REGIONAL FOCUS: DETROIT - Motor City shifts gears. Uncertainwhether the auto industry can ride out the recession, Detroit's PRcommunity is branching out for income. John Frank reports

Sometimes even the oldest cliches carry a ring of truth. Just ask

Detroit PR people, who these days are reciting the old saying, "As goes

the auto industry, so goes Detroit."



Detroit's PR agencies are split between those that depend on auto

accounts, and those that have looked elsewhere for business to areas

like retailing, healthcare, and public affairs.



Those tied to the auto industry, whether working for automakers or the

myriad parts suppliers, have been intensely scrutinizing the health of

the "big three" manufacturers this year, and are now also wondering what

2002 will bring.



The year began with automakers such as General Motors and

Daimler-Chrysler cutting PR spending and staff as they braced for what

many were forecasting would be a dismal 2001. As it turned out, sales

fell from 2000, but not nearly as badly as pundits had been

predicting.



By summer, Detroit was breathing a collective sigh of relief. The year

would be tough, but still might yield the kind of auto sales that would

rank it as the third best in the industry's history.



Auto industry responds to attacks



The terrorist attacks, of course, changed the business equation.

Automakers, fearful that sales would plunge as consumers pulled back

from spending on big-ticket items like cars, responded with 0% financing

on new automobiles.



GM grabbed the lion's share of positive press by being first to make the

offer.



Recent earnings reports have shown how much financial pain automakers

have had to absorb. Ford reported a $692 million loss in the

third quarter, while GM lost $368 million in the same period.



Numbers like that have PR people in Detroit wondering how much worse

things may get next year when, presumably, automakers already battered

by losses will no longer be able to afford to offer 0% financing to

stimulate buying.



"We're waiting for the major slowdown in autos," says Tom Eisbrenner,

EVP with Eisbrenner Public Relations, which, despite not reporting

revenues, is widely believed to be the largest local agency in

Detroit.



Dave Cole, director of the Center for Automotive Research in Ann Arbor,

MI, expects a great deal of business turbulence for the industry next

year. And, of course, that could mean smaller PR budgets for automakers

and auto suppliers. "Costs, wherever they are, are under attack now,"

says Cole. "Uncertainty is the name of the game."



This year, GM's PR "took a substantial reduction in our overall budget"

between 5% and 15%, says Steve Harris, VP of communications with GM.



He's expecting similar cuts next year. In today's environment, "so much

in this industry cannot be anticipated," he says. As a result, "We watch

our fixed expenses very carefully."



Harris has trimmed PR spending by cutting some projects, and by asking

his internal people to do more of the grunt work once assigned to

outside agency staff. What he wants now from agencies is specialized

expertise.



Auto suppliers are taking their cues from the automakers. Gordon Cole,

director of global public affairs with Visteon, a major supplier to Ford

and others, says, "The auto industry is looking at their sales figures,

and we will adjust to meet their needs." This April, he put together a

network of local agencies around the country to give Visteon

local-market PR expertise, and he feels that's worked well for him. But

his PR spending next year will depend on auto sales. "Nobody has a clear

picture of the direction of things," he says.



Steve Rossi, president of McLaren Performance Technologies and former

head of US PR for DaimlerChrysler, wants to do more to promote his

company next year. "You cannot save your way to success," he says. "Now

is when you need more media relations." Rossi is trying to get more

coverage for his firm by doing such things as exhibiting at more trade

shows.



Eisbrenner thinks his firm will end the year slightly ahead of 2000

revenues.



"The first half was flat, but it's been a very good second half," he

says.



"The number of new business calls and pitches we're getting seems to be

way up."



Expanding business prospects



John Bailey & Associates recently nabbed Detroit's North American

International Auto Show as a client, and has seen revenues rise from

$2.1 million last year to $2.5 million this year. John

Bailey thinks he can hit the 20%-25% growth range next year. "We are

planning on a very solid year, based on commitments for spending that

clients are already making," he says.



But uncertainty in the auto industry is prompting many firms to

diversify.



Bailey has hedged his auto bets by increasing healthcare from 20% of his

total revenue in 2000, to 30% this year.



Similarly, Stan Stein, SVP and MD of Manning Selvage & Lee's Detroit

office (known as almost an extension of GM's PR machine), is trying to

diversify his business by going after more non-GM work. "I sense a

softening in the marketplace," he says. "There's cautious spending by

clients."



And Strat@comm's Detroit office, which opened last year as Hill &

Knowlton left the market, has grown to seven people and about $1

million in revenue by going after accounts that are auto-related, but

also involve government and technology. One of its clients makes

software for in-car communications systems, for example.



Marx Layne isn't even known as an auto shop, but it picked up the

Volkswagen of America account this year, and expects revenues to climb

10%, according to partner Fred Marx. He's been trying to grow

professional services work and has diversified his client base - no

client accounts for more than 5% of revenues - to shield the firm from

an economic downturn. "We're certainly aware of the obstacles," he

says.



Widespread effects



Many others are feeling the auto pinch. PR Associates won't realize the

$1.1 million in revenue it had last year because of auto-related

weakness, says Fred Zosel, president. "Whatever normal is, is being

redefined," he says. "I'm not sure we can call next year a growth year

either."



Likewise, Haas Associates started the year projecting a 20% jump in

revenues, but will end the year at about the same $4.2 million

recorded last year.



"It was a pretty good year until right now," says president Mark

Haas.



"Next year, if we can stay flat, we'll be happy. Major automakers are

all talking about trimming their spending."



Those not tied to autos have had a less anxious year, but even they

admit that continued auto problems will eventually spill over to their

clients.



Lovio George doesn't work with auto clients, and saw its revenues climb

from $2.5 million in 2000 to about $3 million. But

president Christina Lovio is expecting only 10% growth next year. "We

are all affected by the automotive industry," she says.



Durocher Dixson Werba, which specializes in crisis communications and

public affairs, expects its revenues to be about the same as last year,

in the $1.2 million range, according to principal Gab Werba.



Seyferth Spaulding Tennyson, headquartered in Grand Rapids (but with a

Detroit office), sees its revenues increasing from $3 million to

$4 million this year thanks to its work with retail clients such

as Taubman Centers, a major mall operator. It's also projecting 10%

growth next year as clients trim internal staff and outsource PR to it,

says principal Chris Tennyson. The firm is picking up work from law

firms and counts the Detroit Medical Center and shoemaker Wolverine

Worldwide among its clients.



And Airfoil Public Relations, a start-up firm last year, will hit

$1.5 million in revenues this year by working with tech companies

and biotech firms. It's expecting to do $1.7 million-$2

million next year. The slowing Detroit PR market has forced Airfoil to

battle major international firms for projects in the $10,000-$20,000 range, a size once too small for bigger firms to

go after, says president and COO Janet Tyler.



But being a small firm is not necessarily a disadvantage. Luke Haase

left Detroit three years ago to start The Intelligence Agency in

Traverse City, MI. He still does business in the city with tech and

auto-related clients, but has found pockets of business closer to

Traverse City, working with a local maker of bulletproof vests and a

company that makes log homes.



He expects a strong 2002 as companies switch to smaller firms to get

lower fees.



Detroit is a hotbed of small shops with auto expertise, and has managed

to keep major multinationals largely out of the market. Shandwick closed

its Detroit office this year, for example.



Auto suppliers like to work with local talent that knows the intricacies

of their business. Normally that means Detroit shops can prosper in

their own backyard, but next year that yard could be a bit barren as the

auto business takes its economic lumps.



DETROIT PR AGENCIES

Rank Firm Name Revenue (dollars) Increase Staff

2000 2000 (%)

1 Manning Selvage & Lee 7,187,067 17 58

2 Weber Shandwick Worldwide 2,744,000 34 22

3 Haas Associates* 2,836,116 N/A 33

4 Burson-Marsteller 2,195,000 60 8

5 Caponigro Public Relations 2,140,838 24 20

6 John Bailey & Associates 2,074,514 48 26

7 Seyferth Spaulding Tennyson** 2,281,053 13 26

8 Bianchi Public Relations 845,475 31 8

9 Strat@comm 667,820 N/A 6

*Includes income from Ann Arbor office **Includes income from Grand

Rapids office Source: Council of PR Firms Auditing: No audit was

required for inclusion in the rankings.

The CEO/CFO/principal was required to sign a statement verifying the

accuracy of the data and agreeing to possible participation in a random

audit Disclaimer: While every effort has been made to ensure the

accuracy of these figures, PRWeek cannot accept liability for, nor make

financial guarantees based upon the information in this chart.



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