Chiat, Caught in Ad Industry’s Woes, Cuts 50

The woes that have gripped the advertising industry for months have finally grabbed hold at Chiat/Day/Mojo. The largest advertising agency in Southern California has laid off at least 50 employees nationwide in recent weeks.

This week, the agency fired 30 from its New York office and six from its headquarters in Venice. Last month, 15 employees from its worldwide corporate finance department, also in Venice, were handed walking papers.

“It’s been a crummy week for the agency,” said Bob Wolf, chairman of North American operations. “You hate to lay people off. But right now the advertising industry is not a vital, healthy industry. Sometimes layoffs are the prudent thing to do.”

Chiat/Day is reeling from the loss of a handful of clients from the agency’s New York office, including Reebok and Royal Caribbean Cruise Lines. These losses totaled more than $100 million in annual billings. Meanwhile, its Venice office, whose biggest client is Nissan Motor Corp., has continued to gain business during the past six months.

This is the largest employee purge at Chiat/Day since 1986, when the agency lost the Apple Computer and Nike accounts.

Wolf declined to comment on the possibility of a management shake-up at the New York office. But Wolf, who formerly ran that office, said he is flying to New York on Sunday and intends to spend nearly half his time there. “We still have a vital agency in New York,” he said. Among its remaining clients there are Nynex Information Resources and Arrow Co.

Chiat/Day is one of the last major agencies in the nation to join the layoff bandwagon. As clients nationwide cut their advertising budgets, agencies generally have little recourse but to fire employees. Executives are hard-pressed to remember when the agency employment situation has been this bleak in Los Angeles.

“The industry is in the pits,” said Charles Sharp, a West Los Angeles ad agency headhunter who said he is receiving calls from the unemployed at an alarming rate. “The sad thing is, when you leave Chiat/Day and go across town to Ogilvy & Mather or McCann-Erickson, you find there are no jobs there, either.”

For Chiat/Day, the problems are much like the Eveready rabbit it set roaming: They’re showing up everywhere. Its separately operated Mojo agency in Australia has laid off an estimated 10% of its work force, Wolf said. But no layoffs were reported at Chiat/Day’s recently opened international offices in London and Toronto.

Locally, the Venice design firm that Chiat/Day owns, Bright & Associates, also reported laying off a dozen employees in Venice and New York this week at the request of Chiat/Day. “The design business is very soft right now,” said Keith Bright, president of the firm.

Also, Pete DeVaux, who was chief financial officer for Chiat/Day, resigned this week. He was replaced by Simon Bax, formerly vice president of financial operations.

Jay Chiat, who co-founded the agency 22 years ago, was traveling in Europe and unavailable for comment Thursday. In December, Chiat handed day-to-day control of the agency over to Wolf and since then has spent much of his time on the road.

“We don’t believe that things will get a heck of a lot better for a while,” Wolf said. “We’re making these moves to be lean and smart.”