IPG to Report on Restructuring Plan

Interpublic Group CEO David Bell on Tuesday will outline an estimated $200 million global restructuring that will result in hundreds of job cuts and the consolidation of some back-office functions, said sources.

In May, Bell told industry analysts that the goal of the restructuring is to get IPG’s margin back into “competitive range.” Tomorrow, he will discuss the belt-tightening moves during a conference call on second-quarter results.

Underperforming IPG shops—including McCann-Erickson, Initiative Media, Draft and Lowe—are in the process of eliminating positions globally, according to sources. For example, McCann’s cut includes as many as 500 staffers, while Initiative’s final work force reduction totals more than 50, said sources. The layoffs began six to eight weeks ago and will continue for several months, said sources.

Bell and the agencies declined comment.

Since the bulk of the charge will be taken for the second quarter, according to sources, IPG is not expected to meet Wall Street’s earnings-per-share consensus of 15 cents for the period. In fact, IPG is likely to claim a net loss for the second straight quarter. In the first quarter, the company reported a net loss of $8.6 million, or 2 cents per share.

IPG declined comment.

At the end of 2002, IPG’s margin stood at 8.8 percent before taxes, down from 13.4 percent in 2001 and well below the 2002 numbers of rivals Omnicom Group (14.6 percent) and WPP (12.3 percent).

IPG’s last major restructuring was nearly three times as big. In 2001, the year it acquired True North Communications for $1.6 billion, IPG took a $646 million charge for costs related to integrating True North as well as realignments.

Tomorrow’s call will be the first for Chris Coughlin, the former Pharmacia executive who joined as COO in June and added the CFO title last month after IPG announced Sean Orr will leave that post. Coughlin has spent the summer meeting agency chiefs and discussing ways to operate more efficiently, said sources.