GM Agencies Out Millions, Need 'Critical Vendor' Status To Recoup

by David Goetzl @dgoetzl, June 1, 2009

General Motors' bankruptcy filing Monday shows that Starcom MediaVest, the unit of Publicis Groupe that handles all media duties for GM, is owed $121.5 million by the automaker. That makes SMG the sixth-largest unsecured creditor for the Detroit-based company.

Publicis is also owed an additional $25.3 million for other duties -- presumably for creative services on brands such as GMC and Pontiac -- according to the filing in the New York court. That means the holding company in aggregate would be owed a total of $146.8 million.

Publicis CEO Maurice Levy has told investors that Publicis could be exposed to about $150 million via a Chapter-11 filing. Interpublic Group, the other major holding company working with GM, is owed nearly $21 million in aggregate, according to the filing -- far less than was expected.

If a judge classifies Publicis and GM as "critical vendors," they could recoup much of the fees owed. GM indicated Monday that it would look to "pay essential" vendors money it owes, which could be an auspicious sign for the two companies. Advertising is likely to be viewed as important in a recovery for GM.

Levy has indicated that any money collected from GM would go directly to Publicis; it doesn't need to be passed onto media companies where it purchased inventory on GM's behalf.

Separately, IPG is listed as the 20th-largest unsecured creditor owed $16 million. But its McCann-Erickson agency is listed as the 47th and owed another $4.6 million.

The nearly $21 million is far below the $150 million IPG executives have said GM may owe the holding company. It was unclear why.

Executives from both holding companies could not immediately be reached for comment.

The approximately $16 million IPG is owed is presumably for services provide by units such as Campbell-Ewald (which does creative on the Chevrolet business) and Jack Morton Worldwide, an experiential marketing agency. The $4.6 million owed IPG's McCann-Erickson is, in part, for corporate-image advertising. Perhaps more important than collecting all fees they are owed, both Publicis and IPG are eager to continue working with GM as it reorganizes, gambling that a short-term loss could lead to longer-term profits.

There is no reason to believe Publicis' SMG would not remain the media agency and its other agencies would not handle creative work for Buick and GMC. IPG would continue with Campbell-Ewald on Chevrolet and perform other duties.

But Publicis is sure to lose business as the Pontiac brand becomes defunct. And the same goes for IPG, as Saturn is likely to be abandoned.

agency, automotive

2 comments about "GM Agencies Out Millions, Need 'Critical Vendor' Status To Recoup".

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M S from Skilled Communications, June 2, 2009 at 9:38 a.m.
This will trickle down to the local level as media reps start getting charged back for past schedules run using co-op dollars that will now go unpaid. Additionally, car dealers are holding off spending because they aren't sure if they will be reimbursed for current and/or future expenditures that utilize co-op accruals. Someone needs to show some leadership and step up to say “the media will get paid. The only way to ensure continued growth of the domestic automotive industry is to keep advertising. We can’t do this unless the media are assured their proper payments.”
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Paula Lynn from Who Else Unlimited, June 2, 2009 at 9:53 a.m.

Duh! The decision makers who approved the credit (usually not the credit department) should have to pony up to the bar whether or not they wind up in the same position as the people they used to up their false bottom line. Yes, they knew.