Lowe Suffers Yet Another Blow to Its U.S. Outpost

Saab Shift to McCann Shines Light on Network's Turnaround That Isn't

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Can an ad agency network survive without much of a New York presence?

After suffering yet another round of layoffs, yet another CEO departure and yet another client loss, Lowe is about to find out. The move of General Motors' Saab brand last week to Interpublic Group of Cos. sibling McCann Erickson strips the agency of GM business and once again focuses attention on a long-promised turnaround that just hasn't materialized at its U.S. operations.
Mark Wnek: Chairman and chief creative of Lowe, New York.
Mark Wnek: Chairman and chief creative of Lowe, New York.

The network -- still regarded as a creative force overseas, and with a highly respected U.S. creative leader in Mark Wnek -- is not abandoning its U.S. outpost, but with every piece of bad news, the skepticism that the company can right itself just gets stronger. Long viewed as the weakest link in the Interpublic portfolio thanks to a steady stream of client losses and management turmoil, Lowe is still reeling from a blow dealt in June, when GM consolidated its Buick-Pontiac-GMC account at Publicis Groupe's Leo Burnett.

Sick bed
The move of the GMC truck brand alone will purge an estimated 20% to 25% of revenue at the network office, as well as almost 70 of the office's staffers, executives familiar with the matter said. Compounding the problem is management instability: North American CEO Nancy Hill left last month after just about a year on the job. (Ms. Hill is not being replaced. Sal Taibi, president of Lowe, New York, is overseeing the office.) Said one Interpublic executive, "If Lowe were a human being, it would have been pulled off life support long ago."

"There have been for at least a few years now questions about Lowe's viability, at least in the United States," one agency-search consultant said. "In the case of Lowe, where they as an agency have lost accounts over the years and they aren't quite as big as they were at one point, you at least like to see them hang on to what they've already got."

The network's CEO acknowledges the diminished pull of Lowe in New York and suggests it can get by with a presence there that isn't exactly thriving. "From a Lowe Worldwide standpoint, New York is important but it is not economically overwhelmingly important," said Stephen Gatfield, formerly of Publicis' Leo Burnett Worldwide, who came aboard last February. "The Saab situation is one that we wouldn't wish to see happen, but it's no more than a run-of-business issue."
Stephen Gatfield, Lowe CEO
Stephen Gatfield, Lowe CEO

Lowe has whittled down its offices by nearly a third this year and shifted its focus to the parts of its micro network outside North America, a footprint that includes Brazil, China, France, India, Spain, Sweden, Thailand and the U.K. Some Interpublic executives like the idea of Lowe as a low-overhead creative boutique -- something akin to a BBH, for example -- that might be plugged into its larger siblings, such as McCann Erickson and DraftFCB, when extra creative firepower is demanded.

"We remain committed to delivering on the vision of Lowe as a provider of high-value ideas that drive integrated communications programs," said Interpublic Chairman-CEO Michael Roth in a statement. "While the recent account shifts in the U.S. have led us to take strong actions to restructure the New York agency, it will remain an important part of the overall Lowe offering."

Tattered agency brand
To be sure, Lowe still has some strengths here. The main one is Mark Wnek, chairman and chief creative officer of Lowe's New York office, who has a lot of fans in the business. One search consultant, AAR Partners Managing Partner Lisa Colantuono, praised his work for XM Satellite Radio, one of Lowe's few recent wins. "They did a phenomenal job with the [XM] win last year -- the creative that they pitched went right into market, which is rare. ... They understand client issues and are able to solve those problems, she said."

But Mr. Wnek has to overcome what's become a tattered agency brand in the American circles, a poster child for agency mergers gone wrong. Mr. Wnek suggests that his office's turnaround could be helped along by a new client base. "While we have parted with some business, which has been difficult fiscally, culturally, it has probably been the right thing," Mr. Wnek said.

But some will argue that's like scratching an itch by cutting off your arm.

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Contributing: Jean Halliday, Matthew Creamer
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