Israel's largest advertising firm, McCann Erickson-Kesher-Barel, is planning its second round of cutbacks in six months, in which 14 workers, or about 5 percent of its 260 employees, will be fired.
All remaining employees, meanwhile, will be asked to take a month of unpaid leave sometime during the upcoming year, while senior management will be hit with a 10 percent wage cut.
These measures come following a 10 to 15 percent wage cut applied to all workers six months ago during the firm's first round of cost-cutting, which did not include layoffs.
The current cutbacks came as a shock to the industry, because the firm recently has received several large accounts, including one from Pele-Phone worth $10 million a year. According to data compiled by Ifat Advertising, McCann-Kesher-Barel grew by 12 percent last year and handles accounts worth $197.6 million at list prices - though actual prices are usually 50 to 60 percent below list price.
Furthermore, CEO Ilan Shiloah had explicitly promised at the time of the initial wage cut that there would be no dismissals. "I believe it is wrong to fire workers during such a deep recession," he said at the time. "The wage cuts are meant to prevent dismissals. It is wrong for a family to find itself without a breadwinner for a period that is liable to last a year or longer. I promise the workers of this company that there will be no firings at least until the end of 2003."
In response, Shiloah said yesterday: "The economic recession keeps worsening, and because of the expected war with Iraq, advertisers are freezing their accounts. We did acquire several new clients, but there has been a drop in revenues, and that is the reason for the dismissals."
Meanwhile, Israel Discount Bank yesterday announced the five finalists in the competition for its advertising account: Reuveni Pridan, Fogel Levin, Yehoshua, TBWA, and Geller-Nessis. The firms will have to submit their final bids by March 11.
The Discount account is valued at about $3 million. In 2002, according to Ifat, Discount's expenditures on advertising totaled $7.5 million at list prices.
Discount began looking for a new advertising agency after its previous one, Adler, Homski & Warshavsky, won a large chunk of Bank Hapoalim's advertising account.
McCann-Kesher-Barel is one of the companies that initially bid for the Discount account, but it dropped out before the finalists were chosen. It decided instead to stick with the Leumi Card account, even though this is worth a mere $850,000 at list prices.
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