Daimler's $1.4 bil showdown

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Just two days before DaimlerChrysler Corp. called for a high-stakes shootout on more than $1.4 billion in creative and media accounts, the board of True North Communications turned down an acquisition offer from Omnicon Group.

Omnicom's goal, said an executive with knowledge of the offer, was to consolidate its grip on the DaimlerChrysler account. Now it's a moot point. If Omnicom wins the battle, it gets the business without the cost and complexity of an acquisition. If True North emerges as the victor, it is highly unlikely merger talks with Omnicom would be re-opened.

True North Chairman-CEO David Bell declined comment on whether Omnicom made an offer for the holding company; Omnicom CEO John Wren didn't return calls for comment by press time.

True North has more at stake, which was reflected in its falling stock price after the review was announced. DaimlerChrysler accounts for about 9% of the holding company's total revenue and, according to executives close to the company, 25% of profits. If it loses its largest client, True North would be a takeover target, especially since the field of potential buyers is expanded if there's no longer an automotive conflict.


Arthur "Bud" Liebler, senior VP-global marketing for the Jeep, Chrysler and Dodge brands, said DaimlerChrysler "knew there were some talks" between the holding companies. But the possibility of an acquisition didn't play a role in the review, he said. "At the end of the day, we have some specific things we need to accomplish, with a merger or not."

True North, seeking to strengthen its ties to DaimlerChrysler, is expected to acquire a 35% stake in Germany's Springer & Jacoby, which handles the automaker's Mercedes-Benz unit in Germany (see story on Page 75).

At stake in the megareview are global creative and media assignments for Jeep, Chrysler and Dodge, which combined spent $1.4 billion on advertising in the U.S. alone last year. Omnicom's BBDO Worldwide, Troy, Mich., handles Dodge, while its Pentacom unit handles North American media buying and planning. True North's FCB Worldwide, Southfield, handles creative for Chrysler and Jeep, as well as corporate advertising. Its DaimlerChrysler Media Alliance has international media duties.

Although the review involves creative assignments, DaimlerChrysler isn't looking for new advertising ideas, but rather ways to cut costs. Proposals from the agencies are due Oct. 6, and a decision is expected before the end of the month.


"This is really and truly about cost efficiencies," Mr. Liebler said. "There's a lot of duplication having two agencies."

Allen Rosenshine, chairman-CEO of BBDO Worldwide, said the marketer is "asking both agencies to look at how the business could be organized so as to save DaimlerChrysler money."

Both agencies said they expect a fierce fight for the prized accounts. Mike Vogel, president-CEO of FCB's Southfield office, said simply, "There's going to be a winner and a loser."

DaimlerChrysler AG, Stuttgart, ordered its North American unit to cut costs earlier this summer. The cuts stem from the parent's plans to chop $5.7 billion in spending from its worldwide budget by 2003. The carmaker wants to boost its stock price, which has sagged from $110 per share in January 1999 to the low $50s.

The automaker has tried unsuccessfully to figure out the profit margins BBDO and FCB make on its business, according to an executive close to the situation who asked not to be named. "For years, DaimlerChrysler has been in compensation battles with both agencies, but Chrysler was never able to pinpoint what the agencies were making," the executive said.


Mr. Bell said DaimlerChrysler compensates its agencies through a combination of fees and performance-based incentives. "It's quite a complex mosaic."

At least publicly, executives from both agencies say they are optimistic of a win.

Said BBDO's Mr. Rosenshine, "If ever a company was ready to offer DaimlerChrysler new structures and processes on a global basis to successfully consolidate additional brands within its operations to effect significant additional savings, that company is BBDO."

Countered Mr. Bell, "We think our chances of being selected for the consolidated business are excellent."

One reason BBDO believes it has the upper hand is that the automaker hasn't included in the review the customer relationship management business handled by Omnicom's InterOne Marketing Group in Troy.

DaimlerChrysler insists both shops are playing on a level field. Said Mr. Liebler, "Don't try to pick a winner, because I can't."

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