Layoffs hit agencies as market cools

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A host of ad agencies are firing, not hiring.

Large agencies are laying off employees for reasons including the dot-com collapse, internal reorganizations, client shifts and client cutbacks in spending. The cuts come as agencies, marketers and media grapple with the slowing economy. Media companies and marketers are already staging their own workforce reductions.

Among those that have been trimming back are Grey Global Group's Mediacom, New York; Interpublic Group of Cos.' Lowe Lintas & Partners, New York; Omnicom Group's BBDO North America and GSD&M, Austin, Texas; Publicis Groupe's Fallon, New York, and Publicis & Hal Riney, San Francisco; and WPP Group's Young & Rubicam. The industry "had a great year last year. But people will be much more cautious with dot-com revenue drying up and self-fulfilling recession fears," said Steven Gundersen, CEO of recruiting firm Gundersen Partners, New York. "People will take a very cautious view toward profitability and hence may lay off to improve margins for 2001."

Michael Russell, equity analyst for Morgan Stanley Dean Witter, said the most vulnerable agencies are those that were privately held last year, private agencies planning to be sold this year, agencies that had larger portions of their business in the U.S., and those that are primarily reliant on creating or placing ad campaigns rather than doing non-advertising marketing services.

"Layoffs are going to be more prevalent in agencies where dot-coms made up a large portion of their business," he added.

Late last year, a spate of layoffs occurred at agencies, including about 100 people at Y&R, about 30 employees at Lowe Lintas & Partners, and more than 100 employees at BBDO North America, but those were cost-cutting moves related to extraordinary circumstances.

Y&R's layoffs were related to a corporate downsizing effort following the agency's acquisition by WPP. Lowe dropped staffers following their loss of the Burger King account. BBDO laid off at least 40 people in its flagship New York office in a cost-cutting move after BBDO won the business of DaimlerChrylser AG's Chrysler Group.

Although Tom Clark, a BBDO vice chairman based in its Troy, Mich. office, declined to comment whether that office will cut any positions, another agency executive said further layoffs at BBDO North America could run as high as 225 people. Another BBDO executive indicated cutbacks were due to an arrangement with the client in which the agency agreed to work for the automaker without charging fees for the first year.

"But it will only last one year," said the executive. BBDO did hire about 200 True North employees who worked on Chrysler Group work when it was at True North's FCB Worldwide. That left about 100 Chrysler account staffers at FCB who likely will be laid off. GSD&M, Austin, Texas, has cut 32 people since the end of 2000, almost 5 percent of the agency. Thirty were let go in the Austin office, while two positions were cut in Chicago. According to an executive at the shop, the layoffs are in preparation for a possible slowdown this year and anticipation that "it's going to be a little leaner."

Fallon, New York, laid off 10 people due to those staffers' poor performance on certain accounts, said an insider. "It's just too bad we had to cut them all at once," said the executive.

Publicis & Hal Riney cut 12 jobs because of slumping work on dot-com accounts and a pullback in advertising by client First Union Corp., which has been working through its own troubles.

A Grey executive said the MediaCom media buying and planning unit has gone through a restructuring over the last six months that will lead to significant layoffs this year. A realignment is also on the way at the advertising division.

Marketers and media also are pulling back. DaimlerChrysler announced its own restructuring plan for its troubled Chrysler Group. Insiders expect a cut of 15 percent to 25 percent of the 13,000 white-collar force at headquarters.

General Motors Corp. said in mid-December it will cut 15,000 jobs in North America, much of that through attritition.

On Jan. 12, General Electric Co.'s NBC announced that it was letting go of 600 employees, or 10 percent of its staff. CNN, in the wake of parent company AOL Time Warner's merger, is expected to cut 500 to 1,000 jobs this week.

True North's Bozell, Chicago, despite the very real possibility it will lose the National Pork Producers Council's $10 million account after that group's members last week voted to discontinue its ad funding program, said it was not planning any layoffs. The pork account is one of the Chicago office's larger accounts, though Bozell said it represented under 25 percent of its Chicago business.

Not everyone's cutting back. Interpublic's Campbell-Ewald, Warren, Mich., said it is hiring.

Contributors: Alice Z. Cuneo, Wendy Davis, Jean Halliday, Laura Q. Hughes, Kate MacArthur, Laura Petrecca, Ira Teinowitz, Laurel Wentz

Copyright January 2001, Crain Communications Inc.

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