Omni-potent: Daimler crowns BBDO

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Omnicom Group's BBDO Worldwide was the big winner in the DaimlerChrysler Corp.'s review as it walked away with the marketer's estimated $2.4 billion consolidated global advertising account for Chrysler Group.

The big loser: True North Communications and its FCB Worldwide, fired from an account that represented about 9% of True North's revenue and as much as 25% of profits.

The loss could hammer True North's stock price -- although Wall Street already had hit the stock hard when the review was announced. It could also leave the holding company vulnerable to takeover from a rival such as Interpublic Group of Cos. or Publicis Groupe.

By January, BBDO will consolidate all Chrysler business at PentaMark, formed in 1998 to oversee all of the agency's Chrysler work. The renamed PentaMark Worldwide is expected to hire many employees who handled the automaker's business at FCB.

While the consolidated account had been reported at $1.8 billion, a Chrysler insider said billings could be as high as $2.4 billion.

"This new combined account will constitute the largest in the automotive industry," Arthur "Bud" Liebler, senior VP-global marketing for Chrysler Group, said during a Nov. 3 press briefing. "BBDO will adopt a new culture, and the top talent from FCB will be part of the PentaMark team."

Omnicom CEO John Wren and BBDO Chairman-CEO Allen Rosenshine were pumped up by the victory but resisted crowing. "We are delighted" was about the only comment either executive would make, referring questions to DaimlerChrysler.

While it's unusual for a marketer to hire a holding company rather than an individual agency, the win was a victory for Omnicom as much as for BBDO. Mr. Wren was closely involved in the review, and Mr. Liebler said Omnicom's global resources played a large role in DaimlerChrysler's decision.


BBDO's office in Troy, Mich., was the incumbent on DaimlerChrysler's $750 million national and regional Dodge dealer accounts. Its PentaCom subsidiary handles $1.7 billion in media for all Chrysler Group brands and Mercedes-Benz. It now adds the brand agency assignment for national and regional Chrysler, Plymouth and Jeep dealer accounts, which had been at predecessors to True North agencies since 1979.

"This is a psychological and prestige victory for BBDO," said Jim Dougherty, a financial analyst at Prudential Securities in New York. "Even in DaimlerChrysler's weakened state there aren't many worldwide marquee clients around, and the big car companies are marquee clients."

DaimlerChrysler kicked off the competition between its incumbent agencies in September, informing them it would plant its consolidated global advertising business at the agency that could cut fees while providing consistent, top-drawer creative work. DaimlerChrysler, which will have a representative on PentaMark's board, expects to save in excess of $50 million a year as a result of the consolidation.

DaimlerChrysler has made no secret about cutting costs. The carmaker recently announced a third-quarter loss of $512 million, due primarily to the U.S. operations of its Chrysler Group. The Chrysler brands suffered losses from heavy incentives, new-product launch costs and overestimated off-lease values, said Mike Flynn, director of the University of Michigan's Office for the Study of Automotive Transportation.

The Chrysler Group is already starting to slash ad budgets, said executives close to the company. "It's going to be a tough environment," Jim Holden, president of DaimlerChrysler, said recently when asked about Chrysler Group's 2001 ad budget.

"What they have in mind is the agency making less," said Mr. Dougherty, who calculated that DaimlerChrysler currently pays about $250 million in agency fees.

"They are trading volume for margin," said an Omnicom executive who requested anonymity.

At the briefing, Mr. Liebler said the carmaker will realize savings in production costs, media buying, human resources and back-office operations.

"With two agencies you have two operations and many redundancies," said Mr. Liebler, who would not estimate how many True North employees will be laid off.

Omnicom was viewed by many as a favorite because of its close ties to Chrysler and the wide array of marketing services it already handles for the company. BBDO said early in the process it believed it had the upper hand because its dedicated InterOne Marketing Group subsidiary wasn't part of the process. InterOne, formerly Ross Roy Communications, handles marketing services, including customer relationship management and direct marketing for DaimlerChrysler.


Ted Cunningham, exec VP-global sales and marketing at DaimlerChrysler and the top executive on the review panel, said InterOne wasn't part of the review because it had spent the past 18 months developing the best processes possible to handle the carmaker's account.

David Bell, True North chairman-CEO, left Detroit before the announcement and was not available for comment. In a statement, he said, "We're disappointed that the superior quality of our global work and our experience in integrating business from other agencies for Chrysler Group did not seem to be the critical drivers that we'd anticipated."

Mr. Bell said if the agency had lowered costs any more than it proposed, "it would also have lowered our margins to levels that would have been unacceptable to us and our shareholders."

Mike Vogel, CEO of FCB's Southfield, Mich., office, said, "Our focus is now on replacing this business and finding the next set of challenges for our agency."

Kevin Smith, True North's chief financial officer, said in a statement the company will continue to receive revenue from the account during a transition period. "At this point, it is our belief that we will be about 15› to 22› below the consensus [earning per share] estimate [of $2.12 to $2.13] for 2001, assuming we're on track with our other corporate plans," he said.

"This is a bigger loss to True North than a gain for Omnicom, by far," Mr. Dougherty said. "The way True North will spin it is they will say obviously we've done some great work for Chrysler, sorry to see them go, wish them luck, and now we have this . . . dynamic auto advertising agency available to conquer new heights with another automaker."

While True North is spinning, Omnicom is sitting pretty.

"In the investment business everybody adores Omnicom," Mr. Dougherty said. "They think it is the gold standard, the best-run agency ever. Right now they are in the driver's seat."

Contributing: Kate MacArthur

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