The tire-squealing you hear up and down Madison Avenue these days is the sound of car accounts pulling out of ad agencies. The murmuring just behind it is the sound of ad executives trying to control the spin.
Martin Puris of Ammirati & Puris Inc. says his agency resigned the bmw account because it could no longer work with the carmaker's marketing executives. John M. Connors Jr. of Hill, Holliday, Connors, Cosmopulos Inc. says his shop lost the Infiniti account because Nissan Motor Co. wanted to cut costs by consolidating its advertising at one U.S. agency. And Richard J. Lord of Lord, Dentsu & Partners insists his agency benefited from having the Amati account, even though Mazda Motor Corp. canceled the new luxury car before the agency filmed its first commercial: "We played in a big game," says Lord.
There's some truth in each of these claims. But none tells the whole story: The auto advertising business is undergoing an upheaval that has ad execs baffled and frightened. In the past two years, no fewer than 12 major car accounts have changed hands, have been put up for review, or canceled--including four of the industry's most celebrated brands in the last nine months (table).
`MY LAST DAY.' Several trends are conspiring to loosen Madison Avenue's grip on its once-loyal car clientele: the growing list of foreign carmakers who are failing in the U.S. market; the push toward more incentives, such as cut-rate leases, at the expense of brand advertising; and rising desperation among auto companies, as retail sales continue to lag. "People are looking a lot harder at their resources," says Philip Guarascio, general manager of marketing and advertising at General Motors Corp. "This isn't business as usual."
Car sales have slumped before, of course. But agencies and carmakers used to be so intertwined that the shops usually rode out the tough times. To be near their clients, many set up offices in Detroit, in the case of the Big Three, or in California, where U.S. operations of some importers are based. And several top car marketers moved easily between Madison Avenue and Motown: Guarascio, for example, spent 21 years at Benton & Bowles before joining gm.
Those cozy days are gone. gm, which hasn't fired an agency since 1958, recently called a review of its $140 million Oldsmobile account, now at Leo Burnett Co. And other GM agencies are feeling the chill. "I operate on the assumption that it's my last day on the account," says Sean K. Fitzpatrick, who oversees gm's Buick and gmc Truck accounts at McCann-Erickson Worldwide.
SMALL IS BEAUTIFUL. Other recent GM moves have done little to comfort Fitzpatrick and his counterparts at the auto maker's six big agencies. GM recently hired boutique shop Kirshenbaum & Bond, which is known for its cheeky New York-style ads, to handle an undisclosed corporate assignment. Guarascio insists this shouldn't threaten gm's existing agencies. But he acknowledges that the carmaker will increasingly tap other small shops for services he thinks they can supply better than the big ones can.
The tremors are sundering some of the most durable relationships in the industry. Consider bmw, which stunned Ammirati & Puris in October by putting its account into review after 18 years--even though its U.S. sales are up 26%. "You have to constantly evaluate your position in the marketplace," says bmw marketing chief Victor H. Doolan. But Puris suggests that Doolan, who recently took over U.S. marketing, simply wants to start fresh by hiring an agency more beholden to him. Doolan has no plans to shelve the agency's durable slogan: "the Ultimate Driving Machine." And he says he asked Puris to participate in the review. But Puris, who was deeply offended, refused.
In these financially straitened times, some agencies have become the victims of circumstances beyond their control. Hill Holliday's ads for Infiniti, which showed swaying pussy willows and Zen rock gardens instead of the car, won the brand lots of attention at its 1989 launch. True, Hill Holliday annoyed Infiniti by shuttling managers on and off the $100 million account, say execs familiar with the agency. And dealers carped that its work wasn't aggressive enough. Still, Infiniti's sales are up a respectable 21% so far this year.
The trouble is, Nissan's overall U.S. sales are down 8%. And Robert M. Paske, Infiniti's director of marketing, says Nissan can trim its marketing budget by consolidating the business at its principal American agency, Chiat/Day/Mojo Inc. Paske says Nissan is negotiating a more favorable compensation deal with Chiat. And Chiat initially plans to hire only 15 to 25 staffers to work on Infiniti, while Boston-based Hill Holliday took on 118 staffers and opened a branch in Marina Del Rey, Calif.
Dealing with fiscal constraints is bad enough, but some agencies must worry about clients who pull out of the U.S. market altogether. Lord Dentsu lost a $10 million account when Peugeot withdrew in 1991. A year later, it lost an additional client when Mazda canceled its planned launch of the Amati. Now, auto experts wonder if Isuzu will get out of the U.S. passenger-car business to focus on sport-utility vehicles. Or if Subaru of America Inc. will withdraw from the market--a rumor it denies.
WORST BLOW. For agencies, the thorniest challenge is simply to survive in a market with too many cars and not enough buyers. To boost sales, many carmakers are taking cues from packaged-goods companies by channeling more dollars into incentives, such as rebates and cut-rate leases, rather than brand advertising. "The deal is the name of the game," says Christopher B. Wackman, former marketing vice-president at Subaru. This hits agencies in two ways: They lose revenue, and the relentless promotions can undercut the brand campaigns they were hired to produce.
The price of losing a car account is steep. BMW had billings of $67 million, for example, and Ammirati & Puris employed between 20 and 30 people on it. If Puris hadn't won two other big accounts, he might have been forced to lay them off. Hill Holliday's Connors closed his California office and laid off all its 118 staffers after losing Infiniti.
But that doesn't mean Connors and Puris are shunning car accounts. Connors has already spoken with bmw, while Puris is regarded as a prime contender for the Olds account. For all the heartache they inflict, car accounts are still regarded as the crown jewels of the ad biz. After all, William Bernbach kicked off a creative revolution and sold plenty of Volkswagens by persuading consumers to "Think Small." That's about the only time an adman ever thought of automobiles in anything less than the grandest of terms.