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The coffee mug was one irritant, say those who watched as BMW of North America's relationship with Mullen, Wenham, Mass., soured.

The mug arrived with Jim McDowell, the former Porsche Cars North America acting VP-marketing who became BMW's VP-marketing in June 1993. A piece of black tape covered its design.

Eventually, word circulated that underneath the tape was the name of former Porsche agency Fallon McElligott. Mullen executives are said to have resented the implication that there was another agency in the wings.

Rumors and implications became reality last week as BMW moved the creative portion of its ad business to Minneapolis-based Fallon, effective July 1. The dismissal came only two years after Mullen succeeded Ammirati & Puris, the New York agency that created BMW's "ultimate driving machine" positioning during its 18 years on the account.

BMW spends an estimated $80 million a year on marketing; Fallon will do creative on the $60 million auto ad portion. DeWitt Media, New York, will continue to handle media buying. BMW also uses several other agencies for promotions and direct marketing, including newly hired Dick Clark Corporate Productions, Burbank, Calif., brought on board to help promote the roadster that makes its debut in early 1996 (AA, March 20).

The decision to change agencies was no surprise, even though sales climbed 8.3% in 1994 to 84,501 units. The relationship was rumored to be rocky even before Mullen's first work aired.

Nevertheless, agency President-CEO James Mullen said he had received client assurances that all was well as recently as the week before the firing.

Mr. McDowell, who called the idea that a coffee mug caused problems "flaky," said BMW made the change as part of an effort to broaden its marketing approach.

"We're extremely ambitious about the products that are coming in the next two years, and we wanted to make sure we had the resources to handle areas like interactive and integrated marketing," Mr. McDowell said.

Two years ago, Fallon competed for the business, but was forced to drop out because it was then owned by Mercedes-Benz of North America agency Scali, McCabe, Sloves, New York.

Fallon Chairman Patrick Fallon said he was "ecstatic" with winning the account, calling BMW "one of the most important brands in the world."

While the Minneapolis office will oversee the account, some staff will be assigned to Fallon McElligott Berlin, opening in New York April 3. That office will be headed by Andy Berlin, now chairman-CEO of Berlin Cameron Doyle, scheduled to dissolve when it ends its work on Volkswagen of America on March 31.

While the strength of former relations was certainly driven home to Mullen, another agency stepped up to the plate last week to replace D'Arcy Masius Benton & Bowles, Chicago, at Amoco Corp.'s Amoco Petroleum Products unit after a 40-year run.

Lintas Campbell-Ewald, Warren, Mich., was awarded the $40 million account covering gasoline, convenience stores, payment systems, car wash and service bays. D'Arcy chose not to participate in the review.

Iris Cohen Selinger contributed to this story.

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