Chrysler owes Ad Agency BBDO $58 million.
April 30, 2009
BREAKING : Ad Agency BBDO Detroit owned by Omnicom Group is owed $58 million in the bankruptcy document, that you can read here
It’s worth noting, when your second largest creditor is your ad agency, exactly what was Chrysler spending their money on… seriously… like this company spent everything they had on advertising… and nothing on R&D …. no wonder they are where they are… in bankruptcy.
They even listed Peter Arnell’s Peapod in the bankruptcy documents…. the POS golf cart… that will never get off the ground… especially now..
It is unlikely that advertising agency BBDO will receive the complete funds, if any, and to make matters worse it appears that BBDO might even lose the account as per the rumors on the street.
$58 million dollars… it’s enough cash to force all sorts of layoffs…. and those layoffs most likely will be expected. We are unsure if that is just their billable fees, or if that is hard dollars allocated out of the ad agency for media spends, as BBDO Detroit has not gotten back to us prior to this publishing. If it’s hard dollars allocated out of the agency, then the chances are the layoffs will be far more severe… and it’s our speculation that that is exactly what the bulk of the money is.. leaving BBDO holding the bag for Chrysler’s bankruptcy.
We actually expect Omnicom to go into the bailout line after this one.
BBDO Minus Chrysler leaves very little
April 30, 2009
EDIT: There is a part 2 to this, as Chrysler owes Ad Agency BBDO $58 million as per bankruptcy documents.
Since Chrysler will file for Chapter 11 bankruptcy and the company will shut down production on Monday. Under bankruptcy, Chrysler would still sell cars and the government would back its auto warranties when it resumes operation under bankruptcy protection, but all this leaves a big open question regarding their Advertising Agency of record, BBDO owned by Omnicom Group.
The rumor on the street is that this relationship will not continue in it’s current form the second the bankruptcy judge looks at that billing sheet. In fact, advertising in general from the company will be reduced to pennies as compared to recent history.
Chrysler spent $1.2 billion on advertising in 2007, much of that going to BBDO, now the advertising budget is expected to be a tiny fraction of that, with whatever of it is left mostly allocated to online. Something BBDO arguably isn’t prepared for.
“I don’t have a freaking clue what they are going to spend on Advertising with this mess. We have the government, the bankruptcy judge, and Fiat all going to have their say.” said a Chrysler employed source, and based on the Fiat Press Release (Included below) it appears that Fiat has zero intention of allocating cash to this venture. The last sentence of the release spells it all. That means Fiat has a say on what is spent, but doesn’t have to put a penny into it.
Another individual puts this into historical perspective. “The Chrysler owned Jeep was designed to fight the Germans and Italians in World War II, now Italy owns it…. who knows how they are going to treat that line”
Interesting time, but one thing is clear, BBDO is going to be seeing some headache level issues coming from the company.
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FIAT GROUP AND CHRYSLER ENTER INTO A GLOBAL STRATEGIC ALLIANCE
Fiat S.p.A. and Chrysler LLC announced today they have signed the agreements to establish a global strategic alliance. The Alliance comprises two elements: Fiat contributing to Chrysler rights in various platforms, technologies, and models, management services and cooperation and assistance in key areas of Chrysler’s business, such as procurement and international distribution, and Fiat’s acquisition of a shareholding in Chrysler.
1.Statement from the CEO of Fiat Group, Sergio Marchionne
“This transaction represents a constructive and important solution to the problems that have plagued not just Chrysler in recent years, but the global automotive industry as a whole. Bringing together Fiat’s world-class technology, platforms and power-trains for small and medium sized cars, and its extensive distribution network in Latin America and Europe with Chrysler’s rich heritage, strong North American presence and talented and dedicated workforce will create a powerful new automotive company, while helping preserve jobs and a manufacturing industry that is critically important to the U.S. and Canadian economies,” the CEO of Fiat Group, Sergio Marchionne, said.
Our goal since we first entered discussions with Chrysler nearly a year ago was to leverage the strengths of both companies to yield the scale, efficiencies and cost savings necessary to create two stronger automakers able to compete more effectively on a global scale. This transaction is an important step toward achieving this objective.
Our work is just beginning, but together with our new partners at Chrysler we look forward to delivering on the vast potential this alliance holds and reintroducing to North American customers of some of our most popular brands, including Alfa Romeo and the award-winning Cinquecento.
We would not be here to announce this agreement were it not for the tireless dedication, focus and creativity of the US Automotive Task Force and their Canadian colleagues. As we worked our way through the myriad of obstacles and issues that arise in transactions such as these, they never lost faith in the project. Through this transaction, they have created the conditions for the reestablishment of Chrysler as a viable long-term participant in the automotive market.
Organized labor unions on both sides of the border have also made significant contributions in accepting reductions in benefits and equity in satisfaction of some of their claims. I would like to thank the leadership of both the United Auto Workers and the Canadian Auto Workers unions for all they have done and for constructively participating in our shared challenge of recreating a great Chrysler.
Over the coming weeks and months, I will be spending a great deal of time meeting with Chrysler employees and touring its facilities. While our agreement must necessarily go through the U.S. legal system for a few weeks, we will be preparing ourselves to reemerge quickly as a reliable and competitive automaker. I believe Chrysler can meet the challenges posed by today’s difficult market conditions by tapping back into its innovative spirit, by focusing on quality as a cornerstone of its product offering and by listening to its customers and delivering the cars they want. It is a model we have strictly adhered to in the past few years at Fiat, and one I believe we can adapt here to write the next chapter in Chrysler’s legacy.
The transaction which we have just finalized represents an historic moment for both Fiat and Italian industry. It is a significant step toward building a new and solid foundation for the future.
Today is also a day of great satisfaction for all women and men at Fiat. The fact that Fiat’s know-how has been appreciated at the most senior levels of the US and Canadian administration – to whom I express gratitude on behalf of our Group’s entire management team – is a source of significant motivation for the work ahead of us.
We are certain that a stronger and more international Fiat will emerge from this alliance, with an even greater capacity to compete in markets worldwide,” the CEO of Fiat Group, Sergio Marchionne, said.
2.The transaction
The transaction will be implemented through an expedited sale of substantially all the assets of Chrysler to a NewCo pursuant to certain provisions of the US Bankruptcy Code. After intense consultations with the US Treasury and all the other constituencies, including, the government of Canada, the United Auto Workers (UAW) and the Canadian Auto Workers (CAW), Chrysler elected such route as the most effective to restructure its debt. As a consequence, today Chrysler will request the bankruptcy court in New York to approve the sale of Chrysler’s business to a NewCo. Subject to the approval of the regulatory authorities, if the Court will approve the Transaction it will require the parties to complete the transaction as soon as possible.
Pending this approval, the current Chrysler will continue its normal business operations and the US Treasury and the Canadian government will provide the company with financing in order to allow the performance of all its obligations towards the employees and to fund its on-going needs.
From the beginning of May Chrysler will benefit of new wholesale financing arrangements entered into with GMAC which will also offer retail financing.
At closing of the Transaction, NewCo will assume the corporate name of Chrysler and become the owner of substantially all the Chrysler’s business without certain debts and liabilities.
At closing NewCo will issue in favor of Fiat an equity interest equal to 20% (by vote and value) on a fully diluted basis and Fiat will enter into certain industrial agreements with Chrysler.
Similarly, at closing the Voluntary Employee Benefit Association (VEBA) will be issued an equity interest equal to approximately 55% on a fully diluted basis of Chrysler. Such equity interest will be administered by the U.S. Treasury. UST and the Canadian Government will collectively hold the remaining 10% equity interest (on a fully diluted basis).
The new Chrysler will also benefit from the recently agreed new collective bargaining agreements with UAW and CAW and of a facility of the U.S. Treasury of approximately US $ 6.5 bn.
The new Chrysler will be managed by a board of directors consisting of nine directors: three directors will be appointed by Fiat. One of Fiat’s appointees must satisfy the criteria for independence under the New York Stock Exchange listing rules. VEBA and the Government of Canada will have the right to appoint one Director respectively. U.S. Treasury will have the right to make the initial appointment of four directors (three of whom must be independent).
Fiat will have right to receive up to an additional 15% equity interest (by vote and value) on a fully diluted basis. This stake can be obtained in three tranches of 5% each subject to the achievement of predetermined targets, in particular, achievement of regulatory approvals to produce the FIRE family of engines in the USA; achievement of sales of Chrysler vehicles outside NAFTA, and achievement of regulatory approval to produce a Chrysler model based on Fiat technology. Upon obtainment of such additional 15% interest, Fiat will also have the right to appoint another director of Chrysler.
In addition, Fiat will be granted an option to acquire an additional 16% shareholding (exercisable from Jan 1, 2013 until June 30, 2016). The price of such incremental equity will be determined in accordance to certain market standards but in any event will not exceed the then Fiat market multiple. This option will not be exercisable while the US Treasury outstanding loan exceeds US$3 billion.
Fiat’s shareholding will be capped at 49% until Chrysler has repaid in full the loan granted by the U.S. Treasury.
3.Fiat’s contribution
Fiat will contribute key technology and other resources to Chrysler.
In summary, the Fiat Contributions will consist of the following: licenses enabling Chrysler to use all Fiat Group Automobiles car platforms (and subject to any restrictive agreement between Fiat and any third party) for the production of Chrysler vehicles in NAFTA; licenses enabling Chrysler to use certain of Fiat’s other key technology, such as engine technology; the on-going provision of management services in order to enable Chrysler to benefit from Fiat’s expertise in operational and industrial recovery; participation in Fiat’s purchasing and procurement programs; distribution of Chrysler vehicles outside NAFTA, in particular by giving Chrysler access to Fiat’s distribution network in countries in which Chrysler currently has a limited presence.
The alliance, a key element of Chrysler’s Integration Plan, would strengthen Chrysler viability for the long term with access to competitive, fuel-efficient vehicle platforms, powertrain, and components to be produced at Chrysler manufacturing sites.
The alliance would also allow Fiat Group and Chrysler to take advantage of each other’s distribution networks and to optimize fully their respective manufacturing footprint and global supplier base. The alliance does not contemplate that Fiat would make a cash investment in Chrysler or commit to funding Chrysler in the future.
Turin, April 30, 2009
WPP group plc loses Olympic Bid
April 29, 2009
In another dismal report, WPP group has totally lost focus of it’s primary advertising agency core. The UK Guardian is reporting that US advertising agency McCann Erickson has reportedly beaten Sir Martin Sorrell’s British WPP group for the contract to promote the 2012 London Olympic Games.
What this means is simply that Sir Martin spent way too much money buying non-core assets and neglecting advertising, Neglecting digital, SEO, SMO… it’s a playbook of what NOT to do right.
To the point where the London (soon to be Ireland) based WPP assets lost the London Olympics…. uhh…. that’s really bad..
The company revenue crashed 6% in 90 days, leaving little new business coming in, and huge amounts of business leaving the door, such as Dell inc with a rumored 90 day notice…. (unverified but widely suspected as being true).
It’s really time for new management, buying revenue at an extreme cost while neglecting the assets that gave you the opportunity to get revenue in the first place is foolish at best…. and at worst gives you 6% revenue declines every 90 days….. as what we have been seeing.
Arlen Specter (R-Pa) to announce switch to Democrat
April 28, 2009
Sen. Arlen Specter (R-Pa) is to announce his switch to the Democratic Party. We have seen a few reports that the switch will give the Democrats complete control over the Senate… the Republicans won’t even be able to filibuster anything with that level of control (60 vs 40).
Arlen Specter the Senator from Pennsylvania has been a fixture in Washington for decades… story is developing…
WPP group plc ad revenue tanks 6%
April 28, 2009
We are having a good time to see how the media is spinning the WPP group plc financial statement. An article on Yahoo says “Revenue Jumped 36%” as the headline, however forgetting to mention the crushing debt that was needed to purchase the firms to increase revenue… sort of like taking a loan with a 6% intrest rate of $100 dollars to get an additional $3 dollars a year in revenue…
there is no way about it, their like-to-like revenue has crashed 6% and the debt payments most likely will increase pressure on the company to continue “cost cutting” — IE: layoffs.
Don’t believe us, here is their complete revenue sheet.
National Infertility Awareness Week
April 28, 2009
This week, April 25 – May 2, is National Infertility Awareness Week®, a movement sponsored by RESOLVE to raise awareness about the disease of infertility which affects 7.3 million Americans.
To help others understand infertility’s physical and emotional challenges Fertility Authority is asking people to join their “ONE THING” campaign to raise awareness and de-stigmatize infertility.
If you could tell a non-infertile friend, relative, co-worker or stranger ONE THING about your struggle with infertility what would it be? To post your comments, visit Fertility Authority’s National Infertility Awareness Week page.
Fertility Authority was launched in late February by an all-female team led by media veteran, Gina Bartasi. It is the only web portal dedicated to fertility. A rich online experience educates women and men on the need to be proactive regarding their fertility and provides the tools and information to do so. Features include: best-of-breed content written by healthcare writers and journalists, vetted by reproductive endocrinologists; a robust interactive community of bloggers, columnists and message boards; a growing video library of patient testimonials; breaking fertility news; and proprietary databases of doctors, clinics and fertility professionals. Fertility Authority will also be introducing their e-newsletter, The Daily Shot, in a few weeks.
So visit Fertility Authority to share your “one thing” or to learn more about fertility issues, and know that you are not alone.
CDC issues Swine Flu Alerts over Twitter
April 27, 2009
The Center for Disease Control has now started issuing Swine Flu Alerts over Twitter. The CDC’s username is @CDCemergency and is issuing real time streams of all the information regarding the CDC’s fight against the Swine Flu.
This is perhaps the first time in history that Twitter is being used for such a large scale planetary fight against a viral pandemic.
Some of the most recent CDC posts on Twitter:
* CDC Swine Flu Update – Conference Call for Clinicians – 2-3PM ET NOW!
* Swine flu – 40 confirmed cases. New York count now at 28.
* Antiviral Drugs and Swine Flu – CDC recommends oseltamivir or zanamivir for treatment and/or prevention.
* CDC testing shows U.S. strain & Mexico strain of swine flu virus are genetic match.
Well worth following the CDC on this one….
#twitteRFP — Ad Agency RFP’s via Twitter
April 26, 2009
This is classic! I had to even “apply” Jordan Kretchmer for CurrentTV floated out an Advertising Agency RFP via Twitter! You have to see how this is going via his Twitter Username @Jkretch.
The funny thing about it is that it actually looks viable, in terms of agencies applying it took a bunch of them off guard… and it appears that is the reason why he floated it that way. They brag about their social media skills, yet cannot even get a simple ping to Jordan via Twitter. Perfect.. absolutely perfect!
Jordan, I had to put this up on Google News for you, because the way you went about this was perfect… I suspect that you are going to see a bunch of really big dumb agencies applying with 3 followers because they setup the account yesterday… meaning they have zero understanding of social media…
I wish all firms floated their RFP via Twitter, it’s the best way to do it…. it really in 140 characters tells the company what your firm can do… I’m telling you, the slick sales guys must be going crazy with this one. BTW Jordan, if you are reading this, and I suspect you are… count Yooter InterActive in….
Swine Flu reported in Philadelphia
April 25, 2009
We are getting UNCONFIRMED reports that the Swine Flu is in Philadelphia, Pennsylvania. We want to stress that the reports are NOT verified and NOT confirmed. Evidently from what we understand a passenger arrived in Philadelphia Airport leaving Mexico City with a fever.
I want to stress this is NOT confirmed and we heard this second hand.
File this as rumor until verified from the CDC… and currently this is NOT verified.
Moody’s downgrades New York Times after Drudge Story
April 24, 2009
Moody’s Investors Service on Friday cut its debt ratings on U.S. newspaper publisher The New York Times Co , but more importantly Moody’s downgraded The New York Times after a story on Drudge Report linked to two separate articles that compared the debt level of the New York Times vs the Cash on hand.
The debate is if Moody’s downgraded the New York Times, or if Matt Drudge downgraded the New York Times.
NEW YORK TIMES DOWN TO $34 MILLION IN THE BANK…
$1,300,000,000 IN DEBT…
Screamed the headlines yesterday, then today, Moody’s downgrades the company. Many suspect that it was Matt Drudge doing Moody’s job.
Story Developing..
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