DETROIT (Reuters) - General Motors Co’s recent decision to pull its well-known Chevrolet brand out of Europe suddenly makes its expensive sponsorship deal with Manchester United, the world’s most recognized soccer club, look like less of a winner.
When the No. 1 U.S. automaker announced in 2012 that it was paying $559 million over seven years to slap the Chevy bowtie logo on the jerseys of “Man U” players, the steep price tag turned heads. Now, in light of GM’s announcement last month that Chevrolet will largely exit Europe by the end of 2015, the contract has become even more of an overpay because players will be wearing a logo for a product that is nonexistent in the region.
“Understand what this sponsorship deal is all about - it’s eyeballs. They’re leaving a big patch of geography with lots of eyeballs so the economic value has to go down,” said Gary Fechter, an attorney who has represented companies in sponsorship deals for 35 years. Fechter is not involved in GM’s deal.
Though Chevy has long been an iconic brand in the United States, it never really took off in Europe, hurt by the region’s tough competition and an economic downturn. GM said it plans instead to focus on expanding its Opel and Vauxhall brands in the region.
GM still sells its Chevy brand in most other markets around the world.
Jim Andrews, senior vice president with IEG, a WPP Plc unit that tracks sponsorships, said the deal still holds promise for GM in emerging markets where Manchester United is popular, but the value took a hit with the exit from Europe.
“I would not classify it as a bad deal, but if you could rewind the clock, knowing that you’re not going to be marketing the Chevy brand in Europe, would you do this deal at that price? I think the answer is clearly no.”
GM executives dismiss the notion that the deal is less valuable, saying the true payoff will be in Asia and other emerging markets.
“Anyone who’s ever lived in Europe or understands Europe will know that there is not a high proportion of Germans that support English soccer clubs. They follow the Bundesliga” or German professional soccer league, Alan Batey, GM’s North American chief, said at the Detroit auto show on Monday. Batey is also GM’s global head of the Chevy brand.
“We never, ever did this for Europe,” he added. “We did this because frankly soccer is the sport of the world. We really did this for our emerging markets, particularly China and Asia.”
As with any sponsorship deal, GM will also have to spend additional money to advertise or promote its partnership with Manchester United. The automaker is planning a huge promotional launch when the Chevy bowtie goes on the game jerseys in August and it will also use the Internet and social media to promote its brand with the club’s millions of fans.
Manchester United’s data on its fan base backs GM’s argument because the club says almost half of its 659 million followers globally are in Asia, including 108 million in China. Another 173 million are in the Middle East and Africa, and 71 million in the Americas, while only 90 million are in Europe.
Fechter, the sponsorship lawyer, called GM’s argument “putting a happy face” on a bad deal that could, however, still work in the end.
Of course, the deal might look better if United’s performance this season was stronger.
Manchester United are struggling on the pitch under new manager David Moyes this season. Going into this weekend’s round of matches, United are only seventh in the 20-team Premier League. They have never finished outside of the top three places since the Premier League was launched in 1992.
Manchester United officials are not fazed by GM’s decision in Europe.
“Chevrolet are very clear that the partnership with us is a global one and we both intend to continue this partnership to help build their brand around the world,” club spokesman Phil Townsend said.
Insurer Aon Plc, the current jersey sponsor under a four-year deal, instead signed a new agreement last April that runs twice as long for $240 million to sponsor United’s practice jersey, training complex and preseason tour.
“We think it’s more efficient and effective for both Aon and Manchester United,” Aon Vice President David Prosperi said.
GM may have overpaid for the jersey deal, but it can still pay off if the automaker reaches enough fans, said Simon Chadwick, professor of sports business strategy at Coventry University in England.
“It might sound a little outlandish,” he said, “but might we see Manchester United-branded Chevys driving around Beijing?”
Additional reporting by Keith Weir in London; editing by Matthew Lewis