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U.S. Auto Makers to Slice $3 Billion in Ad Spending this Year

Auto makers could reduce their ad spending by as much as $3 billion this year, leaving auto ad spending down $15 billion from its high of $24 billion in 2004, according to Sanford Bernstein & Co.

Newspapers and local TV and radio stations are expected to be hit particularly hard, writes the Financial Times. U.S. auto makers are the single largest category of advertisers, accounting for 12 percent of U.S. advertising spending.

TV and radio groups have already been hurt by the decline in auto spending. CBS last week reported a 6 percent drop in Q2 TV advertising sales, while Entercom yesterday reported a decline of 1 percent in second quarter net revenues.

Magazine publishers have also struggled with declining auto ad revenue. Between January and April, auto makers reduced spending on magazines by 17 percent, according to Magna Global. Magna downgraded 2008 ad spend estimates to two percent growth in the U.S. - from 3.7 at the beginning of the year, according to MarketingVOX.

Auto ad budgets are expected to recover, but ad money will be increasingly routed to the internet and to event sponsorship in the future, experts believe.

In the meantime, auto makers are struggling to counteract declining sales with incentives. Chrysler is offering the highest incentives in the industry - as much as 40 percent off select Dodge Ram pickups as part of its latest program for dealers.