Lawyer… Community organizer…. Illinois state senator… United States Senator… President….

[shuffling papers]

Nope. I don’t see “businessman” anywhere on Barack Obama’s resume. I also don’t see any work experience in advertising, nor do I see any employers who were in the auto industry.

Yet somehow, Barack Obama and his crack team of auto industry advisors think they can run GM and Chrysler with no experience. And apparently no knowledge of history, either.

Let me explain.

The news came out a few days ago that they cut Chrysler’s advertising budget in half. After all, they owe their ad agency BBDO a cool $58 million. Actually, We the People now owe BBDO that money since the feds took over Chrysler and all, but that’s another issue entirely. So the geniuses in the Obama administration look and go “oh, that number is way too big. Let’s make it smaller. Gotta save money, yup yup yup.” And this is where they show that they have no knowledge of business, nor do they have any knowledge of history.

I’m an ad guy by trade. I’ve been in the industry long enough to have been through both booms and busts. I watched the dot-com era take off and suffered through a few recessions. You can pretty much tell how things are going economically by watching the want-ads for graphic designers and art directors. When things are booming, every ad agency and design studio is hiring, talent is scarce, and new shops are being set up seemingly every day. When times are tight, there’s a few hundred applicants for every opening. Every time it’s been the same: as soon as the economy shudders, the ad budget is cut. It’s the easiest thing to cut, since you’re not having to lay people off, cut hours, cut benefits, or anything else. It seems like the logical choice. And it’s completely wrong.

Empirical data collected over the past 100 years has shown that time and again, stopping or cutting advertising during a recession or depression only hurts your business. Procter & Gamble maintains a corporate philosophy of not cutting advertising during recessions, and actually increases advertising spending in these times while its competitors cut their ad budgets. Not by coincidence, P&G has come out of each recession — and the Great Depression — with substantial gains in market share. 

Speaking of the Great Depression, CW Post had a 10-year head start and led the cereal industry going into it. Then they cut their advertising budget while Kellogg ramped theirs up. By the time the Great Depression was over, Kellogg was leading their industry. Another example is Camel cigarettes. In 1920, Camel was #1 until Lucky Strike came along and overtook the #1 spot by 1929. In 1931, Chesterfield pushed Camel down to #3. So, in the middle of the Great Depression, Camel decides to increase is advertising budget. By 1935, Camel was back in the #1 position.

How can we explain this phenomenon? Well, in the Great Depression, 25% of people were out of work, but 75% of the people still had money to spend. Those who still had money to spend continued to spend it, but they wanted to spend it more wisely. This means consumers were looking for established companies and better value for their dollar. Advertising establishes a brand as viable; if your brand becomes invisible through lack of advertising, no one is going to see you as viable (if they see you at all.)

“But you’re talking about soap and cereal and cigarettes,” you say. “What makes you think these lessons apply to cars too?”

Okay, one more example: Going into the Great Depression, Ford had a solid lead in the auto industry, selling 10 cars for every 1 car sold by Chevrolet. Chevy responded to the Great Depression by increasing its advertising budget and slid into the #1 car manufacturer slot in 1931, and held that position for five years.

Cutting Chrysler’s advertising budget — and closing up to 3000 dealerships nationwide — will only speed up the demise of the company simply due to the negative impact it will have on public perception.

If Obama & Company knew anything about business (or history), they would have known that simple fact.