Asatsu hit by $80m Mitsubishi deal loss

TOKYO: Mitsubishi Motors has severed lucrative long-standing relationships with Asatsu-DK and Hakuhodo, worth close to US$100 million in annual billings for the pair. The auto manufacturer has hired Dentsu and Yomiko to take over the assignments on October 1. Dentsu will be the lead agency for both creative and media and Yomiko will handle below-the-line and sales promotions. The switch is the largest account move in Japan since Nissan sacked Dentsu in 1992. It comes as Mitsubishi scrambles to win back customers following an admission last summer that it hid complaints about flaws in its cars from government regulators for over a decade to avoid recalls. The loss will hit Asatsu's bottom line hard as its 40-year relationship with Mitsubishi provided about 20 per cent of operating profits. Japan's third largest agency is owned 20 per cent by WPP. However, Asatsu officials have put on a brave face, saying the loss would not impact profitability this year and that they hoped to win new business from existing clients such as Fuji Heavy Industries. A Mitsubishi spokesperson said the review began earlier this year as part of its "Turnaround Plan" to revive the ailing car manufacturer. The switch is a bonus for Dentsu in the run-up to its expected initial public offering later this year. It shows that the advertising giant still has room to grow domestically and even handle competing clients. Dentsu's auto clients include Toyota, a small assignment for Nissan, Honda, Mercedes Benz and Ford. As Japan's economy worsens, many advertisers are not only cutting back but are also consolidating business with the bigger agencies. Dentsu has been a key beneficiary of this trend. Last year, Dentsu increased its market share to 24 per cent, Hakuhodo's share rose to 12 per cent, while Asatsu's was static at 5.6 per cent, partly due to the problems at Mitsubishi.

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