The World: Is this the end of the line for Detroit's agencies?

campaignlive.co.uk, Friday, 28 September 2007 12:00AM

Car sales at Ford, GM and DaimlerChrysler are falling and so is adspend in the industry's headquarters. Ann Cooper reports.

In 2006, the Big Three US automakers sold a total of 8.8 million cars, an 8 per cent drop from 2005. That same year, General Motors cut its adspend by 23.7 per cent to $2.29 billion, according to TNS Media Intelligence, and DaimlerChrysler reduced adspend by 10.7 per cent, to $1.42 billion.

While Ford actually increased spend by 8.5 per cent, to $1 billion, owing to a spate of new products, the implications for Detroit-based ad agencies, whose raison d'etre is largely to service the car-makers, are unavoidable.

Accounts are being shifted elsewhere - GM's $225 million Cadillac moved from Leo Burnett in Detroit to Boston's Modernista!; Chrysler's Jeep went to San Francisco's Cutwater from BBDO Detroit; and GM's corporate account landed at Deutsch, Los Angeles.

It's not a subject many in the Motor City care to dwell on. And with most ad people being unfailingly optimistic, it is inevitable that the spin is a positive one. Earlier this year, for example, the Detroit office of McCann Erickson, a GM agency for 80 years handling GM corporate work, Buick, GMC and much global business, lost Buick and GMC, when GM consolidated at Leo Burnett Detroit.

Garry Neel, the chief executive of McCann Erickson in Detroit, concedes the impact on the agency was massive, but points out: "As I told our employees, we've been a GM agency for 80 years and we're GM's largest global agency."

Neel was able to avoid lay-offs thanks largely to the volume of global and corporate GM business the agency has. "We have business in virtually every country in which GM operates," he says. Plus, markets such as Latin America, Asia-Pacific, Central and Eastern Europe and Russia demonstrate huge potential for continued growth, he claims. "The challenge for GM is North America. GM must be successful here to be successful globally."

The agency is putting more emphasis on pursuing non-automotive clients. "We look at that as being critical, as do other agencies in Detroit," he says. "It's not just the risk of having all our eggs in one basket, it's the diversity of opportunities for our people. But it's very challenging because clients, and particularly search consultants, don't think of Detroit for non- automotive clients."

As for budget cuts, Neel declines to talk specifics. "The short term is extremely challenging," he admits. "But one thing I've learned about the auto business is that having the right product at the right time makes all the difference."

Rich Stoddart, the president of Leo Burnett, North America, argues that shifting budget patterns, particularly in new, as - yet - untracked media, are clouding the issue of adspend. "You're seeing a more dramatic shift in the spending patterns of auto manufacturers from traditional media to non-traditional media, than in any other industry," he points out.

"Digital, lead tracking and CRM programmes are getting a lot more investment, but the problem is that we can't capture their true dollar worth because they're very hard to see. Print, newspapers or broadcast may be down for any individual marketer, but what you're not seeing is what's up."

Another misconception, Stoddart contends, is the media's misguided focus on Detroit as an individual market. He says: "You're asking me to assess the future of ad agencies in Detroit. But I don't think that way and nor does our client."

Stoddart believes the agency has had a collaborative model between Detroit and Chicago for some time. "Detroit is not separate and distinct from our Chicago or London offices. And, yes, GM is primarily serviced out of Detroit, because that's the client's headquarters. I think you run into trouble if you think you can source, retain and field the best talent out of one office. We're not a standalone agency in Detroit. We're a diversified agency and we field the account from offices around the world."

Stoddart dismisses any notion of doom and gloom over the future of the car industry. "Certainly the auto industry has its challenges, as every industry does. But I'm bullish on the future of GM and the automotive sector. Their product platform is incredibly clever. There was an old model in Detroit about all your agency people must be sitting there in a building next door to the client. There are great creative people who live in Mumbai, but the client doesn't care. They just want great creative and account people who will drive that business."

As for accounts going elsewhere, Stoddart plays down the agency's loss of Cadillac, which it had since 1935. "Auto-makers are looking for the best people for the job. Modernista! was an agency already in the GM stable with Hummer. So the trend at GM is to look for best solutions for the brand," he says.

Meanwhile, Neel points out, even though it's been a difficult time, optimism still rules. "Our business is about growth and finding solutions," he says. "Unfortunately, we're in a tough downcycle now. Will it ever get back to where it once was? Probably not. But the Big Three's domination will stablise over time. We can't help with building products, but as advertising partners, we can help with image and perception."

This article was first published on campaignlive.co.uk

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