Toyota Alarms Agencies With Plan to Launch Marketing Companies

Move Suggested It Might Follow in Hyundai's Footsteps and Bring More Than $1 Billion Account In-house

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NEW YORK (AdAge.com) -- Toyota Motor Co. is in damage-control mode after an announcement suggesting the carmaker will bring its more than $1 billion global advertising account in-house prompted panic and confusion at its U.S. ad agencies.

Akio Toyoda
Akio Toyoda Credit: Toyota
Toyota, which unseated General Motors Corp. in 2008 as the biggest carmaker in the world by sales, issued an announcement July 28 out of its Tokyo headquarters detailing the launch of two new marketing companies: one to "handle marketing within Japan" and another company to "carry out and assist global marketing."

The announcement went on to detail plans for the two ventures, saying Toyota intends to staff each with between 100 to 150 employees and capitalize each company with an initial infusion of more than $1 million. Toyota's newly installed president, Akio Toyoda, was tapped to oversee the domestic-marketing company, while former Toyota marketer Hiroshi Takada has been named to lead the company overseeing marketing outside Japan, the announcement said. The carmaker, which is deliberating on names for each of the entities, said its new marketing firms are set to begin operations Jan. 1.

Toyota spokeswoman Ririko Takeuchi told Advertising Age sibling Automotive News the moves were being driven by the Japanese automaker's desire to make its marketing and advertising operations a free-standing entity empowered to make quicker decisions. She said the new companies will "handle advertising, sales promotion and global marketing strategy" and "focus on marketing issues globally and help create a unified message."

It's no surprise, then, that many at Toyota's ad agencies were left scratching their heads about the status of their relationships with the carmaker.

Agency reaction
Several executives at roster agencies told Ad Age they had no information about the motivations behind Toyota's moves, and knew no more about the situation than what was being reported in the press. Adding a layer of concern was that the Toyota announcement followed recent moves by rival Hyundai to bring its advertising in-house. Hyundai shuttled lead U.S. shop Goodby, Silverstein & Partners off its account and is transitioning creative duties to Innocean, the agency owned and controlled by Hyundai's founding family.

Kurt Ritter, CEO of El Segundo, Calif.-based Team One, which handles Toyota's Lexus brand, said in an internal memo to staffers, "It has been brought to my attention that some of our team members here at Team One are expressing concern relating to a recent online posting stating that Toyota will assume 'in-house' responsibility for advertising currently created by [Toyota agency Saatchi & Saatchi, Los Angeles]." He went on to say that the announcement from parent Toyota Motor Corp. was being misconstrued. "Please note that neither [Toyota Motor Sales USA] nor its agencies of record are referenced in this press release. I am sharing this information with all of you to alleviate any concerns."

Saatchi and Team One serve as agencies of record for the Toyota and Lexus divisions, respectively, of Toyota Motor Sales USA. They handle creative, digital and media duties for Toyota and Lexus, with the exception of broadcast-buying duties, which are handled by ZenithOptimedia. Toyota is also one of Dentsu America's biggest clients; the agency handles work for Toyota Motor Corp. North America and the Scion brand. Saatchi, Team One and ZenithOptimedia are part of Publicis Groupe.

A Dentsu America spokesman would say only that the moves had no affect on the agency's U.S. business, while representatives for Saatchi & Saatchi and ZenithOptimedia referred calls to the marketer.

'Great deal of confusion'
Mike Michels, a spokesman at Toyota Motor Sales USA, conceded that the press release from parent Toyota Motor Corp. is causing a "great deal of confusion."

Mr. Michels said North America has, and will continue to have, more autonomy in terms of making marketing decisions than many of the other 150 markets in which Toyota does business. "Many are smaller and need marketing resources the central group in Japan can offer."

"Reports that all agencies will be fired and the all the work brought in-house are totally off base," said Mr. Michels, who described Toyota's creation of two marketing companies as "an internal reorganization of the existing global marketing organization."

Whatever that means remains to be seen, as Toyota indicated the two new structures will be up and running in a matter of months. The moves come as the Japanese car giant faces a nearly 35% sales drop in sales amid one of the worst years in the history of the auto industry. Toyota posted its first operating loss in seven decades in December and a loss of $38.7 million in its most recent earnings period.

In the U.S., Toyota Motor Corp. ranks as the No. 2 ad spender behind General Motors Corp., but brand Toyota was the No. 1 spender in 2008, ahead of GM's Chevrolet. Brand Toyota alone spent nearly $825 million in measured media in 2008, according to Ad Age data.

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