GM Parks $3 Billion Media Account at Carat
"We wanted a media-agency partner with the sophistication to leverage global marketing opportunities," GM Global Chief Marketing Officer Joel Ewanick said in a statement. "Carat has an innovative approach to drive significant marketing value, and their service model has been tailored to align well with our global and regional brands. They are uniquely positioned to help us form strong media partnerships and drive significant global efficiencies."
The account will be run globally by Martin Cass and will be overseen in the U.S. by Carat President Doug Ray.
The selection followed a review by the third-largest global advertiser, as ranked by Ad Age 's DataCenter . The DataCenter estimates that GM spent $3.37 billion on global media in 2009. In its March 2011 10-K, the company reported worldwide advertising costs of $4.26 billion in calendar 2010.
GM's global marketing team, under Mr. Ewanick, led the review with the help of search consultancy R3:JLB. A decision is still pending on a creative review for GM's biggest brand, Chevrolet. The two massive pitches were launched in late 2011 with an eye toward savings and efficiency for the carmaker.
Mr. Ewanick told Automotive News that GM expects to see an expense reduction of millions of dollars or more, merely by reducing its number of marketing partners around the world. Before the review, the company worked with 40 agencies worldwide and with more than 50 worked on Chevrolet. Media-buying duties in India and China were not included in the review.
In the final leg of the process, GM heard pitches from four agency holding companies. Because of regional conflicts, two of the four contenders created teams at the holding-company level. Carat , which had managed the account in Europe, competed against Omnicom Media Group, Interpublic Group of Cos. (the incumbent in Latin and South America) and Publicis Groupe 's Starcom (the U.S. incumbent).
The matter of conflicts added complexity but didn't slow the review process. Within Omnicom, auto clients include Nissan, Porsche, Mercedes-Benz and Mitsubishi. IPG's Universal McCann works with Chrysler and BMW in the U.S., while Initiative works with Hyundai's namesake and Kia brands in the U.S. and in various global markets, including Germany and Australia. UM ran the majority of the business in Latin and South America, supporting Colombia, Chile, Argentina and Ecuador. In partnership with creative shop McCann, it managed the media business in Venezuela, Peru, Uruguay and Paraguay.
In its 10-K, GM reported that of the $5.1 billion spent on worldwide "advertising and sales promotions," GM North America accounts for $3.4 billion, GM Europe for $0.8 billion, GM International Operations for $0.6 billion and GM South America for $0.3 billion. The automaker spent about 67% of its 2010 worldwide advertising and sales promotion money in North America.
Tripling billings and the regional footprint with GM will be a huge boost for Carat as well as for the Aegis network, which recently sold research group Synovate.
Aegis won the $750 million account in Europe from UM in 2006. The hefty sum hasn't wavered much, though the debt crisis has probably tested the stability of the business. But the automaker is undergoing change in the region. It announced that Nick Reilly, president of GM Europe, has decided to retire in March 2012 after 37 years with the company. Karl Stracke will succeed Mr. Reilly.
The results of the review deal the biggest blow to Starcom , which had a strong year in 2011 but begins 2012 with a major loss. In May 2005, the automaker moved its $3.5 billion U.S. media-buying account to Publicis' 36 Group, Chicago from IPG's GM Mediaworks. The shift consolidated GM's U.S. media services within Starcom , whose GM Planworks unit had been handling the automaker's U.S. media planning since 2000. In 2009, the team eliminated the stand-alone unit and moved the account into the firm's standard operations under President-Buying Chief Mike Rosen.
Publicis Groupe said in a statement that it "regrets that a long-lasting relationship with GM has ended" and that it is "proud of the insight and high level of professionalism that Starcom has brought to its work on GM's image over the years, and of the support that we've given to GM through many ups and downs." It said the Starcom partnership represents less than 0.5% of Publicis Groupe revenue on a full-year basis and that the relationship would end in June.
For IPG's UM, the change represents the loss of a sizable budget and growth opportunity in the Latin American auto market. A story in the Los Angeles Times reported that "in Brazil, the region's top market, more than 3.5 million cars and light trucks were sold last year -- up 86% from 2006. Its economy is growing fast and wages are rising." However, the holding company could retain the buying in Brazil, where media is supported by the creative shops as a government mandate.
Omnicom doesn't stand to lose anything in media, as the holding company's relationship with GM is on the creative side, with Goodby Silverstein & Partners, which handles North American creative duties for Chevrolet. The media group likely remained a contender because of the creative, and a personal relationship that could have formed during Mr. Ewanick's stint at Nissan and Porsche -- both currently global media clients at Omnicom. According to the Ad Age DataCenter , Omnicom shops had worked with GM's former Chrysler units since 1926, when Dodge Brothers Corp. hired the Ross Roy agency (acquired by Omnicom in 1995 and folded into BBDO in 2001).
GM went bankrupt in June 2009, after spiraling losses and drastic drops in market share, and despite a multibillion-dollar federal bailout. It cut tens of thousands of jobs and slashed wages and benefits, but a "new GM" rose from the ashes. The company made $4.7 billion in 2010 after losing $4.4 billion in 2009.
GM's forward thinking since pulling out of bankruptcy -- a new CEO in Dan Akerson and Mr. Ewanick's appointment as CMO -- has registered a hit in the subcompact Chevrolet Cruze. It has been the No. 1-selling compact in the U.S. for months, thanks in part to inventory and supply problems facing its usual Japanese competitors, Toyota and Honda.
Mr. Ewanick has consistently emphasized product-differential marketing -- what he calls "swim lanes" -- to define brand identity. "We have to be very strict about it," he said in an interview with Automotive News. "If not, we run this risk of going back to where we were in 1983. You could easily see how you go back to badge engineering if you're not careful."
Contributing: Stephen Williams