NEW YORK (AdAge.com) -- In a sign that the end of Chrysler's relationship with BBDO is near, executives familiar with the situation said BBDO's Detroit office will close its doors in January, leaving the fate of its remaining 485 employees up in the air.
The news of BBDO Detroit's shuttering was delivered today and in-person by BBDO Worldwide President-CEO Andrew Robertson, who called an emergency meeting of all staffers and told them the agency needs to "plan for a life without Chrysler from February 2010."
Mr. Robertson couldn't be immediately reached for comment and other BBDO representatives either declined to comment or couldn't be reached.
Employees who attended the meeting, held not in the office but a nearby venue, were told they were being informed of the agency's closing in compliance with a federal law, dubbed WARN, that mandates companies give staffers a minimum 60 days notice when a business intends to close.
Based on BBDO's contract with Chrysler, which is expected to expire at the end of January, BBDO Detroit staffers will get pay and benefits up through Jan. 31, Mr. Robertson said. He added he would do anything he could to personally help them thereafter. A teary Joe Garcia, who leads the Detroit office, is also said to have made remarks during the meeting.
The announcement spells a devastating conclusion not only of a longstanding marketer-agency relationship, but also a sad end for an office that once served as a major engine of BBDO's North American operations.
Back in 2000, when BBDO emerged the big winner in Chrysler's agency consolidation, the account was estimated to be worth $2.4 billion, and the agency's Detroit office -- exclusively devoted to serving the Dodge, Jeep and Chrysler brands -- numbered some 2,000 staffers. In 2009, amidst squeezed fees and contracted scope of work, the Chrysler account today is worth less than half that in billings, and staff at BBDO Detroit has dwindled to less than 500.
Of course, the writing has been on the wall. As Chrysler has struggled to emerge from bankruptcy this year and reorganize under its new owner, Italian carmaker Fiat, the relationship that has suffered the most is that between the carmaker and its longtime shop.
Advertising Age first broke the news in August that Chrysler, nine years after consolidating global ad duties with BBDO, was reaching out beyond the agency to shops all across the industry to handle creative campaigns. Fiat chief Sergio Marchionne is said to favor "jump ball" reviews for assignments over agency-of-record relationships, thereby preventing any agency from having too much power and allowing the marketer to change shops and ad campaigns at a whim.
Just last Wednesday, Chrysler held a meeting in Detroit where it unveiled a five-year plan for the company, and also broke new TV campaigns for its car brands. That work was the result of assignments doled out -- at the expense of BBDO -- to shops such as GlobalHue and Richards Group, responsible for a Jeep brand campaign and Dodge Ram ads airing now, respectively.
Meanwhile, BBDO and Chrysler seem to have, despite several attempts, been unable to successfully negotiate new terms for working together. The move today to shutter BBDO Detroit suggests that Omnicom CEO John Wren has given his blessing to terminate relations with Chrysler once its contract expires.
On its earnings call last month, Mr. Wren acknowledged that revenue derived from the automaker was at risk, but hinted that Omnicom was out hunting for other carmakers' business.
"We have our challenges with Chrysler which for 2009 will contribute about 1% of our revenue, so that I believe is at risk," Mr. Wren said. "The Detroit office of BBDO is still under contract with Chrysler and therefore it's not available to be pitching other business at the moment. ... We're honoring the contract and will see what the outcome is."
That careful wording suggests only the Detroit office is under contract, and that all other offices of BBDO are now free to pursue other auto accounts.
It remains to be seen what becomes of Chrysler business parked at other Omnicom agencies. Digital shop Organic handles some work, while media agency PHD serves as media agency of record for all three of Chrysler's major brands, Chrysler, Dodge and Jeep. The PHD relationship is now at stake, as Chrysler last month began a media agency review, talking to media shops outside of Omnicom.