In the biggest advertising account switch in history, Chrysler Corp. said today that it had lured Kenyon Eckhardt Advertising Inc. away from Ford Motor Co. to do all Chrysler's $120 million a year in billings.
Chrysler President Lee A. Iacocca -- who was president of Ford until he was forced out last July -- called the deal "unique." Kenyon Eckhardt, which had been affiliated with Ford for 34 years, will sit on Chrysler's product and planning committees, knowing years in advance where the company's marketing is going.
Iacocca, at a press conference, said that it would drop its two main advertising agencies -- Batten, Barton Durstine Osborn, Inc., and Young Rubicam -- and transfer all its advertising to Kenyon Eckhardt.
The move, which Iacocca said had been cooked up in the last month and was approved by Chrysler's board this morning, appears to be a hold stab at getting Chrysler's cash registers ringing again. The company lost more that $200 million last year and has been plagued by manufacturing and production problems in the 1979 model year. Chrysler's share of the U.S. market has slipped to 12.4 percent from 13.1 percent last year.
Iacocca called Kenyon & Eckhardt the "most talented and effective automotive advertising agency in the business." The company did Ford's Lincoln Mercury advertising as well as Ford corporate advertising as well as Ford corporate advertising, designed to push Ford rather than a particular Ford product.
Although neither Iacocca nor K&E President Leo-arthur Kelmenson out-lined the full details of the new relationship, Chrysler is understood to have signed the advertising agency to a five-year contract with a minimum income guarantee coupled with an incentive compensation that will probably be tied to Chrysler's profits and sales.
Normally advertising agencies and clients sign 90-day to 180-day agreements -- although such a greements are often renewed dozens of times -- and the agency's compensation is usually a direct percentage of billings.
Last year Kenyon & Eckhardt handled $75 million of billings for Ford.Kenyon & Eckhardt is the 16th biggest agency in the country with billings of $400 million last year.
It is not clear what advertising agency will handle the promotion of 1980 models for Chrysler and Ford. Kelmenson said that Ford was informed of the switch at 11 a.m. this morning Kenyon & Eckhardt assured the nation's No. 2 auto producer that it would handle its advertising for up to 180 days, or through August.
Automobile companies usually introduce their new models in September and agencies generally begin work on the new model advertising campaign 60 to 90 days before the introduction date.
If Ford insists on retaining Kenyon & Eckhardt for the full 180 days, the company would not be able to do much, if any, work on Chrysler's 1980 model campaign.
Iacocca said he told BBD & O, Young & Rubicam and a small agency that does some work for Chrysler -- Ross Roy -- that they would be retained for at least 90 days.
Both Iacocca and Kelmenson denied that there is anything unethical or questionable about an advertising agency leaving one client for another in the same industry, even though Kenyon & Eckhardt may have had some input into Ford's 1980 model plan.
"You forget," said Iacocca, "I saw their (Ford's) 1981 and 1982 programs. You forgot where I came from."
Iacocca has hired several former Ford executives at Chrysler, although they retired from Ford before joining the nation's third largest automobile producer. A former Ford executive also works for Kenyon & Eckhardt, whose Detroit offices are located on Ford's premises.
Trading in Chryslerhs stock was halted on the New York Stock Exchange yesterday morning, pending what had been trumpted by Chrysler as a major announcement.
Chrysler also announced yesterday that its former president Eugene A. Cafiero, who had been promoted to the board room when Iacocca joined the company last November resigned. It also announced that it will close temporarily four of its five automobile production plants and one truck plant to help reduce growing inventories of unsold cars.
When Chrysler opened late in the day it closed up one quarter to 6 3/4.
"We'll have to move," Kelmenson laughed.
Kelmenson said in an interview after the press conference that typing part of his firms' income to performance and putting representatives on Chrysler products and planning committees will lead to a novel relationship between the advertiser and the agency.
"We'll be concerned with finding the most effective way of using advertising dollar," rather than being primarily concerned with the size of the billings.
Although Kenyon & Eckhardt will face large start-up costs setting up the Chrysler account, the account eventually should be much more profitable than the Ford account, Kelmenson said. Chrysler spent $150 million on advertising last year, but plans to scale it back to $120 million this year.
Iacocca said that BBD & O will take about $70 million of that and Young & Rubicam will receive about $50 million.