Man U’s sponsorship deal with Chevrolet starts to unravel. What on earth is happening? « Untold Arsenal: Arsenal News, supporting the club, the players and the manager

By Tony Attwood

Man U has got Chevrolet as a sponsor.  Big news.  Lot’s of shouting.  Lots of puffed out chests.

But what you don’t read in the football press or the blogs is that behind the scenes all hell is breaking loose.  And the story is getting rather, well, fishy.

Chevrolet is owned by General Motors Co.   General Motors marketing chief is Joel Ewanick and he has just been fired.   Just two years after he joined the company to lead an overhaul of its marketing strategy, and just having completed the Man U deal.

Reuters, no less, have said that a source with inside knowledge of the matter has told them that Ewanick failed to properly report financial details about the deal.

Now of course that could be a slip of the mind.  “Oh yes, sorry, I just did the biggest sponsorship deal in the history of football and, blow me down, I forgot to tell you how much money we are paying the club.”

Hmmmm.

When asked about the source’s observations on the sponsorship deal, Ewanick said in an email that he could not comment.

GM then came out and said that Ewanick’s departure was “effective immediately”.   No hanging around, no golden handshake, no gardening leave, he’s out, sacked, gone, vanquished, removed.   He will be replaced on an interim basis by Alan Batey, the head of U.S. sales and service.

The GM announcement says,

“Ewanick failed to meet the expectations that the company has for its employees.”   That was Greg Martin, their spokesperson.  He declined to elaborate.

Ewanick was created vice president and head of GM’s U.S. marketing in May 2010.  He said, “It has been a privilege & honour to work with the GM Team and to be a small part of Detroit’s turnaround.  I wish everyone at GM all the best.”

So what happened?

The Man U deal with Chevrolet was said to be worth almost $80m a year, which is a lot more than the £19.6m that Aon is paying.  The deal lasts seven years from 2014/15.

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Eyebrows were raised when this hit the headlines and the Financial Times ran this comment from Jim Andrews of IEG, the top sponsorship consultancy.

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“The increase between Aon and Chevrolet I’d say is unprecedented.”   He added that the deal was a lot bigger than the previous record set by the Qatar Foundation’s when it sponsored the sacred shirt of Barcelona, for $39.1m a year, just at the time Barca were failing to pay their players.

The FT continues, “As recently as 2006, Vodafone was paying only about £8m a year to sponsor the club’s kit. It was followed by AIG, which paid £14.1m a year between June 2007 and June 2010.”

Now as the FT says, sponsorship revenues are on the rise, which is why the end of the Arsenal sponsorship deals over the next two years is very exciting news.  There’s a lot of new money coming in to the club.

But what is going on with Man U?

We know that Manchester United have aborted listings in Hong Kong and Singapore, and then bailed out of New York on a technicality after running old financial reports.

We know that a number of Manchester United employees will be getting mega bonuses out of the listing on the NY stock exchange when it finally happens.

We know that these shares will never pay any dividend or have any power or influence over the club (the family retains that) – it is the model that Mr Usmanov has suggested for Arsenal, as I understand it.   Indeed the FT said, in a completely different article “The question is, why on earth anyone would be prepared to buy [Man U], given the disregard in which the Glazers seem to hold their potential investors.”

And we know that (according to the FT) “Manchester United said annual revenue from the Chevrolet shirt sponsorship agreement would be $70m in the first season, rising 2.1 per cent a year until it ends in the 2020-21 season. In addition, it will receive about $18.6m in fees from GM in each of the 2012-13 season and 2013-14 season under the terms of our new shirt sponsorship agreement.”

But…

Having been talking about Vapour Transfers, could we also be seeing Vapour Sponsorship?  Of course I have no inside information and I don’t know anything concrete about this, so I make no allegation – just turn in my usual round of guesswork.  So…

Over seven years since the Glazers moved in, they have revalued the club from £790m to £3bn.   That is not real money, just the valuation based on the shares they create.

The company is listed in the Cayman Islands which means there are no requirement for independent directors to oversee the owners. There are no plans to pay a dividend.  And there is no real knowledge as to what is happening within the company.

My thought in wandering down this by-way is this: the Glazers do say funny things, which are not quite as they seem which leads one to disbelieve all they say.  So for example in the NY listing prospectus they say, when claiming that one in seven people in the world “follow” Man U:

“We and Kantar Media included in the definition of ‘follower’ a respondent who either watched live Manchester United matches, followed highlights coverage or read or talked about Manchester United regularly.”

So according to a survey the club paid Kantar Media for, United has 659 million followers.   But lots of us watch follow highlights of Man U, and we are Arsenal fans.  Some Liverpool fans do this twice a season – when Man U play Liverpool.  And that makes them a follower.

Now if you are going to put out stuff like this, then who is to say what else you are going to do behind all those locked doors in the Cayman Islands?

I don’t know why GM sacked their man as he concluded the Man U deal, and I have no evidence, so all I can do is speculate.  The reason could be…

a) Because they took one look at the Man U prospectus and thought – “you’re having a laugh” and knew that they didn’t want to deal with that bunch of owners – but then found they were locked in.

b) Because they knew that the price hike for sponsorship was insane and that they would never get their money back in extra sales – but found out too late.

c) Because Man U is quickly becoming the sort of business which through its share and other dealings is exactly the sort of company you don’t want a decent firm to be associated with

d) Because the deal as expressed doesn’t exist – it is vapour.   Yes the Chevrolet will appear on Man U shirts, but the amount changing hands won’t be remotely like the amount quoted.  Those figures are quoted just to help the share issue along.  It will be hard to find out the truth because the deal doesn’t start for a while, and one end of it is in the Cayman Islands where it is hard to find anything.

e) Manchester United’s operating profit has fallen for the last three years and is now at half of what it was three years ago.  And this was why the FT ran the headline “Investors in Man U risk losing their shirts”.  Chevvy weren’t pleased with that one.

It might, of course all be coincidence, but we could combine all this flim-flam with our recent report on Manchester United and referees.

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