Until last year, communications executives in the auto industry viewed 'globalization' as just a trendy word that involved corporate structure. But the stunning DaimlerChrysler merger sent everyone involved in marketing autos scrambling to reassess basic assumptions and priorities.
It's clear why the manufacturers' communications departments and agency networks are affected deeply: At DaimlerChrysler, one of the biggest challenges is to achieve economies of scale in sales and distribution, while maintaining distinct brand images for Chrysler and Mercedes. This requires dialogue between both sides, and access to consolidated top management by either side.
The top people at Lowe & Partners/SMS, who have done a great job for Mercedes-Benz in the past five years under the leadership of Marvin Sloves and Lee Garfinkel, now have access to top management in Auburn Hills. The same is likely true for people at Bozell and BBDO, who handle ad work for the Chrysler divisions. It's a good bet that key advertising people on both sides are unsettled by this reshuffling; while it may take time to see realignments shake the industry, the equilibrium has been upset.
Who are the most likely candidates to be affected? And what impact will it have on ad agencies that do business with those companies? It is relatively safe to assert that the remaining independent French, Italian and Swedish manufacturers, plus the weakest Japanese competitors, are at the top of the vulnerability list. Here's why:
With the merger, Daimler-Benz leaped from being one of Europe's specialized manufacturers to being one of the world's top five carmakers. The new DaimlerChrysler has strong footings on both sides of the Atlantic, and players such as PSA/Peugeot-Citroen, Renault, Fiat, Volvo and Nissan have few alternatives but to take huge chances in North America, merge or be absorbed.
Let's look at the ad agency networks of those companies. Suppose you are the board of Euro/RSCG. PSA/Peugeot-Citroen is one of your top worldwide accounts, focused on Europe. You also have a strong agency network in North America, vital for future growth and profitability on a global basis. Volvo is part of the roster, but that is small potatoes in terms of billings (about $60 million) compared to what a major international carmaker typically spends by nameplate, say $150 million to $400 million.
Just as the DaimlerChrysler merger opened opportunities in Europe for Bozell, BBDO or Lowe & Partners/SMS, you need countervailing opportunities in North America. What to do? Urge your U.S. network to pitch a major car account and risk alienating your vital auto partner in Europe? Or stay put and suffer a strategic disadvantage? Similar considerations are being weighed in European boardrooms at Publicis/FCB, which handles Renault and Fiat in various countries.
And then there is debt-ridden Nissan, near the top of the list of potential global merger candidates. TBWA Chiat/Day in Los Angeles has that account in the United States; if a large international car account comes up for review, should the agency go for it, betting on the upside? What kind of contingency plan can they develop in case Nissan is absorbed by a bigger fish? How do they manage the downside? Contingency planning is the most challenging in this fast-evolving global playing field.
The BMW Group poses intriguing questions. Perceived up to a year ago as one of the probable emerging winners going into the new millennium, the group suffered two critical setbacks in 1998: First, the DaimlerChrysler merger reduced BMW to a junior player in Europe. Second, its British Rover side plunged into major labor and financial difficulties. These developments have reduced BMW's ability to take advantage of the new global opportunities, and perhaps even switched its label from hunter to quarry. If you are on the BMW Group's agency roster, no doubt you sleep a little less peacefully today than a year ago.
Last but not least, there is General Motors and its phalanx of ad agencies, with McCann-Erickson, D'Arcy Masius Benton & Bowles, Campbell-Ewald and Leo Burnett Ltd. at the core.
Stirrings at GM
The world's biggest carmaker and advertising spender is still struggling to establish its brand-management system and is still losing market share in North America. It also faces serious problems with Opel in Europe. Indicating clear unease with its traditional agency lineup, the Detroit mastodon allowed GMC to sign up Ammirati Puris Lintas in 1997. Then, last November, GM let its flagship Cadillac division select a small New York shop, Berlin, Cameron & Partners, for Cadillac's new Escalade sport-utility. More such nontraditional new assignments likely will proliferate, and further complicate the contingency planner's task in many agency boardrooms.
Thus, the DaimlerChrysler merger affects more than manufacturers and their suppliers. It also touches deeply their networks of advertising agencies, big and small.