Lincoln Mercury: Why It's Coming, What It Means Ad Agency Young & Rubicam Likely to Open Office Here, Too

Orange County Business Journal, Jan 26, 1998 by FRIED, IAN

The first collateral benefit of Lincoln Mercury's move to Irvine is likely to be the migration to Orange County of its ad agency Young & Rubicam.

John Vanderzee, chairman of Y&R's Detroit office, said the agency will set up a Southern California office and that the agency will be as close to Lincoln Mercury as its client wants.

"If they want us to be right near by, then we'll be in Irvine," said Vanderzee, a longtime Ford Motor Co. marketing executive who moved to the agency three years ago. However, Vanderzee said it was too soon to know where the office will be, when the move will take place or how many of the 300 people working on the account will make the move from Detroit.

"We only learned about this a couple of days ago," Vanderzee said Thursday. That was the day Ford dropped the bombshell news that it will move its Lincoln Mercury division from Detroit to Irvine the first time a major U.S. automaker has based a division outside Detroit.

While Ford officials had apparently been considering the move for several months, the plans did not firm up until the last two weeks. Jim Rogers, Lincoln Mercury's marketing general manager, said company officials saw a move west as a way to gain greater independence from Ford and to stay on top of the latest car trends, which typically are born in California.

"We felt we needed to manage (ourselves) rather than being an afterthought of Ford," Rogers said.

In the past several months, as top management began considering such a move, a separate internal study group also suggested a Southern California HQ, Rogers said.

The move, which will involve the transfer of about 150 sales, marketing and design employees, was bold but not shocking, analysts say.

"We're only mildly surprised," said analyst Eric Noble of Santa Ana-based AutoPacific Group. "It's unfortunately a well-kept secret that Southern California is the second auto capital of the U.S. and has been for the past two decades."

Southern California is home to all but one of the Asian carmakers (Subaru is in New Jersey), and a score of design facilities for foreign and domestic makes. Five carmakers Mazda, Mitsubishi, Hyundai, Kia, and Suzuki have their U.S. headquarters in Orange County, while Toyota, Honda and Nissan are based in LA County.

"Most auto trends start or develop early in Southern California and then spread across the U.S.," Noble said. "For Lincoln Mercury, they get the best of both worlds.

"What they needed first and foremost is some distance from their sister division."

In recent years, Lincoln Mercury has tried to re-distinguish itself from its larger sister company in both product and marketing. Rogers said the first big move came with the introduction of the Mercury Villager in 1994. A new Cougar is planned for the spring.

Lincoln Mercury saw a three percent rise in total unit sales for 1997, to 603,984, with a rise in sport-utility vehicle sales offsetting a decline in car sales.

The company spent $106 million in national advertising in the first 10 months of 1997, according to Competitive Media Reporting. Another $71 million was spent on Lincoln Mercury dealer advertising, also handled by Y&R.

Noble, whose company works with nearly all the major auto manufacturers, said he is convinced the agency will be in OC.

Lincoln Mercury officials also suggested that the ad agency would be in OC, although Vanderzee did not rule out the possibility of an LA site. Y&R currently has about six people in an LA office that serves Lincoln Mercury's regional dealership business.

"Our ad agency relationship is quite close," Rogers said. "My anticipation is that they would move quite close to us. We go hand-in-glove."

While Lincoln Mercury will be away from Detroit, it will be moving in with Mazda, another Ford-controlled entity. Lincoln Mercury is negotiating to build its headquarters on an 11-acre site adjacent to Mazda's North American Operations headquarters in the Spectrum.

Although Lincoln Mercury may not be buying additional Irvine Co. land, officials there were thrilled to add such a big brand name to their marquee.

"It's fabulous for the county," said spokesman Larry Thomas. "It's also wonderful for the Irvine Spectrum."

Company officials said Lincoln Mercury is looking for temporary space to house workers, who will begin the migration this summer.

"We're informed they are going to move the bulk of the people into the Mazda building in the Spectrum," Thomas said. A source said additional people will be housed at a Mazda research and design facility near Red Hill Avenue, in Irvine.

Rogers held out the possibility that being neighbors could lead to more cooperation with Mazda, but said the move is not an attempt to merge the brands in any way.

All of the Big Three automakers have had some OC presence. Ford has a regional office in Anaheim, Chrysler has its LA zone office in

Irvine and General Motors has operated a Delphi battery plant in Anaheim since 1952.

It remains to be seen whether Lincoln Mercury's move will lead another U.S. maker to boost its presence in OC or Southern California.