Ad agency McCann Erickson's historic motto is "Truth Well Told," which is unfortunate because its latest ad for General Motors -- one that claims that "we have repaid our government loan, in full, with interest" -- is turning out not to be true.
It's the oldest PR mistake in the book: Don't make a public statement if a rudimentary fact-check demonstrates that your claim is false. And certainly don't have your CEO say it -- which is what this ad does (video below).
The commercial accompanied a press release last week that said GM had repaid $5.8 billion to the U.S. and Candian treasuries -- a rare piece of good news for the automaker, hooked to the public's dislike of the bailout. You can see why they were keen to make it into an ad. The spot starred GM CEO Ed Whitacre, who has fronted McCann's corporate image work for GM before.
According to a letter sent by Sen. Charles Grassley, R-Iowa, to U.S Treasury Secretary Tim Geithner, $17.4 billion was made available to GM in an escrow account at the Treasury. After $6.7 billion was paid back, a further $5.6 billion was to be released to GM:
Therefore, it is unclear how GM and the Administration could have accurately announced yesterday that GM repaid its TARP loans in any meaningful way. In reality, it looks like GM merely used one source of TARP funds to repay another.The Houston Chronicle's Loren Steffy notes that $5.8 billion is merely a fraction of what the U.S. actually invested in GM:
For starters, the Obama administration bigfooted the bankruptcy process last year, benefiting autoworkers at the expense of investors. Bondholders wound up with a smaller stake in the new company than retirees, who were owed less. As I wrote at the time, almost one-fourth of the GM bondholders were small investors, many of whom held the bonds in retirement accounts.Worse, a GM exec later admitted the claim in the commercial is literally false. Grassley quoted a TV interview in his letter in which GM vice chairman Stephen Girsky was asked:
Meanwhile, taxpayers in the U.S. and Canada invested about $50 billion to buy a 61 percent stake in GM. Neither the cost of the bondholders' haircut nor the current value of taxpayers' investment is known because GM's stock isn't publicly traded.
Question: Are you just paying the government back with government money?The most astonishing part of all this is that Whitacre himself made the claim and appeared in the ad. He must have known, in broad terms, what GM's true financial position with the government was. McCann has more of an excuse: If the client approved the spot, so be it. But the agency is running a risk here: If it was a smart strategic partner -- instead of a vendor hoping to secure the account by making Whitacre feel like a TV star -- it would have checked the script and advised against airing the spot.
Mr. Girsky: Well listen, that is in effect true, but a year ago nobody thought we'd be able to pay this back.
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