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TCC'S DAILY EDITION: August 13, 2003
Ford's Leach Out In Europe
subscribeFord Europe chief Martin Leach stepped down Tuesday amidst an unexpected and embarrassing downturn in the automaker's European earnings in recent months. Ford Europe lost $525 million in the second quarter, twice what Wall Street expected. Merrill Lynch auto analyst John Casesa called the loss "a disaster."
Leach, 46, took over Ford Europe a year ago after running the unit's product development and motorsports for two years. Prior to his European responsibilities, he was head of worldwide design and product programs at Ford's Mazda Motor Corp. unit in Japan. The loss is viewed as especially troublesome for Ford, because the company, struggling to break even on its global auto operations this year and amidst a highly scrutinized turnaround plan under chairman and CEO Bill Ford, has repeatedly said it is basing its comeback strategy on the apparent turnaround of Ford Europe.
Ford has spent the last four years driving down costs, making factories more flexible and closing unneeded production lines in Europe. Ford has reduced costs in Europe by $1.3 billion since 2000, while raising productivity and quality. The European unit earned $35 million last year after a profit of $266 million. The second quarter loss, though, wipes out years of progress. Merrill Lynchs's Casesa asked rhetorically in a recent research note: "If it didn't work in Europe, why should it work for the whole company?"
When the second quarter loss came to light, Bill Ford sent his top cost-cutter, David Thursfield, back to Europe. Thursfield is chairman of Ford of Europe, but moved to Ford headquarters in Dearborn, Mich., last year to oversee global purchasing and procurement for the whole company and specifically to run billions in costs out of Ford's system. Thursfield and Ford chief operating officer Nick Scheele have been portrayed as the right team of managers to help Bill Ford because of their work in Europe. As head of Ford Europe before and after Leach's appointment, though, Thursfield bears the weight of responsibility for the collapse despite Leach's ouster. "The Ford of Europe team remains committed to improving our financial results and to delivering outstanding products," said Thursfield, who says he must cut $2.5 billion in costs this year, up from the previously announced $500 million. Ford vehicle sales outside of its Premium Auto Group were down 5.4 percent in the second quarter from a year ago and profit margins collapsed under the weight of heavy discounting and a strengthening euro. For managed to increase market share in Europe in the first half of this year to 9 percent, versus 8.8 percent for the first half of last year. But, like in North America, at the high price of generous consumer rebates that eat up profits. —Jim Burt
Ford Earnings Drop, Beat Estimates by Joseph Szczesny (7/28/2003)
Number two’s recovery still in progress as European sales plummet.
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