GM Structure Benefits IPG

But 60 Regional Dealer Agencies Are ‘Left Hanging’
DETROIT–The Interpublic Group of Cos. emerged as the clear winner when General Motors last week outlined its much-anticipated integrated field marketing strategy. The losers were the approximately 60 agencies handling local advertising for GM’s 954 dealer marketing groups in 211 markets.
As of April 1, 1999, GM will no longer fund the DMGs, leaving the local shops no role. The approximately $1 billion in local media buying for GM lines that was previously handled by the regional agencies will be consolidated at GM’s Local Communications Inc. unit, created under the auspices of IPG.
The consolidation will give the automaker “20-25 percent better cost efficiency,” said Phil Guarascio, GM vice president and general manager of advertising and corporate marketing. “And I’m confident our share of voice will not decline.”
The move mirrors GM’s consolidation of national media buying at GM Mediaworks, also a unit of IPG. The holding company’s Ammirati Puris Lintas, Campbell-Ewald and McCann-Erickson agencies are among GM’s national creative shops. GM’s non-IPG roster shops are Leo Burnett and D’Arcy Masius Benton & Bowles.
As of April 1, creative duties for regional and local programs will also be handled by those five national agencies.
GM’s reorganization of its sales, service and marketing structure takes effect Jan. 1. Its field sales and marketing staff will be divided into five regions, with 200 marketing teams working with all dealers, no matter which GM brands they sell.
The national agencies will be required to have at least one office set up in each of GM’s five regions, said Guarascio.
Another bonus for IPG will be the establishment of R*Works, a support agency that will be staffed and housed in GM regional offices to provide fully integrated, tactical event sponsorships and local promotions. R*Works (short for Regional Works), will be operated by IPG, and “take the best of the best” event and field marketing talent from IPG agencies, Guarascio said. Employees at McCann-Erickson’s Momentum unit, which handles largely the same assignments, will be naturals for these positions, he added.
Where does the April 1 cutoff of funds for dealer marketing groups leave the regional agencies? “We’re left hanging,” said an executive at one agency.
The agencies have been expecting bad news for months since it was first reported that GM intended to centralize local media [Adweek, Sept. 28]. But some shops admitted to some bitterness that GM has reversed its course after its divisions spent the last several years pushing consolidation of dealer advertising at a small number of “select agencies.” Some shops spent heavily on the reviews that decided who would win that “select” designation. The chosen shops then competed in reviews of DMG accounts around the country, often opening service offices to handle those accounts.
J.W. Messner in Grand Rapids, Mich., was Chevrolet’s largest local marketing agency, with nearly $100 million in billings. Although the shop has a dozen nonautomotive accounts, president Paul Accinno said some layoffs are planned. It has not yet been determined whether the agency will close any of its nine regional offices across the country, which primarily service Chevy.
The agency will pursue the individual dealer business, Accinno said. “Having 1,600 Chevrolet dealers that liked what we did, we obviously have a pretty big interest,” he said.
Strong Automotive Merchandising in Birmingham, Ala., is losing $40 million in Chevy dealer work, but has no plans to lay off employees or close any offices. It may pursue individual GM dealer business, and is now exploring other category opportunities, said Ray LaLone, the agency’s president. The agency turned down a chance at a $5 million Ford dealer association account earlier this year because of Chevy’s stringent conflict rules. “Now, when those opportunities come back around, we’ll be able to look at them,” he said.
Kragie/Newell in Des Moines, Iowa, will shut down the Detroit office it opened to serve the Chevy DMG there, but expects few other staff cuts. “We’re glad we have a diversified client list,” said president Liz Newell. “We’re grateful for the work we’ve had from Chevrolet, and we’ll move on.”
Will Ruch, president of Hughes, Ruch & Murphy in Brookfield, Wis., said the shop has a wide enough client base to roll through the loss of its Oldsmobile dealer business.
It handles Wisconsin, Minnesota and the Rockford, Ill., areas. Ruch said the loss would not lead to layoffs at the agency.