ASIA: Asatsu pays for Mitsubishi mess

Disaster for an advertiser all too often means crisis for an agency, even if the problems have nothing to do with advertising. Such a turn of events has robbed Asatsu-DK, Japan’s third-largest agency, of its biggest client, Mitsubishi Motors, which was the source of at least $80m (&£55.6m) in fees and provided about a fifth of Asatsu’s operating profit. At the same time, Hakuhodo lost about $20m (&£13.9m) of Mitsubishi work.

The winners, Dentsu and Yomiko, take over Mitsubishi’s ad accounts on October 1, with Dentsu as lead agency for both creative and media. Yomiko will be involved mainly with below-the-line activity and promotional materials. Overseas and truck advertising are both excluded from the switch, but both are under review, sources say. Mitsubishi Motors is also Asatsu’s largest international client.

The switch is the largest account move in Japan since Nissan sacked Dentsu in 1992.

Mitsubishi is scrambling to win back customers following its admission last summer that it hid complaints about its cars from government regulators for ten years in an attempt to avoid costly recalls. The cover-up scandal badly eroded consumer faith in the Mitsubishi brand in Japan – its car sales have declined precipitously since the scandal began.

The ailing manufacturer is cutting 9,500 jobs – 14 per cent of its global workforce – and closing one of its four Japanese plants, reducing production capacity by 20 per cent. Suppliers have been told to reduce prices by 15 per cent over three years.

A Mitsubishi spokeswoman said the review began earlier this year as part of a “turnaround plan” to ensure the company’s survival and was intended to “increase the strength and efficiency of advertising in terms of a unified tone and manner, enhancement of quality, and brand reinforcement”. Neither Mitsubishi nor Dentsu would comment on reports that the agency had promised to cut media costs by at least 15 per cent compared with Asatsu.

Asatsu said the loss of Mitsubishi would not affect profitability this year, and that, in fact, it opened the door to the capture of other automotive business.

The switch is especially good news for Dentsu in the run-up to its expected IPO later this year, showing that the giant still has room to grow domestically and can handle even more competing clients. Current car manufacturing clients include Toyota, Nissan (a recent small assignment), Honda, Daihatsu, Subaru, Yamaha, Mercedes and Ford. Indeed, as Japan’s economy continues to decline, many advertisers are not only cutting back but also consolidating into bigger agencies. Dentsu is the main beneficiary. Last year Dentsu increased its market share by 1.2 percentage points to 24.2 per cent, Hakuhodo’s share rose by 0.3 points to 12.1 per cent and Asatsu-DK’s share remained unchanged at 5.6 per cent, due partly to the problems at Mitsubishi Motors.

For WPP, which owns 20 per cent of Asatsu-DK, there should be no knock-on effects unless the agency decides to cut its dividend. This is unlikely, since Asatsu-DK has ample reserves in cash and marketable securities to cover its payout.