PR firms face realignment as Havas closes Diversified

LEVALLOIS-PERRET, FRANCE: Havas Advertising has disbanded its

Diversified Agencies Group (DAG), affecting the management of three

major US PR firms and making a casualty of North American chief Patrick

Lemarchand.



DAG houses most of the France-based conglomerate's PR assets. Its US PR

firms are Abernathy MacGregor Group, Magnet Communications, and Noonan

Russo. The largest agency within DAG was direct-marketing firm

Brann.



The other major Havas-owned US PR firm, Middleberg Euro RSCG, is in the

Euro RSCG advertising network, and is therefore unaffected.



The move whittles Havas' divisions from four to three, leaving Euro

RSCG, Arnold Worldwide, and Media Planning Group. Alain de Pouzilhac,

chairman and CEO of Havas, informed agency heads of the decision a few

days before Tuesday's announcement of disastrous half-year results and a

major restructuring.



Havas VP of communications Simon Gillham said, "We are changing where

the PR firms will be in the organization. We will announce where they're

going in November."



DAG's demise has thrown into question the future of its chairman and CEO

Jean-Michel Carlo. Many reporting lines that led to Carlo will now go

straight to de Pouzilhac. Gillham denied speculation that Carlo was

leaving, and told PRWeek that Carlo is helping de Pouzilhac with the

reorganization, and the two will decide whether Carlo's next assignment

will be inside or outside the company.



De Pouzilhac said he may create a new, small group of high-profit,

specialist agencies, which would likely include IR powerhouse Abernathy.

De Pouzilhac has already warned that those agencies that are not

high-performance may be sold or closed.



Another possible scenario is that Havas will operate its PR firms as

independents that report directly to de Pouzilhac, while being nominally

aligned to either of the two ad agencies.



Havas has recently been making cuts to try and lose a target 1,200

people from its payrolls. Among PR firms currently cutting back are

Noonan Russo, acquired by Havas earlier this year. Magnet Communications

confirmed that it has cut 12 PR staffers in addition to the 36 people it

axed in June.



Havas posted a EUR7 million loss for the first half of 2001, compared

with a EUR45 million profit for the same period 2000.



De Pouzilhac predicted that the market would not begin to recover until

2003.



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