VANOC Revises Business Plan as Economic Crisis Hits Sponsors

(ATR) First it was General Motors teetering on the edge of bankruptcy. Now it’s Bell, Canada’s largest telecommunications company. The leveraged buyout of its parent company BCE may fail because of the global economic crisis.

These are trying times for Vancouver 2010, which is bracing itself from an economic maelstrom not seen by any previous North American organizing committee.

The official VANOC line is that all sponsor payments are current. Work is ongoing on a revised business plan. Chairman Jack Poole offered a blunt assessment of the troubled economy, calling it “frightening.” Dave Cobb, VANOC's executive vice president of revenue, marketing and communications, says organizers are around $16 million short of their sponsorship target. (Vancouver 2010)

Dave Cobb, executive vice president of revenue, marketing and communications, said VANOC is up to $16 million shy of its goal of $618 million cash and in-kind sponsorship raised from IOC TOP sponsors, some of Canada’s biggest corporations and a roster of U.S.-owned companies.

“Like every business we have to be prepared for a slowdown, prepared for people tightening their belts,” Cobb said. “We’re still going to do everything we can to raise every dollar of revenue we can.”

When the VANOC board meets behind closed doors for the last time this year on Dec. 9, it can take pride in the $281 million worth of tickets requested by Canadian residents in the five-week domestic phase. But any back-patting will be tempered with the talk of the times and ongoing deliberations on the revised business plan due early in 2009.

VANOC dodged a bullet in October when Fortress Investment Group refinanced debt-laden Intrawest – parent of alpine skiing and sliding sports venues at Whistler Blackcomb. Now VANOC is hoping to avoid sponsor withdrawals and cutbacks.

Bell, VANOC’s biggest Canadian backer at $163 million, suddenly became the center of speculation on Nov. 26 when the planned BCE acquisition by the Ontario Teachers’ Pension Plan and Providence Partners hit a roadblock. Auditor KPMG announced it wouldn’t guarantee BCE’s solvency because assets plunged in value.

In recent months, Bell has made nationwide layoffs and recalled executives to its core southern Ontario market, home of one-third of Canada’s population. A new advertising campaign was launched in August after its Frank and Gordon animated beaver duo was retired. They were introduced before Torino 2006 and weresupposed to remain icons through Vancouver 2010.

General Motors, meanwhile, warned it is in danger of running out of cash if it doesn’t get a bailout from the U.S. government. Through its Canadian subsidiary, GM pledged $43 million worth of vehicles and $11 million in cash.

The company has rationalized sports marketing costs by canceling ad buys on the Super Bowl and Academy Awards telecasts and even cutting short a nine-year endorsement deal with golfer Tiger Woods.

GM said it would fulfill the remaining seven years on a 20-year naming rights deal at General Motors Place, the Vancouver hockey arena. It will be called Canada Hockey Place during the Games, as per IOC rules that prohibit venue advertising.

Bell spinoff and VANOC sponsor Nortel Networks, North America’s biggest phone equipment maker, announced a $2.8 billion loss on Nov. 13 and laid-off 1,300 workers. Sun Microsystems axed 6,000 globally after losing $1.4 billion.

Meanwhile, official 2010 flyer Air Canada’s shares hit record lows amid a $107 million loss and news the company is for sale. Canadian newspaper and TV giant Canwest, burdened by a $3 billion debt, announced $814 million in losses the same week 560 people – or 5% of its workforce – were laid-off.

Mining giant Teck, the supplier of metals for athletes’ medals, needs to repay a $4.7 billion debt from its acquisition of Fording Coal. Its gold assets are being shopped around as the solution.

Canadian Pacific plans to cut spending in 2009, after its quarterly profit dropped 21% in October. Andrew Liveris, CEO of Dow Chemical, offered a grim forecast of a “pretty protracted global recession” stretching into 2010.

Glimmers of hope exist. Visa’s third quarter results were better than analysts’ predictions. Petro Canada profit rose 61% on higher oil prices. Panasonic is seeking a takeover of Sanyo. Bombardier is expanding in India and China and could get a boost if Canada increases infrastructure spending to battle the recession. And McDonald's quarterly profit was better than analysts estimates with a 7% jump in global sales.

VANOC and its partners may very well weather the storm, but sponsor activation in the Olympic city at Games time may be the true barometer of how hard the recession hit.

With reporting from Bob Mackinin Vancouver.

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