• by Joe Mandese  @mp_joemandese, May 12, 2005

The loss of General Motors' $3.2 billion media account is both a symbolic and a material blow to Interpublic's media operations. Although probably expected, Interpublic's management team had always managed to "save" the business in the past, by negotiating better compensation deals, crafting new organizational and service structures, or even by acquiring adversaries.

When giant independent media buying agency Western International Media began cozying up to GM in the early 1990s, then Interpublic Chairman Phil Geier did the only thing a dealmaker could do, he acquired Western from founder Dennis Holt and made it Interpublic's first independent media network, Initiative Media.

The only uncertainty during the GM buying review was what secret plan Interpublic might hatch to preserve the business this time around. Interpublic Chairman-CEO has his own compensation plan tied directly to Interpublic's earnings performance, and the lost of the GM buying assignment should all but ensure he misses those targets.

"We estimate that the GM U.S. media buying account is worth $40-50 million in revenues," said Merrill Lynch analyst Lauren Rich Fine in a notice sent to investors late Wednesday. Fine estimated that while that would translate into "less than 1 percent of IPG's annual revenues," Interpublic's management indicated it represented $5 million in net income, or an operating margin of 15 percent to 20 percent on the account.

"We think the [profit and loss] impact could be larger in the first year, depending on whether there will be severance and real estate charges," concluded Fine, who nonetheless said the securities firm was maintaining its "neural" rating for Interpublic's stock.

While not a devastating economic blow to Interpublic, the loss of the GM business is an emotional one, coming at time when the agency holding company is facing so many other business issues.