To cut costs, DaimlerChrysler's Chrysler group will choose one global creative agency and create one global media planning and buying unit, the company said.
One of the two advertising agencies for Chrysler will be forced to lay off up to 40 percent of its employees, says an executive with one of the agencies.
The automaker is requiring a competition between FCB Worldwide, a unit of True North Communications Inc., and BBDO Worldwide, a unit of Omnicom Group Inc. The two must propose a new structure for media planning, buying and creative work by October 6.
'This is strictly about efficiencies,' said Bud Liebler, senior vice president of marketing for the Chrysler group. 'Do we really need two research departments, two human resource departments and all the agencies' field services?'
The agency that wins the account, which has annual billings in the USA of $1.2 billion, excluding dealer advertising, will retain the creative employees of the other agency and those employees that work with DaimlerChrysler on dealer matters. That means about 60 percent of the employees from the losing agency will be retained, said John Wren, CEO of Omnicom.
'Administrative people will be eliminated,' he said.
BBDO has about 450 employees on its units that are in review, meaning about 180 of its employees could be laid off, based on Wren's estimate. FCB has about 1,600 employees on the account, meaning about 640 of its employees could be laid off. FCB would not confirm Wren's estimate.
FCB handles creative work for Chrysler group corporate and the Jeep and Chrysler brands globally, while BBDO handles the Dodge brand, which is marketed only in North America.
PentaCom, a unit created three years ago by the former Chrysler Corp. but managed by BBDO Worldwide, handles media planning and buying for all of Daimler-Chrysler in North America, including Mercedes. FCB in February created a unit called DaimlerChrysler Media Alliance after winning DaimlerChrysler's media planning and buying account for the rest of the world except Germany.
Strengthening True North's case in the battle, the company on September 8 acquired 35.5 percent of Springer Jacoby in Hamburg, the agency that handles creative work for Mercedes-Benz in Germany, said a source close to the industry.
'It shouldn't come as such an extraordinary surprise,' Wren said. 'This is the final stage in about a three-and-a-half year process to cut costs.'
That three-step process started when the former Chrysler Corp. consolidated customer relationship marketing and other 'below-the-line' marketing services into a dedicated Chrysler agency called Ross Roy Communications Inc., which is now InterOne Marketing Group. Creation of PentaCom was the second step.
Not in the review are agencies that handle minority marketing for the Chrysler group, including Don Coleman Advertising Inc., of which True North last year acquired 49 percent.
True North has had the Chrysler account since 1979. BBDO has handled Dodge since 1960.
Tom Clark, vice chairman of BBDO Worldwide, will handle BBDO's pitch. Mike Vogel, president and CEO of FCB Worldwide, and Bill Morden, group vice president and creative director, will handle FCB's. A decision is expected in the fourth quarter.
FCB does not have a contingency plan for losing. 'We're not interested in the possibilities of defeat,' said David Bell, chairman and CEO of True North.