A Chrysler bankruptcy could leave Omnicom out $80 million

DETROIT -- Failing what looks to be an increasingly likely 11th-hour rescue from the White House, Chrysler could be headed to bankruptcy court -- a move that could leave Omnicom Group on the hook for $80 million. 

The estimate came from executives close to the matter who said that PHD, Chrysler’s media agency, would be owed the most. Siblings BBDO, Cutwater and Organic are the automaker’s other main advertising partners. 

Omnicom Group declined to comment on what steps the holding company might take or what its liability could be. Andrew Robertson, CEO of BBDO, also declined to comment. 

Protecting itself 

An executive close to the matter said the agency was taking steps to protect itself in the event of a Chrysler bankruptcy, and a second executive said PHD officials in suburban Detroit spent last weekend preparing documents for Omnicom’s attorneys related to Chrysler’s indebtedness. Specifics, however, were not available. Jim Helberg, executive vice president and the top-ranking exec at PHD in suburban Detroit, didn’t return a call for comment. 

Omnicom apparently hasn’t filed any federal lawsuit against its client over the payments, according to an extensive search by Advertising Age. It may be that the holding company is simply readying legal documents in the event it would have to file a claim should Chrysler land in U.S. bankruptcy court, noted the head of a marketing vendor to the carmaker. 

Chrysler is up to date on its payments to its ad and media partners -- all on a 60-day cycle, said a spokeswoman for the automaker, adding that Omnicom hasn’t sued the automaker. But in congressional hearings this week the automaker indicated it would run out of cash by the end of this year failing federal funding. 

Chrysler said on Dec. 5 it had hired bankruptcy experts at law firm Jones Day as advisers to provide an outside analysis on restructuring options, as CEO Bob Nardelli prepared for the first hearings in Washington last month. 

What $80 million means 

For Omnicom, $80 million would present limited exposure for a company its size, as the amount represents about 0.6 percent of the company’s 2008 revenue, equivalent to about one month of net income, according to an Advertising Age analysis. Still, $80 million would be a major hit if the holding company was unable to recover the full amount. Advertising Age is an affiliate of Automotive News. 

Chrysler spent $579 million in U.S. measured media in the first nine months of 2008 or $287 million less than the same period in 2007, according to TNS Media Intelligence. 

Early last month, BBDO Detroit, also in suburban Detroit, eliminated 145 jobs, or 22 percent of its staff, across all functions in response to Chrysler, its main client, dialing down on costs.