GM Bankruptcy Filing Puts Pressure on Upfronts, Gives Buyers Bargaining Power

General Motors typically spends about $300 million during the upfront season, and the company’s bankruptcy filing this week has likely caused broadcast and cable nets to brace for a potentially harmful impact.

GM was already planning to cut its upfront commitments, said a person close to GM, but now the decision on spending will be left to bankruptcy court, writes the Wall Street Journal. Now, buyers are likely planning to use GM’s bankruptcy filing to negotiate better prices for their clients, according to Steve Lanzano, COO of MPG.

The upfront has been slow to get started. Two weeks after the networks presented their fall schedules, marketers have still not registered their budgets, say some network execs, and negotiations have either stalled or never got underway in the first place. Buyers are determined to get price cuts, while networks are equally determined to raise prices.

Merrill Lynch’s Jessica Reif Cohen has forecast that the broadcast upfront will fall 13% to $6.87 billion; now, with the GM filing, more pressure will fall on the marketplace, Cohen says, pointing out that the courts recently cut Chrysler’s request to spend $134 million on ads in the next nine weeks by half.

GM’s sixth-largest unsecured creditor is Starcom MediaVest Group, with a claim of $121.5 million. Other unsecured creditors include Publicis (owed $25.2 million), Interpublic (owed $15.9 million) and McCann Erickson of Calgary, Alberta (owed $4.6 million).

General Motors’ woes have already affected media. The company trimmed its advertising 15% in 2008. GM yanked its advertising from the Academy Awards in the first quarter of 2009, after having spent more than $110 million on Academy Award advertising between 1997 and 2008 and $13.5 million in 2008 alone.

GM officials say the bankruptcy should be a short-lived one, with the company emerging from bankruptcy protection as a new, leaner company within two to three months, according to ABC News.