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On Location: Commercial producers revved up over GM's pay-later policies

November 17, 2009 |  9:00 am

Commercialchart General Motors may be slowly motoring back to life, but its new, stripped-down approach to business has rankled some of its vendors in Hollywood.

Although it is showing some signs of recovery, local commercial production has been in the doldrums for much of the year, thanks to the deep recession, which caused advertisers to sharply curtail their spending.

The woes of the U.S. auto industry, GM in particular, hit commercial producers hard. This is  especially true in Los Angeles, where about 40% of all commercials filmed are tied to carmakers. Although the advertising industry is based in New York, most commercials are filmed in L.A., which has about 170 commercial producers.

GM, which depended on a government bailout to stay afloat, has taken a number of steps to restructure its business since emerging from bankruptcy this summer.

But one of its belt-tightening practices -- requiring that vendors who supply advertising services accept deferred payment terms -- has drawn the ire of the Association of Independent Commercial Producers, a trade organization that represents 300 companies that produce commercials for advertisers and their agencies.

In a recent letter to Treasury Secretary Timothy F. Geithner, the association's president, Matthew Miller, said the change was a reversal of industry practice and imposed an unfair financial burden on many small businesses that produce commercials, forcing them to take out costly loans to cover heavy upfront costs.

"Many have rightly said that 'GM is too big to fail,' which is why most Americans, though wary, were willing to back the administration's plan to save the American auto industry,'' Miller wrote in his Nov. 10 letter. "But now, as the majority owner of GM, it seems disingenuous that the government would condone or take part in the exploitation of small businesses. This is counterproductive to a successful GM, harmful to the tens of thousands employed in this industry, and sends a very poor message to business."

A Treasury Department spokesman declined to comment. A GM representative didn't return calls.

-- Richard Verrier