Hyundai's contract with WPP's wholly-owned AD Value (formerly DiamondAd), one of the biggest agencies in Korea and half-owned Ablea, expired late last year. But the shops had continued to work on the estimated $120 million Hyundai and Kia business, said two executives close to the matter. WPP Group Chief Executive Martin Sorrell declined to comment; a WPP spokesman referred calls to the client.
Michael Choo, an international communications manager at Kia Motors Corp. in Korea said in an e-mail that "if the in-house agency is formally formed, the existing agencies, including Ablea and AD Value, will be largely impacted because Kia and Hyundai were their largest customers." But executives close to the matter said it's not a matter of if, since the automaker is already in the process of registering the agency's name, InnOcean.
Major shareholders in the agency will be members of the automaker's founding family, the Chungs, and it will be headed by the daughter of Hyundai-Kia Automotive Group Chairman Mong-koo Chung, the oldest surviving son of the automaker's late founder. The in-house agency will "control the marketing and communication activities of Hyundai Motor, Kia Motors" and other affiliates "at home and abroad," The Korea Times reported last month, citing an unnamed Hyundai official.
That story was discovered online by a U.S. Hyundai dealer, who notified officials of Hyundai Motor America. Bob Cosmai, president-CEO of Hyundai Motor America, said after subsequently conferring with the Koreans, he sent letters to dealers explaining "it's not going to affect us at all." He said the in-house shop in Korea will allow more consistent messaging for both Hyundai and Kia in smaller markets handled by independent distributors.
Hyundai's U.S. creative agency, independent Richards Group, Dallas, will not be affected, Mr. Cosmai added. "They do great work for us." Kia and Hyundai's combined U.S. media budget, at $340 million, is handled by Aegis Group's Carat North America, New York
Several executives close to Hyundai aren't surprised at the South Korean automaker's latest move, citing a pattern of more centralized control. In January, Mr. Chung announced a new global brand management strategy for the two brands and new global ad slogans developed internally in Korea.
The automaker's U.S. executives have continually denied that Korean management orchestrated the 2002 review of its separate media accounts for Kia and Hyundai and Hyundai's creative review. But Carat's contracts are with World Marketing Group, a unit formed by the automaker in Korea, not with Kia or Hyundai in the U.S. The CEO of WMG is in Korea: Eue-sun Chung, the only son of Mong-koo Chung and his heir apparent. WMG has more recently started media auditing in Canada and Europe for the automakers.
In the U.S., a WMG representative said its job was to monitor Carat's performance. But within months of WMG's formation, its role changed; its strategic planning manager told Advertising Age "we are basically the in-house media departments of Hyundai and Kia."
Hyundai-Kia Automotive Group is one of Korea's largest remaining chaebols, or conglomerates controlled by families that conduct inter-group trading. Until 1999, the Hyundai Business Group chaebol had an in-house ad agency. Hyundai sold an 80% stake in its in-house ad agency to Cordiant Communications Group for $100 million and inked a five-year contract for Hyundai's auto account in Korea. WPP acquired DiamondAd in 2003 when it acquired Cordiant and later upped its stake in the shop to 100%.
AD Value was a key part of Mr. Sorrell's strategy for WPP to beef up its revenue in Korea. WPP also holds a stake in LG Ad, the in-house agency of Korean conglomerate LG. Last fall, WPP won a $200 million, long-term global assignment from Korea's Samsung Electronics for several units in its stable.
Contributing: Lisa Sanders