Volkswagen shock for WPP

GLOBAL advertising giant WPP is facing the possible loss of its second client at the recently acquired Grey Global in a week, as the German-based carmaker Volkswagen re-evaluates its £760m media spend.

The takeover of Grey Global by WPP has landed the account in the same company as VW's arch-rival Ford. Just two days ago another Grey client, confectionery giant Mars, pulled its business from Grey/WPP to consolidate with Omnicom.

Although Mars said the pullout had nothing to do with the takeover, industry insiders point to the fact that Mars made a similar move some years ago when Saatchi bought Ted Bates.

The possibility of client concerns over conflict of interest were inevitable given the consolidation of the industry around the world but WPP insiders say they believe fallout will be limited.

They say WPP chief Sir Martin Sorrell canvassed opinion from all Grey's main clients and from WPP's own before making the move on Grey.

'Martin talked to everyone,' said a key executive of WPP's J Walter Thompson agency, who did not want to be named. 'I think our clients are comfortable with our internal controls that ensure there is no conflict of interest.'

Ford is a client of J Walter Thompson as is food-to-household products giant Unilever. Its arch-rival Procter & Gamble is Grey's chief client, which accounted for 10.6% of Grey's $1.3bn (£710m) revenue last year.

Grey's MediaCom has VW's European and Asia-Pacific markets' accounts while in the US WPP's French rival Havas handles the business through its Media Planning Group.

A spokeswoman for Volkswagen indicated that it was more interested in saving money as its profits tumble than being concerned with agency machinations.

It recently announced that because of unfavourable market conditions it expected its 2004 operating profit before special items to drop to €1.9bn (£1.27bn) instead of the originally targeted €2.5bn.

However, US advertising industry publication AdAge points out that Volkswagen has previously shown sensitivity to WPP and its relationship with Ford.

In December, with concerns over avoiding agency conflicts with Ford, VW's Seat brand moved its $83 million global account from Bates Worldwide in Barcelona to Grey's office there.

The key battle for Sorrell

WITH a client list including Warner Bros and Mars, Sir Martin Sorrell was always courting possible conflicts of interests when he brought Grey Global into the WPP empire for £760m earlier this month.

While the loss of Mars is a blow, and VW's possible migration is another, the account that made the fight for Grey worthwhile is its Procter & Gamble business.

Sorrell will be battling to ensure the US consumer giant is not perturbed by the presence of Persil and Dove soap maker Unilever on the WPP roster. He must assure clients that the walls between the elements of WPP - J Walter Thompson, Ogilvy & Mather, Young & Rubicam, Red Cell and Grey - really are impervious.