8 Min Read
DETROIT (Reuters) - The ouster of General Motors Co's (GM.N) global marketing chief is related to a hugely expensive sponsorship deal with England's Manchester United soccer club for which GM is paying twice as much as the team's previous automotive sponsor.
On Monday, GM, the biggest U.S. automaker, announced its Chevrolet brand would sponsor the hugely popular club's shirts for the next seven years. The deal is worth $60 million to $70 million a year and includes a $100 million activation fee that brings the total value to as much as $600 million, said a person with knowledge of the contract who asked not to be identified.
By comparison, insurance broker Aon Plc (AON.N) pays about $31 million a year for the current jersey sponsorship, which runs through the 2013-2014 season.
GM did not disclose financial terms of its agreement, which was announced the day after the Detroit company said it was removing its global marketing chief Joel Ewanick because he "failed to meet the expectations that the company has for its employees." Sources told Reuters Ewanick didn't properly report financial details about the jersey deal.
Another source said the wording of the affected deal terms was changed before the deal was made public on Monday. The persons requested anonymity because they are not authorized to discuss contract details.
GM, which spent almost $4.5 billion on advertising last year, announced another sponsorship deal with Manchester United in May. GM said then it wanted to tap in to Manchester United's estimated 659 million fans around the world to boost the image of the automaker's Chevy brand, especially in Asia. GM last week also said it signed a four-year auto sponsorship deal with Manchester United rival Liverpool.
While GM would not discuss Ewanick's departure, some industry officials said a deal as big as the Manchester United sponsorship agreements would have been signed by multiple executives. They also raised the possibility that GM simply wanted to dump Ewanick as the automaker's U.S. market share has declined by nearly 2 points in the first half of 2012 compared with the year before to 18.1 percent.
"Joel was good for shaking up the staid GM marketing function and he made a real positive difference in just two years, but this episode, whatever it turns out to be, has tarnished his reputation overnight," said Peter DeLorenzo, Editor-in-chief of auto website Autoextremist.com.
However, sources said GM was committed to Ewanick's efforts to shake up the automaker's image. Ewanick, 52, was named vice president and head of GM's U.S. marketing in May 2010, about seven months before the automaker's blockbuster initial public offering in November of that year.
Brought in by former GM chairman Ed Whitacre, former vice chairman Robert Lutz and current North American chief Mark Reuss, the high-energy Ewanick was given free rein to shake up GM's marketing, which had been perceived as stale.
The first major effort under his watch was the "Chevy Runs Deep" campaign that launched at the start of the Major League Baseball's World Series in 2010. Critics say the campaign has failed to connect well with consumers.
When he was promoted to global marketing chief in December 2010, Ewanick said the move was intended to give marketing a seat at the executive conference table and a say in planning and budgeting for new GM vehicles.
Ewanick, who was credited with helping drive Hyundai Motor Co's (005380.KS) fast growth in the U.S. market, steered GM back to sponsorship of high-profile events like the Super Bowl.
In May, he announced GM would pull its paid ads from Facebook (FB.O) days before the highly anticipated initial public stock offering for the social networking website, and said GM would not advertise on CBS (CBS.N) during the 2013 Super Bowl because they were both overpriced.
Ewanick also led GM's effort to drive down the ad fees paid to broadcast TV networks during the advanced selling season that ended in June, said Brad Adgate, senior vice president of research at Horizon Media. The big four U.S. TV networks garnered single-digit increases from advertisers.
With his aggressive cost-cutting and a hyper personality some found off-putting, Ewanick clearly made enemies. One former GM executive, who asked not to be identified, received an email about the marketing chief's ouster with the subject line "Ding Dong, the witch is dead."
GM Chief Executive Dan Akerson previously said the automaker needed to focus more on marketing.
The "Chevy Runs Deep" campaign, which features the voice of actor Tim Allen, has aimed to focus buyers on the positive association many Americans had with GM before the long decline that culminated in its bankruptcy and $50 billion bailout by the Obama administration in 2009.
In April 2010, GM's Whitacre ordered the ouster of Campbell-Ewald, which had handled advertising for Chevy for over 90 years in favor of San Francisco-based Goodby, Silverstein & Partners, which is owned by Omnicom Group Inc (OMC.N) and best-known for the "Got Milk?" ad campaign. Goodby worked with Ewanick at Hyundai.
Campbell-Ewald created some of the most memorable advertising campaigns in U.S. auto history for Chevrolet, including the "Baseball, hot dogs, apple pie and Chevrolet" ads of the 1970s and "See the USA in your Chevrolet" in the 1950s. Industry officials said agencies that were cut may see Ewanick's ouster as a chance to get back in the door with GM.
Earlier this year, GM announced efforts to save $2 billion over five years by pruning the number of ad agencies it uses.
Chevrolet sold 2.48 million cars and trucks in the first six months of the year, and the U.S. market accounted for 42 percent of that total. GM is pushing to boost demand for the mass-market brand in China, Brazil, Eastern Europe and other regions.
Appealing to consumers overseas was a big reason for the sponsorship deals with Manchester United, which set terms for its U.S. initial public offering on Monday.
The soccer club's current jersey sponsorship deal is with Aon, which pays for the right to put its name on the front of jerseys worn by players during games. That practice is quite lucrative for soccer clubs around the world, but is not allowed by most U.S. sports leagues.
In a sign of how important the size of the deal is for Manchester United, the club revealed in its IPO filing that its revenue fell 3 percent to 5 percent in the year just ended to 315 million to 320 million pounds ($495 million-$503 million). Based on those figures, the annual value of the shirt deal is about 13 percent of the club's revenue.
In May, GM announced a five-year deal with Manchester United for what is known as its auto sponsorship in which GM replaced Volkswagen's (VOWG_p.DE) Audi brand. Terms of that deal were not disclosed, but analysts said it is likely worth at least tens of millions of dollars.
Alan Batey, GM's North American vice president of sales, was named the interim head of GM's marketing. The automaker declined to make him available for comment.
Reporting by Ben Klayman, additional reporting by Paul Lienert and Deepa Seetharaman; Editing by Gary Hill, Matthew Lewis and Muralikumar Anantharaman