Repo Man: Chrysler Owes Media $58 Million

by Wayne Friedman , May 2, 2009

Will local TV stations be holding Chrysler's $60 million media bag -- or its media agency?

In light of Chrysler's recent bankruptcy filing, its agency, Omnicom Group's BBDO Detroit, is listed as the second-largest creditor. According to the filing, Chrysler owes BBDO $58.1 million.

But reports suggest that most of any monies owed should be paid to local TV stations -- or, to a lesser extent, national broadcast or cable TV networks. Earlier this year, Chrysler moved much of its TV budgets from national networks to local TV stations.

In a recent Omnicom earnings call, Randall Weisenburger, Omnicom's executive vice president/CFO, said of the Chrysler reorganization: "Our exposure is extremely limited -- maybe to the point of zero." In a worst case scenario -- that is, if the Chrysler brands go away completely -- Weisenburger says Omnicom may be on the hook for some $25 million to $35 million in "cash exposure."

Omnicom representatives did not return messages by press time.

For some time, local TV stations and other media have realized Chrysler's financial crunch. Many have been asking for cash upfront for media deals.

Traditional media liability has worked this way: Media creditors must first go after the advertiser, and can only go after the media agency if the media agency has already been paid by the advertiser. This is "sequential liability." This is what the American Association of Advertising Agencies and the Association of National Advertisers suggest media agencies and advertisers abide by.

Media sellers have long believed that sequential liability favors advertisers and media agencies. In recent years, media sellers pushed for what is called "joint and several liability," which claims that both the advertiser and the agency are on the hook for financial defaults.

accounts, ad buys, agency, legal

2 comments about "Repo Man: Chrysler Owes Media $58 Million".

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John Potter from Potter Productions, May 4, 2009 at 10:06 p.m.
It is my understanding the 4As do not support sequential liability, the process of media going direct to the advertiser to get paid if the agency is not paid. Instead, agencies are liable to pay media whether or not they get paid. I recall the WSJ took a case to the US Supreme Court some years ago and the Court upheld that the agency is on the hook as a legal representative for the advertiser whether or not the agency gets paid. I'd like to see clarification from 4As.
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Paula Lynn from Who Else Unlimited, May 5, 2009 at 10:55 a.m.

Just because the non support of sequential liability is even written into a contract, doesn't mean the media doesn't try. Also, many times the agency either refuses to sign a contract - depending upon if the media accepts it - will pay full rate (believe it or not) or will have the advertiser sign the contract directly.