The victor will work with a new marketing manager for the VW brand, expected to be Gerhard Schoeps, currently manager of the marketing communication department of Lufthansa German Airlines and a former BMW marketing executive.
Mr. Schoeps, 38, who joined Lufthansa last January from BMW, couldn't be reached for comment.
5 TO 7 CONTENDERS
VW is believed to have invited five to seven agencies to pitch the business, but would confirm only DDB Needham's participation.
A decision is expected by the end of March so the winning agency can prepare for the fall relaunch of VW's main model, the Golf.
The company declined to comment on the replacement for departing Marketing Manager H. Dieter Dahlhoff, who had a close relationship with DDB Needham.
"A successor for Dahlhoff has not yet been named," a company spokesman said.
CEO WANTS BETTER CREATIVE
VW Chairman-CEO Ferdinand Piech is known to want more creative advertising in Volkswagen's home market. Agency executives said Mr. Dahlhoff insisted Germany run uninspired locally created advertising even though DDB Needham offices in other markets were winning creative awards for their VW ads.
Mr. Dahlhoff's relationship with Mr. Piech deteriorated over the past year after Mr. Piech hired Robert Buchelhofer from BMW as distribution and marketing director, ranking above Mr. Dahlhoff.
Although VW's 19.4% share of the German car market has remained steady for two years-and the company's goal is to hit 20% in 1997-new competition is looming with the spring 1997 launch of Mercedes-Benz's first small car, a rival to VW's main Golf model.
Ads for Mercedes' A-Class car, by Springer & Jacoby, Hamburg, have already started.
"Volkswagen looks at the Mercedes-Benz ads and wishes they had such a creative campaign," said an executive close to DDB Needham.
Mr. Piech also wants to expand the Volkswagen brand into more upscale segments without losing its reputation for affordability, a tricky task. His goal: to become the second-largest premium price car marketer in Germany after Mercedes.
Since Mr. Piech took over VW's leadership in 1993 from Carl Hahn, a big DDB Needham fan, the agency relationship has deteriorated. DDB Needham eventually lost VW's U.S. business, closing its Detroit area office.
VW said in a statement that the agencies invited to pitch for the business include "international networks as well as creative agencies from several European countries." VW said it has the option of pairing a small creative agency to develop strategy with a bigger agency with stronger account handling skills.
Besides DDB Needham, VW is believed to have invited Rempen & Partner, a Duesseldorf agency owned by Havas Advertising's Campus network; Rempen will lose Mazda Motor Corp.'s German account in early 1997 to J. Walter Thompson Co., Frankfurt.
VW may also be looking at a combination of GGT, London, and BDDP, Sulzbach, Germany, said executives familiar with VW. BDDP briefly handled BMW in Germany but now holds the account only in France.
GGT and BDDP executives said they had not been contacted by VW, but would be interested.
Slagman, a new Hamburg agency formed as a breakaway from Springer, is also considered a contender.
Media buying will remain with HMS Carat, Wiesbaden, Germany.
Contributing: Jean Halliday