Chrysler Challenges Rate Hikes

I have my flak jacket on under my suit,” joked Arthur “Bud” Liebler, svp/global brand marketing for DaimlerChrysler, as he faced a hostile lunch crowd at last Friday’s Magazine Day. Though the annual gathering was a day to celebrate magazines, Liebler was perceived by publishers as more of a spoiler than a cheerleader.

Faced with a crushing third-quarter loss, the Chrysler Group is seeking to contain media costs by first taking aim at magazines. “I think we’ve been pretty damn strong partners to magazines through the years, and they to us,” said Liebler. “In the last few years when we’ve been very successful, we’ve given them the rates they’ve requested, and now we’re saying we can only afford to do the business we can do. … If there’s some magazine family we just can’t come to terms with, we’ll take that money [elsewhere].”

Publishers were gunning for a rate hike that averaged between 5-9 percent. Publishers that negotiated early, such as Emap, got a rate increase; others (Time Inc., Hearst Magazines) were less fortunate. All company representatives declined to comment. Hearst, Meredith Corp., Condé Nast Publications and Hachette Filipacchi Magazines executives did not return phone calls.

“We didn’t feel this was an act of a partner,” said one Time Inc. executive. “This seemed to be a unilateral action about which we were consulted. We remain hopeful that we will be able to establish some sort of dialogue.”

While Time Inc. is holding internal meetings on what response to take, some publishers are still in negotiations with Chrysler.

At least three publishers, including U.S. News & World Report, have agreed to the terms put forth by Chrysler. So far, no one has rejected the automaker’s request, said David Martin, president/CEO of PentaCom, an agency under the PentaMark umbrella, which handles Chrysler’s U.S. media buying.

After posting $512 million in operating losses for its third quarter, DaimlerChrysler AG last month made known a $2 billion cost-cutting plan that includes price cuts from suppliers.

Last week, Chrysler consolidated its media planning and buying under one roof at Omnicom Group, whose PentaMark unit will oversee its brands. [See story on page 14].

“Costs just have to be contained,” said Liebler. “We just consolidated our advertising agencies; the media is another piece of it.”

Ad spending in magazines for Chrysler dropped in 1999 by 1.6 percent to about $330 million over the prior year, per Competitive Media Reporting.