Last week, Mr. Cunningham headed up the panel reviewing a global media and creative shoot-out between incumbents BBDO Worldwide, Troy, Mich., and FCB Worldwide, Southfield.
Mr. Cunningham, 54, has been in his current post since last September. He met recently with Advertising Age Detroit Bureau Chief Jean Halliday in his office at North American headquarters in Auburn Hills to discuss the state of car advertising.
Within days of the interview, Chrysler Group announced its stunning, projected third-quarter loss in North America of roughly $528 million, citing increased incentive spending and new model start-up costs for the Chrysler, Jeep and Dodge brands.
Advertising Age: What trends are you seeing in auto advertising?
Mr. Cunningham: If you look at the dominance of [vehicle] advertising, it's [model year] cleanup advertising and it's highly incentivized. The industry, we think, is running artificially. It's not unusual to have cleanup advertising this time of year. What's unusual is the advertising is a lot more incentivized.
AA: What advertising and marketing processes did you adopt when you were running Chrysler de Mexico (from 1996 to 1998) that you brought back to the U.S.?
Mr. Cunningham: In Mexico we had no money, so I "stole" everything of [Chrysler Group Senior VP-Marketing] Bud Liebler's [creative] I could. All we had to do was translate the ads [developed in the U.S.].
We're trying to share creative better [now], so we don't have redundant production costs. If I look at the costs of Canada and Mexico, we probably cut our ad production budget outside the U.S. market by 75% over the past three years. We don't cut the budgets. We just put the savings into media.
AA: What were the challenges last year of centralizing global marketing and advertising for the Jeep, Chrysler and Dodge brands?
Mr. Cunningham: The challenge was how do you get all these countries so that the strategy works with the product universally. That's out of Bud's group. For the [Chrysler] PT Cruiser, our first global launch [earlier this year], we brought in all the marketing managers from around the world to see how to utilize their input. Now we have Market Performance Centers in 122 countries. The [company-owned] MPCs took over distribution in about a dozen countries [from independents].
AA: How many vehicles do you sell outside the U.S.?
Mr. Cunningham: Our target in 2001 is 230,000 units. We're just now trying to finalize it. Germany continues to be our biggest market, although it deteriorated under our new MPC. Venezuela remains strong for us. Argentina and Brazil are tough on everybody [in the industry]. In China, we're in the process of completing new agreements. Switzerland was one of our strongest markets. The Middle East is coming back for us now. We're still in the growing stages of this.
AA: In the current move to consolidate your global advertising and media at one agency, what's more important -- a uniform brand message or costs?
Mr. Cunningham: The bigger part, to me, is the cost side. What we were doing in Europe was creating ads with a little European flavor, and it was more expensive than doing it here. The cost side of the business is what you're going to address.
If you look at what's happened in the industry, the 3% to 4% [margins] on the pricing economics of cars in the past year has gone to 1% to 1.5% pricing or even less.
It's not just the car business. We aren't isolated from cost pressures. We have fixed costs -- the UAW contract and materials. We aren't isolated from cost pressures. We are no different from other industries.
AA: You and other U.S. carmakers have made no secret about the annual cost cutting with your manufacturing and parts suppliers since at least the mid-1990s, but advertising was spared. Why?
Mr. Cunningham: Our attitude now is there are no sacred cows for cost cuts. [With parts supplier cuts] a lot of people will ask, "What about product quality?" but there are a lot of people with high quality and not high costs. You have to make sure you have the most efficiency with the highest quality.
AA: How do you cope with rising media costs -- shift into non-traditional media, do more regional advertising?
Mr. Cunningham: We don't just increase our ad budgets. As revenues rise, our budgets rise. We're setting our ad budgets now. Our spending on things like customer relationship management and events is about 20% to 25% of our ad budget.
Our Web pages are going to be a key link to our advertising. We rarely do banner ads. In the last three or four years, our Internet investment has been substantial, and we're doing a major upgrade to our servers now.
When we change our [vehicle] prices or incentives, it's all automatic now [on the Web]. When you go to some of these dot-coms, you'll get a [vehicle price] swing of up to $3,000 over the suggested price. We don't want our dealers selling to dot-coms. Still some do, and we talk to them about it. By February, we hope our [upgraded] Web sites and server will be up for about 70% of our volume Five Star dealers [who have met strict certification standards]. We're still wrestling with whether to have one corporate site or brand sites.