Auto Troubles Hurting Classified Ad Publishers

The U.S. auto industry's troubles have hit local advertising hard -- and few media executives see a major recovery anytime soon.

While national auto advertising is weathering the storm -- largely because the big car companies are trying to move inventory -- local and classified advertising by dealers has dropped sharply, newspaper executives said this week at the Mid-Year Media Review in New York.

"Auto has had tough sledding this year, for reasons we all know and read about every day," Gary Watson, president of Gannett Co. Inc.'s (GCI) newspaper division, said on Wednesday.

Gannett's auto classified advertising is down about 3.6 percent this year, Watson said, while describing the outlook for the rest of the year as "very uncertain."

General Motors Corp (GM) and Ford Motor Co (F) are facing some of their biggest challenges in years, with a slowdown in sales of their mid- and large-size sport utility vehicles. The fuel-thirsty SUVs, former profit engines for Detroit's automakers, are increasingly out of favor with consumers who face steep gasoline prices.

Ford slashed its full-year earnings outlook and announced plans for more jobs cuts on Tuesday, while General Motors has stopped giving earnings guidance for this year and plans to cut more than 20 percent of its blue-collar employees over the next three years.

GM also has launched an aggressive new discount program to sell off bloated inventories, which media watchers expect to support national advertising.

But local advertising -- particularly in classified sections of newspapers -- is another matter, executives warn.

Knight Ridder Inc. (KRI) Chief Executive Tony Ridder said at this week's media conference that "poorer sales of vehicles by U.S. manufacturers" will make classified auto advertising a big challenge for 2005. Through May, Knight Ridder, the second-largest U.S. newspaper publisher, has seen auto advertising in the classified section fall 5.8 percent.

The problems at GM and Ford "have real consequences for local dealers," Knight-Ridder senior vice president Art Brisbane added.

As New York Times Co (NYT), Chief Executive Janet Robinson said this week, classified revenue has suffered "due to sharply lower automotive dealer advertising" at its local papers.

At its flagship New York Times and other national papers, entertainment advertising has been another tough spot for publishers, who blamed a smaller number of big movie releases for the pullback.

Robinson, however, predicted that entertainment advertising should improve in the year's second half with an increase in the number of movie releases.

While Knight Ridder said movie advertising is not a particularly big part of its advertising revenue, its CEO acknowledged that 2005 has been slower than normal for movie ads.

"There's only been one blockbuster so far -- that's 'Star Wars,"' Ridder said.

But he added that movie advertising "should be better in the second half of the year."