The auto companies are notorious for squeezing their suppliers. When Jacques Nasser, Ford's president-CEO, headed the auto company's European operations, he tried to beat down its ad agencies' commissions from 13% to 10%. And in one oft-told story, Mr. Nasser was said to have turned out every third light in Ford's British factory to force the government to lower its electricity bill. It worked.
When Mr. Nasser went to Europe in the early '90s, one of the first things he did was to fire some of Ford's suppliers. Months later he renegotiated new deals with them. At the same time, he put the remaining suppliers on notice that they had better sharpen their pencils to stay on the preferred list. They don't call him Jac the Knife for nothing.
Is there a familiar pattern here? The Ford move to eliminate magazine publishing houses such as Hearst and Meredith came suddenly and without negotiation. Ford's ad agencies didn't know, and some say even people within Ford weren't informed before the ax fell. I've been told the magazine schedule for Ford's new truck, the Excursion, had to be revised at the last minute to replace the exiled magazines.
The magazine industry is viewing this carnage as a serious sales problem. "Ford is signaling the industry that they want us to do business with them in a different way," said Magazine Publishers of America VP-Marketing Christine Miller. "They want us to be really marketing-focused and not just media-focused."
I agree that Ford is sending magazines-and other suppliers-a signal but not the one Chris was talking about. What Ford is saying is that magazines better be prepared to dig down very deep if they want to get back on the list of Ford's authorized ad vendors-and so should the publishers that remain on the list if they want to remain there.
If Mr. Nasser's negotiating tactics haven't changed, in a matter of months the magazine publishers abruptly shown the door will be back in Ford's good graces, a lot poorer for the experience but with the lesson well learned.
Wasn't it Mr. Nasser who proclaimed to his parts suppliers that he wanted a 5% reduction in their prices every year forever? And the magazines have the temerity to actually ask for rate increases?
One of the key reasons for the squeeze on magazines may have been that Ford overspent in other areas, like the upfront TV negotiations. David Ropes, director of corporate advertising and integrated marketing at Ford, had to get the money from somewhere, and magazines were a ready target since they account for a third of Ford's ad budget.
I'm not at all convinced Ford sees salvation in multititle deals and cross-promotions like the one General Motors just cut with Warner Bros. GM can market all the Looney Tunes minivans it wants and clog the airwaves with Wile E. Coyote Pontiac commercials to its heart's content, but it's still got to move the metal at the dealer level.
And down in the trenches things aren't going so well. GM admitted it was late in buying TV time in many metro markets and didn't buy as much time as it wanted to. "In some markets, there wasn't enough [TV] inventory," Phil Guarascio, VP of corporate marketing and advertising, told Automotive News. "It's a commodity situation."
That's the real trouble with the automobile business: They view everything they buy as a commodity. The magazine industry can beat itself up for not being adept enough at putting together cross-marketing deals, but what the auto guys want is