John Holt

The historic bankruptcy filing of American automobile icon General Motors today sparked widespread discussion from the halls of the White House to the factory lines of Detroit. But it was also was a hot topic in Seattle's SoDo neighborhood. That's the home base of The Cobalt Group, a 14-year-old company which provides digital marketing technologies for thousands of auto dealer Web sites.

GM happens to be one of The Cobalt Group's biggest customers, so one might think that CEO John Holt would be worried sick (especially with news that the auto maker may close as many as 2,100 dealerships.) But Holt tells TechFlash that the bankruptcy is a good thing because it ends months of speculation over what might happen to the beleaguered auto maker. And the self-described optimist said he thinks GM will emerge stronger, spending even more money on the digital marketing services that The Cobalt Group provides.

"Today's GM is the strongest GM I've ever worked with," said Holt.

"...Bankruptcy has been hanging over GM and its dealer network like a sword of Damocles and folks have been somewhat frozen - both by anxiety about the bankruptcy and by this dreadful economy," he added. "Now, everyone can get back to the business of designing and building cars and trucks and selling and marketing them."

But won't fewer dealers translate into fewer marketing dollars for The Cobalt Group, which in turn could lead to more layoffs?

Holt, whose company cut about four percent of its workforce in December, doesn't think so. He said the company -- which ran online sales and advertising efforts for about 10,000 dealers last year -- has certainly lost some business as the tough economy wiped out Ford, GM and other dealers across the country.

But he said the company is "performing as expected" because it accurately forecast dealer attrition for 2009. No layoffs are planned.

"In fact, I'd say we're ahead of plan, both because we footed expenses to the expected revenue plan and because we exaggerated dealer losses in our forecast," said Holt. "After six months of constant front-page-news speculation, I'm one who believes the GM bankruptcy will be clarifying and confidence-building, both for the American consumer and for the auto industry."

Here's why Holt is so optimistic about the new GM.

"They've cleared out huge legacy costs... They're concentrating only on their four strongest brands... They have substantial financial backing. The remaining dealers will have bigger territories and they'll sell more cars and be more profitable.

Importantly for Cobalt, the marketing budgets at the average remaining dealership will be bigger than the industry average per dealership marketing spend today... And much of that spend will wind up in high ROI digital marketing.

We're superbly positioned to help this new strong GM and its remaining dealers in the brave new digital world.... especially as the economy begins to recover and unit sales creep back up and marketing spend increases... which I expect we'll see starting in Q4."

In fact, Holt thinks digital marketing may increase at the new GM as auto sales improve and management looks for new, effective ways to sell cars.

"The awful economy cleared out a lot of old habits such as over-spending on traditional media. We've been a pauper the last 15 years cajoling dealers to reduce, just by a little, their traditional media spend and give the Internet a try.

Now, in a zero-based budgeting world, where dealers are saying, "if I have only one dollar to spend on marketing, where should I put it?"... I believe they're going to put it into digital."

In this new era, Holt says that the traditional media companies may find themselves to be the "pauper" trying to get a portion of the auto companies' ad dollars.

"The shoe's on the other foot, as it should be, because nothing beats pay-for-performance measureable media, and that's what the Internet's all about," he said. "So I like our chances."