Ford has cancelled a new arrangement with its primary advertising firm, the WPP Group, after an internal review of the deal, the New York Times reported.
The NYT said that, though Ford is already the largest client of WPP, the world’s largest agency company, the new arrangement would have made some of the business closed to outside competition in exchange for more competitive rates. Nicholas Scheele, the president and chief operating officer of Ford, had informed marketing and sales executives of the deal in a February memo, the NYT said.
The NYT said that other large companies have put similar deals in place to cut costs, but Scheele apparently did not comply with Ford’s procedures for allowing a single supplier to monopolise a business.
The NYT noted that Scheele’s friendship with WPP’s chief executive, Sir Martin Sorrell, as well as the fact that his son has a job at a WPP unit were also part of the review but added that no action was taken against Scheele, who had previously disclosed his ties to WPP, which is based in London.
In a Ford memo cited by the New York Times, Scheele said that Ford would form an internal group to review the company’s advertising relationship with WPP and come up with a new deal.
The NYT said that Ford accounts for 7% of the company’s revenue, or $US1.5 billion worth of annual billings. Its divisions handle advertising for the Ford, Lincoln, Mercury, Jaguar and Land Rover brands, but not the company’s Mazda and Volvo units, the newspaper noted.
The New York Times said that, despite the reversal at Ford, the arrangement with WPP is said to be secure, in large part because Ford’s principal competitors have close ties to two of WPP’s principal rivals. Much of General Motors’ advertising business goes to the Interpublic Group of Companies and much of DaimlerChrysler’s is with the Omnicom Group, the NYT said.