Nobel winner: U.S. auto industry will likely disappear
STOCKHOLM (AP) — Nobel economics prize winner Paul Krugman said Sunday that the beleaguered U.S. auto industry will likely disappear.
“It will do so because of the geographical forces that me and my colleagues have discussed,” the Princeton University professor and New York Times columnist told reporters in Stockholm. “It is no longer sustained by the current economy.”
Krugman won the $1.4 million Nobel Memorial Prize in economics for his work on international trade patterns. Some of his research on economic geography seeks to explain why production resources are concentrated in certain locations.
Speaking to reporters three days ahead of the Nobel Prize ceremony, Krugman said plans by U.S. lawmakers to bail out the Big Three automakers were a short-term solution, resulting from a “lack of willingness to accept the failure of a large industry in the midst of an economic crisis.”
Facing massive job losses, the White House and congressional Democrats are negotiating a deal to provide about $15 billion in loans to prevent the weakened U.S. auto industry from collapsing.
With advertising rates for the Super Bowl running as high as $3 million for a 30-second spot, some marketers are wondering whether during these tough economic times they can afford the big game.
FedEx, a loyal Super Bowl advertiser, still hasn’t decided if it will buy in. FedEx is concerned that shelling out big bucks — at a time when it’s “asking employees to do more with less” — will look “wrong,” says a person close to the company.
“Companies have to be mindful that jumping into the game can open them up to criticism,” this person says.
The Memphis, Tenn., package-delivery giant is holding out to see if it can get a bargain.
FedEx’s hesitation is raising eyebrows on Madison Avenue because it has advertised in 12 of the past National Football League championship games.
The company is also one of those that get extra mileage out of the game because its spots tend to be entertaining, and are widely anticipated. During the last Super Bowl, one FedEx ad featured an enormous carrier pigeon wreaking havoc in a city.
Advertisers taking a pass on Super Bowl XLIII altogether include beleaguered General Motors, which has been in 16 games, and Garmin Ltd., the maker of GPS devices, which had advertised in the past two games. A company spokesman for Garmin says its decision to sit out was “unrelated to the economy.”
Jumping into high-priced media deals can raise lots of image questions, say ad executives.
“With this much money on the line it can be a negative reflection on a company, especially if they are cutting back staff or getting a government bailout,” says Steve Lanzano, chief operating officer at MPG North America, a media-buying unit owned by Havas.
General Electric‘s NBC had sold most of its Super Bowl ad inventory by early September, prior to the meltdown on Wall Street. Because the economy had been soft for most of the year, many in the industry were surprised by the brisk pace of sales. Advertisers gobbled up the available slots even though NBC raised its price sharply, compared with the previous Super Bowl, for which News Corp.‘s Fox got about $2.7 million for 30 seconds of commercial time. (Advertisers who buy multiple slots and fourth-quarter space typically get discounts).
NBC is in better shape than Fox was during the past recession. In 2002, Fox, whose parent also publishes The Wall Street Journal, had about 10% of its ad time unsold just two weeks before the game.
NBC seems to have experienced some slowing of demand over the past few weeks. It says it now has about eight ad slots left to fill. That’s roughly the same number that were left in September.
The Super Bowl has shown no signs of flagging in the ratings. This year’s nail-biter between the New York Giants and the New England Patriots drew 97.4 million viewers, the biggest TV audience for a U.S. sporting event.
Ads appearing in the game seem to get more advance publicity every year, helping to offset the price tag.
The peacock network has also lured some new marketers to the Feb. 1 game in Tampa, including Pedigree, the dog-food brand owned by Mars. Even Monster.com, the online job site owned by Monster Worldwide, is currently in talks to jump back into the game after sitting out the past few years, according to people familiar with the matter.
“As of now, we have not committed to the Super Bowl,” says a spokesman for Monster.
“Companies realize that it’s even more important in a challenging economy to deliver their message in front of the largest audience they’ll see all year,” says a spokesman for NBC.
Still, marketers and ad executives say it is a tough call to make during hard times. E*Trade Financial knows exactly how nerve-racking the Super Bowl decision can be.
This past February, the New York company jumped into the game even though its stock price had plummeted more than 80% over the course of the year; the word “bankruptcy” was floated by analysts. Some consumers were pulling their accounts from the online broker.
“There were some people internally who said, ‘is this wise?’” says Nick Utton, chief marketing officer of E*Trade. Mr. Utton says he decided to do Super Bowl ads because he felt that it would ultimately show confidence in the brand.
But executives crossed their fingers: if the campaign wasn’t well-received, the criticisms wouldn’t be limited to “lackluster creative.” They would be about “irresponsible corporate spending.”
Luckily for E*Trade, its ads got a favorable reception, resulting in a 32% increase in newly opened and funded brokerage accounts during the week following the Super Bowl, the company said. And even though it is still hurting, it says it will be returning to the game. E*Trade is tightlipped on what the ads will look like, but it’s likely its talking baby will be back.
Write to Suzanne Vranica at firstname.lastname@example.org