Volvo Agency Steps Down Over Ad Flap : Advertising: Scali, McCabe, Sloves resigns the $40-million account after questions on a car-crushing spot.

Much like the cars rigged for a TV commercial, Volvo’s ad agency has now been crushed too.

Scali, McCabe, Sloves, the New York agency that has created Volvo ads for 23 years, on Tuesday resigned the $40-million annual Volvo Cars of North America advertising business. Volvo was by far its largest client. The move comes just one week after questions were raised about the production of a car-crushing ad that was not properly labeled as a re-enactment of a sporting event.

“It breaks my heart,” Marvin Sloves, chairman of the troubled agency, said in a telephone interview. “We resigned because it’s the right thing to do. Ultimately, the agency is responsible.”

Officials from Volvo insist they did not pressure the agency to resign. But since the issue was made public last week, the company had not taken a firm stand in support of the agency.

For Sloves, whose agency has recently seen a flood of account losses, the timing could hardly be worse. Earlier this month, Nikon Inc. fired the agency. Hertz Corp. left last fall. Also, the agency is in the midst of negotiating a buyback from its British-based parent, WPP Group.

At issue is a TV commercial that showed a so-called Monster Truck rolling over and crushing other cars while a Volvo managed to stay intact. Investigations by the Texas Attorney General’s Office revealed that the Volvo used in the ad had been fitted with special supports, while the supports of the other cars were actually weakened. Volvo officials have said the modifications were made to the cars for safety reasons. The ad agency said it did not approve the changes.

Although Volvo ran full-page ads in national newspapers apologizing for the commercial, it has not quieted all criticism of the ad’s deception. Some top ad executives have also said the bad publicity about the commercial has left a black mark on advertising in general.

“It’s not the kind of thing that’s healthy for the industry,” said Carl Spielvogel, chairman of the New York ad agency Backer Spielvogel Bates, which creates ads for Hyundai. “The American public will not buy any kind of chicanery,” he said, adding that Scali in the past had created some very good ads for Volvo.

Sloves insists that the agency never intended to deceive with the ad. “I don’t believe we have disgraced the advertising industry,” he added.

Sloves said agency layoffs will be announced shortly but declined to speculate when or how many. Industry executives estimated that at least 20 to 30 of the ad firm’s 230 employees could eventually be handed their walking papers.

Meanwhile, new Volvo commercials created by Scali will begin airing next week, said Robert Austin, manager of public relations at Volvo Cars of North America. The ads will feature statistical data from the Highway Loss Data Institute. “We do not intend to back off from promoting the safety of Volvo cars as a result of this.”