Exclusive: Chrysler exits Arnell, haggles over BBDO pact

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Still reeling from a $1 billion loss in the second quarter, Chrysler Group is parting with Arnell Group, the shop behind its much-criticized deal with Celine Dion, and renegotiating its contract with its main agency BBDO Detroit.

Joe Eberhardt, exec VP-global sales and marketing, would only say that the contract of Omnicom Group's Arnell "is up for review at the end of December. Ask me in January" whether it would be renewed. But executives close to the situation said Chrysler will not re-up with Arnell, partly due to what's said to be an onerous $1 million per month retainer the agency has charged the automaker. The move comes as Chrysler prepares to hike ad spending in 2004 by $250 million.

Mr. Eberhardt, who said shortly after his June 1 arrival that he's not a fan of celebrity advertising, said Chrysler will fulfill its three-year contract with Ms. Dion.

Peter Arnell, CEO of Arnell Group, said he didn't know whether his contract was being renewed and declined to comment further.

Arnell, along with WPP Group's Fusion Five, Westport, Conn., was hired by Mr. Eberhardt's predecessor Jim Schroer, who resigned from Chrysler under pressure in late May. Fusion 5's contract is also expiring and won't be renewed (see related story, right).

Mr. Arnell handled the 2002 deal with Ms. Dion as pitchwoman to help the Chrysler brand move upmarket and also brought Aerosmith to Dodge in 2001. He was paid for brokering deals with Martha Stewart for the Chrysler brand and the 2002 "Band of Brothers" miniseries with Home Box Office for Jeep.

Celine fails to explain

Mr. Eberhardt recently admitted Chrysler's Pacifica launch ads earlier this year with Ms. Dion didn't explain its features or that it is a combination sedan, minivan and sport utility. Pacifica sales have since rebounded from its slower-than-projected start, due in part to new ads from Omnicom Group's BBDO and a lower price. Chrysler has since backed away from the siren's appearances in ads and cut back on the amount of her music in TV spots.

Mr. Arnell's production company, Sweet Pea, created the Chrysler commercials with Ms. Dion, which several executives close to the automaker said went millions of dollars over budget despite their simplicity. Sweet Pea's fees were in addition to Chrysler's purported $1 million monthly fee to Arnell Group.

A Chrysler spokesman said he wasn't familiar with Sweet Pea nor any details about its work for the automaker. She declined to comment on the monthly fee it paid Arnell.

putting the squeeze on

Meanwhile, the marketer is said to be squeezing its lead agency, BBDO Detroit, Troy, Mich., for cost cuts. Chrysler's purchasing department has gotten more involved in agency talks in the past six months, one executive close to Chrysler said. An inside purchasing spokesman confirmed the department has increased its involvement with agencies, but didn't give specifics.

BBDO's 1,790 staff on Chrysler handles an enormous amount of business. In addition to national and regional dealer group creative, it also executes dealer training, call centers and direct marketing. Mike Vogel, chairman-CEO of BBDO Detroit, couldn't be reached for comment.

BBDO "could have one or 5,000 people on the account," said Mr. Eberhardt. The important question is what service and what creative we get out of it."

Regarding BBDO's contract talks, he said Chrysler is negotiating its 2004 pact with the agency, which "has been a great partner and is working with us to be the most efficient and effective we can be."

Omnicom President-CEO John Wren is said to be working closely with Chrysler, and has flown to Detroit to be part of BBDO's talks, executives close to the company said. He still keeps in touch with Mr. Eberhardt, having met the Chrysler executive during his stint as VP-marketing of sibling Mercedes-Benz USA in the late `90s. Mr. Wren did not return calls seeking comment.

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