Ford hires US firm as its lead ad agency in a major blow to WPP  

A Ford advertising billboard in New York City in January 2016
 Richard Levine | Getty Images

Ford hired advertising agency BBDO as its lead creative shop in a move that the auto company calls a new global marketing approach.

After a five-month process, Ford announced that WPP — the largest ad agency in the world — will continue to run "activation," or functions such as in-store advertising, website development and marketing for its dealerships. It will also retain media planning and buying.

But BBDO, part of rival group Omnicom, will run brand advertising, which means it will create overarching big ideas for Ford and its vehicles. Brand advertising is often seen by creative agencies as more prestigious than promotional or retail-focused campaigns, and it means that WPP's agencies will now have to follow BBDO's creative lead. Andrew Robertson, CEO of BBDO Worldwide said in an emailed statement: "Today is a big big day. We have a wonderful new brand to help build."

Ad agency Wieden + Kennedy will also work with Ford as an "innovation partner" on specific projects, Ford said in an online statement.

Significant challenges ahead for WPP: Advertising CEO

WPP-associated agencies have worked on Ford's advertising for decades, starting with J. Walter Thompson (JWT) in 1943, according to industry website Ad Age. WPP bought JWT in 1987 for $566 million and has since created Global Team Blue, a collection of agencies within WPP that solely worked on Ford's ad business.

In an online statement, Ford said the new setup will reduce costs, representing "$150 million in annual efficiencies" and that it would use more technology to personalize its ad campaigns. Ford hired Jim Hackett as CEO in May 2017, tasked with restructuring the automaker, but is yet to give details of his turnaround plan.

"Ford already is one of the most recognized and respected brands in the world," said Joy Falotico, Ford group vice president and chief marketing officer, in an online statement. "In this pivotal moment of reinvention and transformation, we're excited to partner with world-class creative agencies to unlock the full potential of the iconic blue oval."

Jim Hackett, president and chief executive officer of Ford Motor Co., speaks during a discussion at the Automotive News World Congress event in Detroit, Michigan, U.S., on Tuesday, Jan. 16, 2018.
Andrew Harrer | Bloomberg | Getty Images

Brian Wieser, a senior research analyst at Pivotal Research, said in an analyst note emailed to CNBC that Ford's account was likely worth $500 million to $600 million a year, and that less than half the business would be leaving WPP. For BBDO parent company Omnicom, this might mean a 2 percent increase in organic revenue from November, Wieser added.

In a note seen by Ad Age, WPP's Satish Korde, who is CEO of Global Team Blue, said: "WPP is assessing the impact and implications of this decision, which cannot be fully determined until more detail is known."

"As you all know, we gave this review everything we had: It was an extraordinary effort by the entire global team over many, many months. We accept this difficult decision with our heads held high and thank everyone for their contributions," Korde added.

WPP, which recently appointed Mark Read as CEO, said in an online statement: "WPP agencies will continue to handle activation, including media planning and buying, digital and production. These responsibilities also include tier two advertising work in the U.S., the China advertising operations with its joint venture partner, all Lincoln advertising, and all the Ford public relations business."

"WPP will work closely with Ford on the shape of its future relationship and the impact on its people," it added.