Interpublic Group of Companies, Inc. (NYSE:IPG) has had a fairly good year in 2014, as revenue was up over 8 percent in the third quarter, with over 6 percent of that organic growth.
The company had mentioned some headwinds in the fourth quarter, but the announcement I heard today as I'm writing is that it has lost its $280 million in billings with General Motors (GM) for its Cadillac brand. That was an unexpected event. Rival Publicis (OTCQX:PUBGY) won that contract, which already accounted for $172 million in billings in the first half of 2014.
Since this is additive to the already-mentioned headwinds, it could have a strong negative effect going forward. It will depend if it is able to offset that loss with other significant wins.
Also of note in relationship to losing the contract was it had recently moved all of its employees in its Lowe Campbell Ewald unit, which served the account, in order to be able to work closer with Cadillac employees at GM's headquarters.
In what is a slap in the face to Interpublic, Cadillac cited the "undisputed expertise" of Publicis in handling luxury brands as the reason for making the change. It also underscores the inability of Interpublic to boost the sales of Cadillac during a time when U.S. auto sales had climbed almost 6 percent. Over the last year sales at Cadillac dipped 6 percent.
It's unfortunate for Interpublic, as it had been having a decent year, and most investors will remember the loss of Cadillac heading into 2015.
Since this is happening at the end of the year, it probably won't have a lot of impact on the quarter, although it will result in a loss of some expected revenue.
The fact this caught Interpublic off-guard is a sign there must have
