You could argue that it was the results of his advertising decisions — imitative, meaningless and misleading commercials, dropping sales and profits, loss of market share, loss of number-one worldwide position to Toyota (again) — that cost GM global marketing chief Joel Ewanick his job.
But if you did, you’d be wrong.
According to reports emerging today, it was something much worse in a conservative, business-as-usual corporate culture that values process over results (a trait Government Motors shares with its largest shareholder — the United States government — and its CEO).
According to GM insiders, a whistle-blower ratted Ewanick out for the capital offense of…cutting corners — over the Manchester United jersey sponsorship deal.
A repeat offender
Ewanick’s violations of company process go back to the start of his employment. In furnishing his new office, he bypassed GM’s furniture-procurement procedures and instead (Gasp!) bought office furniture directly from IKEA for only $2,000 — saving 96% of a budgeted $50,000.
In one of his earliest sponsorship deals, for Cadillac with the Northstar-at-Tahoe ski resort in California, he again ignored company procedures. Even though GM eventually approved the deal, insiders held it against him, especially since he owned a home nearby.
When Ewanick announced in May, on the eve of Facebook’s IPO, that he was canceling GM’s $10 million advertising buy on the social network, his boss, CEO Dan Akerson, reportedly complained it was “ungentlemanly.”
From June through his axing, Ewanick had been sentenced to carry around something GM calls its Farley Award. This is a mock-up of Ford’s blue oval logo with “Farley” instead of “Ford,” in the center. The “award” is named for Jim Farley, a Ford marketing chief known for his, shall we say, colorful language (particularly when talking about GM). According to one inside source, it was “presented” as “proof Mr. Akerson was taking steps to help his marketing chief learn his limits.”
At a June conference in Cannes, Bloomberg News reported,
…Jeff Goodby, who co-founded the joint-venture that does Chevrolet advertising for GM, joked that he would begin by asking Mr. Ewanick about his position on Facebook. This was just weeks after the dust-up marred the IPO of the Menlo Park, Calif.-based social networking company.
“Motherf—er,” Mr. Ewanick responded with laughter, as reported by Advertising Age. “You’re gonna pay for this s—.”
The playful back-and-forth continued between the two friends, including Mr. Ewanick joking about being willing to give a Goodby competitor advertising without a competitive-bidding process…
The final straw
But what really tore it for GM management was the incredibly expensive sponsorship deal Ewanick negotiated to put the Chevrolet bowtie on the backs of Manchester United’s uniform jerseys, where it would be seen by all the soccer team’s fans — most of whom live in countries where Chevrolets aren’t sold.
By way of perspective, in 1999, when Man U won the Premier League championship, Sharp electronics sponsored the team for $1.3 million a year.
The next year, Vodaphone Group took over, for about $12.5 million, a price jump considered “incredible” at the time, according to Nigel Currie, managing director of BrandRapport UK.
In 2006, AIG paid almost $22 million a year, and this year’s sponsorship, for insurance broker Aon Corp., cost just over $31 million.
The seven-year deal Ewanick negotiated for GM, to start in 2014, costs $559 million. That’s an average of $79.9 million a year, or 2.5 times what Aon’s paying — and that’s not including a $100 million activation fee. “This is just unbelievable,” Currie said of the record-breaking deal.
Cost accounting, not cost
But it wasn’t the cost of the deal that did Ewanick in; it was the cost accounting.
To avoid sticker shock, Ad Age reports,
a whistle-blower [from the marketing depaqrtment] stepped forward…and the Detroit-based company determined Mr. Ewanick was spreading the price of the agreement with English soccer team Manchester United among several different marketing budgets to avoid his boss’s spending limits…When confronted, Mr. Ewanick denied it…
Mr. Ewanick was questioned by Michael Millikin, GM’s corporate counsel, about the extent of the Manchester United deal over the course of two to three days, one of the people said. While Mr. Ewanick denied trying to hide the details, more elements he hadn’t disclosed were uncovered over the course of the investigation..
As a result of the probe, parts of the arrangement originally put together under Mr. Ewanick were revised for less money…
Both Akerson, Ewanick’s former boss, and Alan Batey, his interim successor, have publicly declared that there will be “no change” to Ewanick’s marketing policies or decisions. It was “inconsistencies” in following procedures that led to his downfall.
“While Joel was a risk-taker and big-picture kind of guy, he was not real concerned about the details and that indeed may have been his downfall,” AutoStratagem prinmcipal Daniel Gorrell was quoted as saying. “His leaving may suggest that GM will take a more conservative, business-as-usual approach in the future.”
Excuse me, but wasn’t that approach the cause of GM’s problems to begin with?