figure at 9.2 percent for Fox network alone.

The auto industry tumbled behind the mortgage crisis because home equity is a primary source of financing for cars. TV stations have been feeling the pinch all year.

Call-letter stations derive as much as one-fourth of ad revenue from car makers and dealers, and all are reporting declines in the category: LIN TV, with 23 percent of revenues coming form the auto industry, reported a 15 percent tumble in the second quarter. Sinclair, deriving 18 percent of its station revenue from the category, was off by 15 percent in the third quarter.

The Television Advertising Bureau reported that auto spending dropped by more than 8 percent--nearly $5.8 billion--during the first six months of 2008 compared to last year.

The Big Three this week warned lawmakers of impending bankruptcies without federal assistance. Lawmakers, in turn, are still smarting from the $700 billion bank bail-out that Treasury Secretary Henry Paulsen used to prop up this his cronies’ stock prices instead of buy up bad mortgage loans as Congress intended.

It didn’t help matters that the supplicating potentates of the auto industry traveled to Capital Hill via private jet. The New York Daily News suggested in a headline that the “ Arrogant, boneheaded Big Three need to resign.”

Shares of Ford dropped to $1.04 in Nov. 20 trading; GM hit $1.74. Chrysler, majority owned by private equity investor Cerberus Capital Management, has indicated a loss of more than $1 billion for the first half of the year. Cerberus, named for the three-headed canine guarding the gates of Hades, has pledged to hand over any profit from a sale of Chrysler to the government if the fed ponies up a handout.