LG Unplugged
On the 23rd July last year, at a breakfast for the media before the German Grand Prix, LG Electronics was proudly announced as Red Bull Racing’s latest Team Partner. More specifically a Team and Technology Partner, LG were already well regarded as a global partner to Formula 1, with the multi-season deal, signed mid-way through 2010, signalling a propitious move that would allow the electronics giant “to reach an even broader market.”
The partnership was heralded as a coming together of “two of the world’s leading innovation brands” and marked the inclusion of LG’s Vehicle Integration Kit (VIK) in the RB6. At the beginning of this year, however, rumours began circulating that some of LG’s key partnerships in Formula 1 were in doubt. The most prominent of which, with Red Bull, was quietly terminated mid-way through January, following considerable speculation on its longevity.
Leading the announcement in Germany last year was Dermot Boden, LG’s Chief Marketing Officer, who also featured in last month’s ‘Most Influential’ list. After joining the Korean company in 2007, the Irishman was widely credited with masterminding the brand’s association with Formula 1 as an official technology partner to the series. However, on 1st January this year, Boden left the company, with his three-year contract left unrenewed. A spokesperson for LG described the move as a “parting of the ways”.
Boden’s discrete departure came just weeks before LG Electronics posted record quarterly losses of $230m for the October-December period. Huge operating losses in LG’s mobile phone division, which generates about one-fifth of the company’s total revenue, were sparked by a 15% fall in handset sales. Industry commentators have attributed this to a misreading of the sector with LG initially marketing a range of luxury handsets instead of newer Smartphone technologies similar to Apple’s iPhone.
The losses, whilst not directly attributed to its Formula 1 activities, will have pushed the senior management to make clear and definite moves to adhere with the company’s corporate responsibility, as signalled by the recent situation with Red Bull Racing.
Yet scaling back its marketing budget in the sport may prove more difficult than anticipated. Details of the Red Bull deal are sketchy, but understanding it as a multi-year contract would suggest that a severance clause be enacted should one of the parties renege on the partnership.
Boden’s discrete departure came just weeks before LG Electronics posted record quarterly losses of $230m for the October-December period.
The deal with Bernie Ecclestone may be harder to break-up, with one source suggesting it may cost the company more in severance, than to actually continue with the global partnership. Not to mention the poor coverage LG would receive, should they attempt such a move. Perhaps, ultimately, Formula 1 is still a long-term strategy for the electonics company. In 2009, Boden stated, “In today’s economic climate, all organisations need to be strategic with their expenditures. Here at LG we can think of no more important investment than our brand. After having carefully researched marketing and sponsorship opportunities, I am confident that this exciting partnership will best highlight and enhance the profiles of both global organizations over the long term.”
According to LG, Boden will not have a direct replacement, although his duties are expected to be shared amongst his regional counterparts, such as the company’s UK head marketing officer, Paul Meadows.
Despite these recent developments, LG’s other Formula 1 commitments appear to have been unaffected. Team Lotus confirmed, “The relationship with LG still stands. They will continue as a team supplier in their capacity to provide technical equipment to Team Lotus in 2011.”