General Motors in the US, but probably soon in the UK also, is one of several major marketers that are asking advertising and media outlets to wait as long as 120 days to be reimbursed for production costs and media outlays, putting a painful burden on some shops.
Many firms and trade groups are vowing to resist these changes, saying the companies are essentially bullying their media and advertising vendors into making them no-interest loans. But it's hard to know what they could do, other than walk away from the marketers in question.
General Motors is in effect bankrupt . They rely for their survival on Government loans. I doubt whether it's possible to effect credit insurance at the required levels to cover one month of advertising expenditure let alone three months. And the government certainly won't act as media space cost underwriter.
So not only is the agency being asked to subsidize GM's cash flow, now GM want the media buyer to take the risk of GM defaulting, leaving the agency - acting as principals- to pay the media owners. On the small margins under which agencies operate this is a financial suicide note.
So the agency is being invited to save GM by going bankrupt itself. Media Madness is alive and well. I hope media agencies in their greed for additional income say to GM ‘we're going to remain profitable and keep our employees employed so take your business elsewhere'.
