The $35 billion to $40 billion stock-swap merger announced last week, if approved by shareholders, also could lead to reviews of the car brands' ad agency assignments for creative and media in the U.S. and overseas because of conflicts.
MORE MEDIA FOR BBDO?
Omnicon Group's BBDO Worldwide, which has separate units now buying media for the two carmakers on both sides of the Atlantic, may get more business from the new DaimlerChrysler, industry observers speculated.
The two spent a combined $1.78 billion in measured media globally last year, according to Competitive Media Reporting and other estimates. The $1.4 billion the pair spent last year in the U.S. would make the combined company the nation's No. 3 media spender.
At this point, ad agencies are in the dark about what will happen, and most expect it to be months before decisions are made on the stable of shops working for the merged company. Media buying will likely be the first area addressed, they added.
"They're going to squeeze the media for sure," said Philippe Defechereux, an author of car books and former auto ad executive now based in New York. "They're going to ask for [deeper] discounts."
An ad executive whose company works with one of the marketers said a media consolidation was already starting.
Daimler's Mercedes-Benz of North America uses Interpublic Group of Cos.' Lowe & Partners/SMS, New York, for its $100 million U.S. account. Interpublic's Ammirati Puris Lintas, Milan, handles Mercedes in Italy.
The potential problem is Interpublic, whose shops -- including McCann-Erickson Worldwide, New York; Campbell-Ewald, Warren, Mich.; and Ammirati's New York office -- count Chrysler-archrival General Motors Corp. as a major global client.
McCann alone has more than $1 billion in billings from GM.
SAAB TO LOWE?
Lowe's GM work is expected to rise, with Automotive News reporting today that Saab AB is expected to sign with Lowe Group in Sweden to be its first global agency.
Although agency conflict rules increasingly are being relaxed across various product categories because of global consolidation, most observers would be surprised if GM would allow such a conflict to exist. Chrysler could also push for Lowe's removal.
Philip Guarascio, VP-general manager of marketing and advertising at GM's North American Operations, declined comment on the merger, and a GM spokeswoman said it's too early to say what will happen.
"We'll have to wait and see how the [DaimlerChrysler] structures fall out and how their marketing organizations are set up," she said.
"I think GM is going to sit back and wait and see" before deciding whether to allow the Interpublic shops to keep Mercedes, said John Bulcroft, president of auto consultancy Advisory Group. "If GM feels it can upset the apple cart, it will go ahead and do that."
But a second ad executive familar with the situation doesn't expect a problem, saying GM already grandfathered Lowe and IPG on Mercedes, plus Mercedes has 15 different agencies in different countries.
STRICT IN THE PAST
In the past, the car business has been fairly strict on agency conflicts.
Jaguar Cars, acquired by Ford Motor Co. in 1989, started an agency review in early 1992 and eventually tapped Ford roster shop Ogilvy & Mather Worldwide, New York, dumping incumbent Geer DuBois.
Mazda North American Operations held a review about one year after Ford took control of the carmaker. Chrysler had forced Mazda agency Foote, Cone & Belding, Santa Ana, Calif., to resign the business after FCB parent True North Communications acquired Chrysler agency Bozell Worldwide, Southfield, Mich.
Mazda picked W.B. Doner & Co. which had handled six large Ford Division dealer ad groups.
Ford consolidated its nearly $2 billion in U.S. media spending for all its brands last year, counting Mazda and Jaguar, at Ford Motor Media, Detroit, a dedicated unit of J. Walter Thompson USA.
CHRYSLER'S '97 MEDIA
Chrysler spent $1.3 billion in measured media in the U.S. last year, according to CMR (see chart, opposite page). Chrysler, which has a minimal presence outside the U.S., spent just $128 million abroad in 1997.
Mercedes spent $208 million outside the U.S. in 1996, CMR reported.
Dodge Division agency BBDO, Southfield, set up PentaCom as a subsidiary dedicated to handle all Chrysler Corp. media planning and buying, plus regional dealer group buys for Dodge. Chrysler has been considering giving Pentacom the media business for Chrysler, Plymouth and Jeep dealer ad groups, now handled by Bozell.
Mercedes' U.S. media buying could go to PentaCom if GM doesn't force Lowe to resign.
"If I were Chrysler, I'd push very hard for PentaCom to buy media for both in the U.S.," Mr. Bulcroft said.
Chrysler wasn't granting interviews last week after the merger news was announced in London, by Daimler Chairman Juergen Schrempp and Chrysler Chairman Robert Eaton, who will be co-chairmen of the new company. Mercedes North America President Mike Jackson declined to comment.
In Europe, Mercedes uses BBDO-owned GFMO, Hamburg, for its media buying. Bozell said it buys Chrysler media in 50 countries outside the U.S. The account is worth $127.9 million.
GFMO could absorb the Chrysler buying in Europe.
BRANDS STAY SEPARATE
Both carmakers said they plan to keep the Mercedes and Chrysler brands separate.
"Clearly they have to maintain very clearly differentiated brand identities," Mr. Defechereux said. "They should keep [the name] DaimlerChrysler as far removed from consumers as possible."
A publishing executive agreed about the importance for keeping the brands separate.
"I'm sure they'll remain totally independent from a marketing standpoint, but surely there will be great efficiencies in all media," said Brian McMahon, senior VP-group publisher of Hachette Filipacchi Automotive Group.
Contributing: Carol Krol, Dagmar Mussey, Pat Sloan, Laurel Wentz