By Anthony Crupi

President Obama's auto task force has taken steps to ensure that Chrysler has one last shot at survival, but with General Motors preparing to join the Auburn Hills gang in bankruptcy on June 1, the domestic automotive category looks like it will spend the rest of the year up on blocks.

Chrysler’s restructuring plan may ultimately preserve the livelihoods of its 26,000 UAW employees and the tens of thousands of dealers and suppliers that depend on the automaker’s business. In the near term, however, the company will remain in limbo until its merger with Fiat is complete.

Meanwhile, with the Fed as arbiter of how the company spends its bailout money, Chrysler’s been forced to slice its ad spend budget in half. The nameplate had hoped to drop some $135 million in a national prime time TV campaign designed to remind consumers that it’s still open for business.

The $67 million that the task force will let Chrysler spend obviously won’t buy as much time or awareness, but the government also apparently recognizes that it can’t yank the automaker’s ad budget altogether. Testifying in bankruptcy court on May 4, Capstone Advisory Group executive director Robert Manzo said the task force understood that “marketing dollars are critical to make sure the right message is out there about what’s happening to Chrysler during this interim period and why Chrysler will be a brand going forward.”
Executives at General Motors would probably kill to hear news as good as that. After posting a $6 billion loss in Q1, GM is widely expected to run out of gas very quickly.

“It is increasingly likely that GM will file for bankruptcy protection, making existing shares almost worthless,” says Standard & Poor’s Equity Research analyst Efraim Levy. (In fact, at presstime, GM’s bankruptcy was considered all but inevitable.)

Even pre-Chapter 11, the incessant media coverage of GM’s woes has already ravaged consumer confidence across the auto-brand spectrum. Foreign and domestic car and truck sales plummeted 34.4 percent in April, to just 819,540 vehicles, per Autodata. Year-to-date, sales are down 37.4 percent, with Chrysler (-46.2 percent) and GM (-45 percent) sustaining the greatest losses in the period.
Still, other nameplates are quite aware that when consumer confidence does return, consumers who’ve abandoned Chrysler and GM will be looking for somewhere to go, and there’s some early jostling for market share going on now.

For example, Hyundai is in line to control 5 percent of U.S. market share this year, thanks in large part to its increased spend behind its Hyundai Assurance program, which lets consumers return their car if they lose their job. Kia Motors increased ad spending 43 percent in 2008, while raising its market share to 3.1 percent, up from 1.9 percent a year ago. Volkswagen also boosted its media investments, increasing spend by 45.7 percent.

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